B.C. hospitality industry sees growth split along K-shaped lines

Wealthy spending lavishly

Photo: Rob Kruyt, BIV

Graeme Benn, general manager at the Parq Vancouver's Douglas, Autograph Collection hotel and its JW Marriott Parq Vancouver hotel, has seen stronger revenue growth for premium-category rooms.

Hospitality and tourism sector executives increasingly discuss a buzz-phrase in earnings calls with analysts: the K-shaped economy.

The upper arm of the K indicates a well-to-do consumer increasingly willing to spend lavishly. The bottom slope of the K indicates other consumers who find discretionary income becoming scarcer.

This phenomenon shapes business decisions and it impacts life for consumers.

Airline executives are discovering this. So are restaurant owners, hoteliers and others who cater to the tourism and hospitality sectors.

Delta Air Lines Inc. (NYSE:DAL), for example, reported in January that in the final quarter of 2025, quarterly revenue from economy seating fell seven per cent while revenue from premium-seat classes rose nine per cent.

Those numbers add clarity to what has been rhetoric from executives at other airlines.

Air Canada (TSX:AC) executive vice-president Mark Galardo in November said “we see a continued shift in consumer preference toward premium products. Once thought of as mainly a corporate segment, we see an opportunity for leisure travellers seeking our signature front-cabin experience.”

He forecast continued strong demand for business class and first-class seating into 2026.

“This has come up quite a few times in earnings calls by the CFOs: the K-shaped economy,” said retail analyst Bruce Winder, president of Bruce Winder Retail.

BIV has reported on retailers making moves to address this trend, as well as data backing up the existence of this phenomenon.

Statistics Canada data show the wealthiest 20 per cent of Canadians enjoyed a 5.9 per cent compensation increase in 2024, compared to 2023 – higher than the average.

The average compensation increase for the top 10 paid executives at B.C. public companies shows the phenomenon even more. They earned an average $13.6 million in 2024, up more than 11 per cent from the top 10 paid B.C. executives in 2023, who made an average $12. 2 million, according to BIV research.

Not all tourism and hospitality businesses are flourishing simply because they offer high-end offerings.

One of B.C.’s highest-end tourism offerings is the Rocky Mountaineer train.

“Things are moving along at Rocky,” CEO Tristan Armstrong said in an email to BIV when asked how business was going. He sounded cautious in his outlook for the tourism operator.

“We continue to wrestle with market-wide headwinds while we drive work to reinforce our offering. Like everyone, I think we're hopeful for great macro-economic stability in the near term.”

Restaurants see evidence of K-shaped economy

Northland Properties Corp. restaurant group president Alan Howie told BIV that while he has heard a lot of buzz about the K-shaped economy, he believes restaurants across the price spectrum can do well if they are run well and provide value.

By that, he said, he means “service, management, food quality, atmosphere—all those sorts of things.”

His company in January bought the Denny’s Corp. trademark and intellectual property for Canada.

Denny’s, which has 85 locations across Canada, has six restaurants under construction. Howie said he plans to double the restaurant chain’s size within five years.

Part of Denny's success is that it offers more affordable fare but it also provides quality food and great service, Howie said.

On the other end of the scale, Howie oversees the Michelin Guide-recommended restaurant Boulevard Kitchen & Oyster Bar, which he said is doing very well.

His company's Chop Steakhouse & Bar has grown to 18 locations across six provinces.

"Chop is a brand that is a mid-scale-premium steakhouse and it is doing really well," he said. "It's been the strongest brand of any of our restaurants."

BC Restaurant and Foodservice Association CEO Ian Tostenson told BIV he fears for many eateries that are mid-priced and do not provide sufficient value, quality and service to draw customers.

"One problem we're having is in that mid-range restaurant market where people are feeling a lot more pressure financially," he said.

"There is a crowd of people that have the money to go and play at the top end of the market. You also see fast food outlets offering more value meals. That says they are trying to attract a reluctant consumer."

Competitors at premium-casual eateries, such as Earls Kitchen + Bar and Tap and Barrel, see customers increasingly wanting discounts on slower weeknights.

"You have to have happy hours," said Earls' owner Stan Fuller. "We do wine nights, too, for the same reason. You have to give people a good deal to create that warm spot, and then your Thursdays, Fridays, Saturdays and Sundays are sort of full bore at full price."

Tap and Barrel owner Daniel Frankel said he understands the financial pain many customers are feeling.

"We've been hit hard in Canada," he said. "Our economy is pretty shaky right now. We're walking on eggshells here."

He said he sees customers trade down in what they buy.

"Everybody's competing for the best happy hour and it's a bit of a race to the bottom right now. Nobody wins that race, right? Because everybody ends up losing on that."

Hoteliers navigate K-shaped economy

Tony Capuano, CEO of the world's largest hotel company, Marriott International Inc. (Nasdaq:MAR) made clear to analysts in November that his company was seeing most of its growth from premium offerings.

Its growth in revenue per available room (RevPAR) was "strongest at the higher end, as higher-end consumers have demonstrated resilience to macroeconomic uncertainties and continue to prioritize travel," he said.

"Luxury RevPAR rose four per cent, and performance weakened down the chain scales."

Hotel general managers in Vancouver echoed Capuano's assessment.

"Pricing for our premium-category rooms are growing exponentially faster than for our entry-level rooms," said Graeme Benn, the general manager at the Parq Vancouver's Douglas, Autograph Collection hotel and its JW Marriott Parq Vancouver hotel, both of which are Marriott hotel banners.

"We are seeing more occupancy and rate growth in our premium-room category than in our standard rooms in the hotels."

He anticipates that when Vancouver hosts seven World Cup games in June and July, there will be a surge in demand and prices, particularly in the days before the two July knock-out matches.

"If their team qualifies and makes it to the round of 32, or 16, and they have the resources to be able to make a last-minute decision, within a week or 10 days, they could say, 'I'm going to go to Vancouver, and I need a hotel. We're going to buy tickets whatever the cost is.'"

Over at the Sheraton Wall Centre, another Marriott property, general manager Sean Antonson told BIV his hotel is moving its lounge from the 25th floor to the 34th floor to replace meeting rooms.

That space is set to open in April for those who want a premium experience, he said.

"Our business travellers and those in the Marriott Bonvoy tier are people coming to Vancouver who want an elevated experience," he said.

The lounge would resemble premium lounges at airports, with prices for entry based on memberships and affiliations, he said.

The general public will likely be able to buy a day pass for between $50 and $75, and get free breakfast and evening hors d'oeuvres, said Antonson.

"We'll have a business centre and games up there so it will have a vibe and be a neat place where you can watch the sunset and have a glass of wine," he said.