Happy New Year and a Warm Welcome to 2019!

It is hard to believe that another calendar year is behind us. One of my annual traditions is to reflect on the year that was and envision “what might be” and “what should be” for the year ahead of us at MasterBUILT Hotels.

Today my mind turns to how far we’ve come since January 2012 when I joined Superior Lodging to help lead the build-up of MasterBUILT Hotels and the Microtel by Wyndham brand across Canada. I honestly had no idea what I was getting myself into at the time! Seven years later, and thanks to the contributions of so many of our team members past and present, we now have 20 Microtels open/under construction in 6 provinces; 2 Marriott branded hotels in Calgary with a 3rd opening in Fort McMurray this March; and numerous other commercial real estate holdings. All our hotels have been built from the ground up, which if you know construction, represents a lot of blood, sweat and tears. Today, MasterBUILT is proudly recognized as one of the leading developers and operators of hotels in the country and the future has never been brighter. We have an incredible pipeline of development projects with an exceptionally talented and dedicated team of employees and partners that will unquestionably make this pipeline a reality.

Every year presents unique challenges as we strive for success in both our business and personal lives, and we (myself in particular) often don’t take enough time to reflect on and celebrate what we have accomplished.

As a company, we have a lot to be proud of from this past year. We’ve grown to almost 300 team members located across our vast country. Thanks to the contributions of our people, we were recognized as one of Canada’s Best Managed Companies by Deloitte for the fourth year running. Every one of our managed Microtels was recognized as a “best of the best” brand award winner by Wyndham Hotels & Resorts, speaking volumes to our team’s unwavering commitment to operational excellence. Through our ‘Common Ground by MasterBUILT’ social responsibility program, we donated ~$180K and contributed hundreds of volunteer hours in the communities where we work and live. We also deepened our partnership with First Nation communities across Canada, entering into several new agreements that will create sustainable wealth and employment opportunities for their people. Reflecting on the year that was, we can truly say that we made a meaningful impact in our industry and our communities.

In 2018, we also achieved a number of “firsts”. We opened our first Microtel in Quebec (Val d’Or) which was also our first modular built hotel. Val d’Or will soon be joined in Quebec by the beautiful new 100-room Microtel Mont Tremblant when it opens later this month as our first resort location within Canada. In May, we opened Microtel Oyster Bay, our first hotel on Vancouver Island. In September, we started construction on our first Microtel in the Province of Manitoba in Portage la Prairie.

Looking ahead, the next twelve months at MasterBUILT will bring us even more firsts, the culmination of the tremendous effort that our team has put in over the past couple of years at every level of the organization to create the momentum we have today. What does “momentum” look like? Four new hotel openings and the potential for up to 12 new ground breaks in 2019!

Whenever I am peering into my crystal ball (which may be more of a frosty snow globe), the economy and its impact on our business is always top of mind. The past few years have been a tale of two economies in Canada with our energy markets (Alberta, Saskatchewan, Newfoundland) continuing to struggle while our three largest provinces (Ontario, Quebec and B.C.) have enjoyed strong economic growth resulting in near record low unemployment. At MasterBUILT, we’ve deliberately built a diversified asset portfolio and business model that enables us to weather regional economic cycles and succeed in good times and in bad. Nevertheless, we’ve felt the pain of the downturn in Canada’s (not just Alberta’s) oil & gas sector and have a great deal of empathy for all the businesses and families that have been severely affected. As we move forward into 2019, we will continue to diversify our portfolio through our continued expansion in Central and Eastern Canada, deploying capital into the Microtel by Wyndham brand within key markets like the Greater Toronto Area, Greater Montreal Area and Ottawa region to build greater long-term brand equity for all owners and investors. We will also begin to roll-out the Microtel brand into the Atlantic provinces and expand our brand portfolio with both Marriott and Wyndham to further diversify our product mix. We will have a lot of exciting news to share on all these fronts throughout 2019.

Outside of oil & gas markets, the Canadian hotel sector has enjoyed record profitability with cap rates still hovering near record lows. We know this won’t last forever and that a general recession is inevitable. The questions that no economist can answer are “when” and “how deep”. From my perspective (and I am not an economist), the economic outlook in 2019 is a wild card with contrasting indicators and big questions yet to be answered, many of them stemming from an increasingly volatile geopolitical environment. There is the threat of a potential trade war between the US and China (and the US vs a lot of countries). What will the spillover be in Canada? There is the looming possibility of a Trump impeachment. Could this spark the US into a full-blown recession with Canada to follow? The Bank of Canada recently indicated they plan to increase rates at least twice in 2019 despite slowing economic growth. How will this affect access to capital? Labour shortages in many parts of Canada (albeit, not in Alberta) have contributed to significant construction cost inflation and the cancellation of several significant real estate projects within the GTA. How will these shortages continue to impact our business and project underwriting throughout 2019? The oil price differential in Canada, caused by a lack of pipeline capacity (a direct result of government policy), is forcing oil & gas companies to slash capital spending in 2019. How will this further affect demand for hotel rooms in Canada? Will the proposed Liberal government’s Bill C69 get passed in the Senate, further stifling new energy infrastructure projects? Will Canada’s lack of tax competitiveness relative to the US result in further closure/movement out of Canada of major manufacturing and other businesses? And on and on.

As a developer with a long-term perspective, we typically try to keep one eye on the present and one eye beyond the turbulence of a single economic cycle or government. With that said, I strongly believe that 2019 will be one of the most important years in the history of Canada as a nation. Rarely has government policy so blatantly quashed economic opportunity and divided the nation like we are seeing today. In 2019, we need leadership that will bring back a balanced and responsible perspective on the economy, the environment and other important social issues. We need less virtue signaling and governments that can make decisions that ultimately build a better and more unified nation, even if it isn’t popular with a special interest group.

Canada is a great country and our home. At MasterBUILT, we are committed to investing in, building and running high quality, modern hotels to serve the road warriors, hockey families, and workers that are the fabric of our nation. In 2019, my wish is that everyone digs into the facts, looks beyond the propaganda strewn throughout both traditional and social media, makes an informed and rational decision that is in the best interest of Canada as a whole, and ultimately gets out to vote for change.

I look forward to serving you in 2019 and that your year is full of much happiness, health and prosperity!

All the best,

Eric Watson
President, MasterBUILT Hotels

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