Quebec’s hotel industry: challenges for 2026 and concrete solutions for SMEs

A sector weakened by major changes

Following a spectacular recovery in 2023, the hotel industry is experiencing a downturn. Revenue had climbed during the post-pandemic period, but this growth stabilized. Ever since 2024, SMEs have been under rising pressure due to higher costs, increasingly uncertain demand and smaller teams.

According to Statistics Canada, profit margins reached a record high of 18.5% in 2023. However, this margin crumbled for several hotels and particularly those that rely on business travel and peak season stays.

Travel trends change fast and today’s clients book closer to their travel dates and take longer vacations, but fewer trips.

Labour is a daily challenge for hotel owners

Staff shortages have affected every region. Many hotels struggle to recruit receptionists, housekeeping and kitchen staff, and managers. Due to a lack of employees, certain establishments have to operate with smaller teams, limit their services and close entire floors.

This lack of workers is due to:

• a limited local employee pool;
• high staff turnover;
• housing scarcity in certain regions;
• strict rules that limit hiring temporary foreign workers for lower-wage positions;
• stiff competition among employers.

Each employee departure is a burden on an SME. Maintaining service levels becomes more difficult and quality can suffer. This is a major issue with regard to client satisfaction.

Costs are rising faster than revenues

Inflation has hit the hotel sector hard. Expenses of all kinds have continued to grow. This includes salaries, energy, insurance, cleaning products, food and maintenance costs. Inflation is also compounded by rising interest rates which makes debt repayment more difficult than ever.

This context puts direct pressure on margins for SMEs. Hotel room rates have risen since the pandemic, but this is not sufficient to offset the increasingly higher expenses. Full-service hotels are even more affected since they have to manage costly facilities such as pools, spas, restaurants and meeting rooms.

At the same time, several small businesses have postponed or limited the scope of their investment projects due to a lack of funds. While programs such as the PADAT program (in French only) offer valuable support, independent establishments still face limited investment capacity.

A changing clientele with high expectations

The market is undergoing a transformation. Teleworking completely changed how people travel. Several clients now extend business trips to explore a location. This is known as “hybrid travel.”

A few strong trends have emerged:

• Travellers want more flexibility;
• They seek spaces where they can work;
• They prefer local, simple and authentic experiences;
• They spend time comparing before booking.

SMEs that want to succeed have aligned their offering with these new habits. They create simple and appealing packages, collaborate with local businesses (restaurants, spas, activities), fit out rooms where guests can telework comfortably and offer experiences that combine discovering the surroundings and relaxation.

Reservation platforms are useful, but costly

Online reservation platforms play a vital role in hotel visibility, but they can be costly for SMEs in particular. Commissions eat into direct revenues and reduce financial flexibility.

This is why several hotel owners are relying more on direct reservations. A few simple strategies that work include:

• offering an exclusive benefit such as lunch, parking or a late checkout;
• simplifying their website;
• responding promptly to requests;
• publishing targeted promotions on social media.

Each direct reservation represents a significant saving for an SME.

Investments required to stay ahead of the curve

Travellers want modern, comfortable and well-maintained hotels. To meet this demand, SMEs must invest in renovations and start out by focusing on:

• effective soundproofing;
• comfortable rooms;
• high-quality bathrooms;
• WiFi upgrades;
• smart locks.

The PADAT program (in French only) offers loans that allow hotels to launch projects that were repeatedly postponed.

A targeted improvement plan can boost client satisfaction… and average rates.

Seven practical ways to help you to get back on your feet

Despite the challenges, certain simple actions can help you to regain control.

1. Conduct a thorough diagnosis of your situation

   Identify where you’re losing money, monitor your margins and evaluate your borrowing capacity to plan investments.

2. Adjust your pricing more often

   Dynamic pricing doesn’t have to be complicated and it can help you to track demand.

3. Optimize cost management

   Negotiate your energy, maintenance and insurance contracts and adopt energy efficiency solutions.

4. Retain your workforce

   Through training, career progress, stability and recognition, create an environment that encourages employees to stay.

5. Focus on direct reservations

   Offer exclusive benefits, work on your website and simplify the booking experience.

6. Modernize gradually

   Prioritize soundproofing, bathrooms, comfortable rooms and technological tools.

7. Seek help quickly

   If your business is facing challenges due to debts, interest rates and lower revenue, our Licensed Insolvency Trustees can help you to restructure your finances before it’s too late.