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HAW trying to rebound

Getting room rates back to pre-recession levels will help municipal revenues, as well as hotels

When the recession hit in fall 2008, Whistler hotels began dropping their rates, hoping to bring in visitors at a cheaper price. According to the Hotel Association of Whistler (HAW), the strategy didn't work as planned and now hotels are dealing with reduced revenue and, despite the deals, reduced occupancy across the resort.

"The short term gain might not have been worth the long term effect. The biggest challenge now will be to get those rates back up to what they once were," said Mark Herron, chair of HAW and general manager of Four Seasons Whistler.

The strategy was supposed to sustain Whistler's economy through the recession. It worked, kind of. The slow economy still exists but Whistler saw a 27 per cent drop in room rates during the first half of 2009 compared to the same period in 2008. It was the country's steepest decline in room rates, according to the Canadian Hotel Profit Index (CHPI). And those numbers have not yet recovered.

HAW is concerned that not only are hotel profits dropping but so are revenues from the hotel tax. The hotel tax is paid to the RMOW and is used to market Whistler. Because tourism is generally recognized as the lifeblood of Whistler, the hotel tax is "essential to our survival," Herron said. If people are paying less for their rooms, tax revenue goes down.

"You find that those restaurants and the retail shops and a number of smaller businesses are affected by this," said Herron. "There's a bigger question as well: if quite a number of the income in the municipality comes from the hotel tax, and both occupancy and rates are dropping, what's happening in that arena?"

According to a 2009 report from PKF Consulting, overall occupancy in Whistler was at 58 per cent, down one per cent from the year before. Average room rates went down from $216 to $193. Revenue for occupied rooms was down $127 to $112 on average.

Between January and May of this year, PKF reports that occupancy rates are down another one per cent from 2009, at 62.7 per cent, although room revenue is up 27 per cent because of the Olympics.

"There is an argument that even a reduction in price didn't really work," Herron said. "We've attracted less people for less money."

"The room rate is driven by demand and when we see demand falling off due to the economic situation - and some hotels have used strategies like lowering prices to drive demand - sometimes that can be successful," said Arlene Schieven, vice-president of marketing at Tourism Whistler.

Such was the case last August, when a combination of blue skies and low hotel rates saw a 70 per cent occupancy rate for the month, 20 per cent more visitors than the same month the previous year. For the first time since the recession hit, there was enough of an increase in volume to offset the decline in rates.

But that isn't the norm. The new normal is a shift in client base from destination travelers to regional travelers from the Lower Mainland and Washington who make last-minute decisions based on price. About 44 per cent of visitors were from the regional market in 2009, a slight increase from the two previous summers, according to Tourism Whistler visitor surveys.

"When the recession hit, there were a lot of deals to be had and it has kind of trained the customer to think in that way," Schieven said. "They believe there will be availability so that probably reinforces that behavior."

But regional customers alone are not enough to rely on for growth. Herron says reliant on regional visitors actually reduces the resort's reputation to that of a "discount house."

"You're reducing the profits not just of the hotels, but of the hotel tax, and it looks as though from our end, guests are spending $50 less than they were. It's a different mix. It's a different target market."

Add to that an issue that has plagued Whistler since the 1990s: excess supply versus limited demand. Whistler runs an average of 50 per cent occupancy year-round for the entire resort, due mostly to more hotel rooms than tourists visiting. According to Herron that creates a price competition between hotels to reel in the relatively small group of visitors, which leads to ever lower room rates.

"When you promote that publicly, it perpetuates that, (competition)," Herron said.

And yet Whistler still ranks as one of the most expensive destinations in Canada, according to the CHPI. And if the Olympics proved anything, it's that Whistler still has the potential to pull in top dollar for hotel rooms.

Herron says there was no price tag for the people who came to the Olympics. Much of the success of Whistler during the Games was how the resort was marketed as a destination - as the place to be. People came, they saw, they spent. Herron wants to see that applied year round. If Whistler is marketed more to destination travelers, and shakes up the regional-customer-dominated market, the price point will rise on its own.

This is starting to happen. Pique reported last week that Tourism Whistler is returning its focus to the destination market. The RMOW is working on the Cultural Destination Tourism Plan (CDTP) through Whistler2020 to re-brand Whistler as a cultural hotspot as well as a world-class ski resort. HAW is working with the RMOW, the Chamber, the Restaurant Association of Whistler, the Bar Association and other stakeholders to discuss what the best strategy is moving forward. Herron says nothing solid has come from these discussions so far but all concerned parties are "much closer than we were" to forming a consensus.

"I think that there is a coming to mind that we probably need to reinvent Whistler and that we probably need to come together as a community," Herron said.