Fort McMurray's hotel industry in limbo

In the midst of the Fort McMurray wildfires, hotels and lodgings in neighbouring communities stepped up, slashing prices and providing refuge for the displaced.

But as the fires work their way eastward, leaving behind charred homes and business with damages in the realm of $9 billion – making it one of the costliest natural disasters in Canada’s history – the hospitality sector faces a long battle.

“Natural catastrophes like the tragic forest fire in and around Fort McMurray [have] an interesting effect on the lodging needs: in the short term there is a sudden increased demand for lodging in neighbouring cities as a result of the massive involuntary relocation and the closure of a town,” Dr. Gabor Forgacs, an associate professor at Ryerson University’s Ted Rogers School of Hospitality and Tourism Management told Yahoo Canada Finance. “Lodging room nights that were booked into the town must be relocated elsewhere as well.”

But in the long term, effects could be costly, says Forgacs.

“Certain lodging capacity might have been taken out of inventory for getting damaged and needs to be either repaired or rebuilt, which will take time as well,” says Forgacs. “That will result in the loss of thousand of room nights in the given market.”

One of the first businesses to be consumed by the blaze, a Fort McMurray Super 8 in the Beacon Hill neighbourhood, was destroyed on live television with its owner helplessly watching from Calgary.

ALSO WATCH: Raw: Fort McMurray hotel burns, aftermath of fire

“The first real evidence we had of it … was when the reporter was literally standing in front of the Super 8 reporting live — as the Super 8 was burning,” owner Eric Watson told The Calgary Herald.

The 140-room hotel was built in 1999 and recently underwent $3 million in renovations. It employed close to 30 people and according to Watson was “the busiest Super 8 in the world” during the height of Alberta’s economic boom a few years ago.

But as horrific as the fire has been for the city’s residents, to the hospitality sector, it is yet another gut-punch in an already struggling industry.

“The commercial lodging industry has been negatively impacted in Alberta as a result of the troubles of the oil and gas industry,” explains Forgacs. “Any time a key economic sector of a given province is scaling back and is slowing down or shelving projects it translates into less business travel and less needs for accommodation.”

In a conversation with the Edmonton Journal, Terry Hartz, vice president of operations at Edmonton-based Sawridge Group, which operates a hotel in the city, estimated the hotel industry there has seen business contract by 50 per cent compared to two years ago.

Richard Wong, executive vice-president at Nova Hotels, which has the closest hotel to Fort McMurray International Airport, corroborates Hartz estimations telling Fort McMurray Today that occupancy rates have dropped between 40 and 50 per cent.

But it’s not just the industrial areas where hoteliers were hard hit by the economic retreat. In October, revenue for available room across Alberta fell 23 per cent, owing to a drop-off in corporate travel.

But is it the end for the hospitality industry in Fort McMurray? Likely not. As Watson pointed out the Calgary Herald, as long as there’s an oilpatch, workers are going to need a place to stay. Their only option, it seems, is to rebuild.

It’s just a question of how long that takes, says Forgacs.

“In the long term in might take months until normalcy returns and Fort McMurray will be open for business again,” he adds.