BUSINESS BOOMING AT VANCOUVER HOTELS
High room rates, occupancy pull in investors from home and abroad as ?enormous activity? helps offset industry?s poor performance in cities hit by oil slump
Evan B Duggan
The Vancouver Sun
Strong performance in B.C.’s hotel industry is helping to offset losses elsewhere in Western Canada’s hotel market caused by weak oil and gas prices, according to a new report by global commercial real estate firm CBRE.
Pain in the oilpatch was the major cause of a 26.1-per-cent drop in per-room revenue in Calgary for the first quarter of this year, according to the 2016 Canadian Hotels Outlook.
Meanwhile, Toronto and Vancouver have been experiencing high room rates and high occupancy figures. Revenue per available room rose 16 per cent in Vancouver in the first quarter of 2016 and nine per cent in Toronto.
The Canadian market has also built on 2015’s record investment volume of more than $2.3 billion, the report said. Annual transaction volumes of roughly $2.5 billion is the new normal for the Canadian hotel market as strong revenues pull in more investors.
So far this year, there have been 45 hotel transactions across Canada worth $600 million. That is down from the same period last year when there were 65 deals worth $920 million. But the second half of this year is shaping up for a “significant amount of activity” that will rival or beat last year’s totals, said Bill Stone, executive vice-president with CBRE’s Hotels Capitals Group.
“We’re seeing enormous activity in … Vancouver and Toronto,” Stone said. “Vancouver has been appealing to a broad array of investors, a number of them offshore and a lot of domestic.”
B.C. hotel profits were up 28 per cent in 2015 and are expected to grow 13 per cent this year. Hotel profits in Alberta fell 31 per cent last year with a drop of another 27 per cent expected this year.
There haven’t been many rooms added to Vancouver’s hotel inventory in recent years, said Cindy Schoenauer, director of valuation and advisory Services at CBRE in Vancouver. “It (new supply) was less than one per cent in 2015, and there was almost negative growth in 2014 and 2013, so it’s a market that hasn’t seen a lot of supply,” she said.
But demand for hotel rooms in Metro Vancouver is strong, reaching 70 per cent occupancy in the first quarter of this year, she said.
The price for a hotel room is also climbing here, she said. “Revenue per available room in Alberta is down 25 per cent, whereas in B.C., we’re up 15 per cent, so we’re really seeing two different things happening when you’re looking at the western Canadian numbers.”
Schoenauer said more hotel rooms are on the way in Metro Vancouver. Nearly 150 rooms are set to open this year at Trump Tower. Parq Vancouver, a new $600-million “urban resort” with two hotels totalling 517 rooms and suites, is expected to open next to B.C. Place in December. She said a 144-room hotel in Surrey is being built by Marriott Autograph Collection.
Suburban markets are feeling the benefit of a tight downtown market, Schoenauer said. “Richmond, North Vancouver, Burnaby and Coquitlam, they all feel the benefit from that,” she said, adding that markets outside of the City of Vancouver have more opportunities for developers to buy land for new hotel projects.
It’s now tougher than ever to book a room in Vancouver during the peak summer season.
“We’re tracking about 9.8 million overnight visitors this year, and we expect that to be a record year,” said Tourism Vancouver’s vice-president of marketing, Stephen Pearce. “Last year was a record year with 9.3 million, and 2014 was a record year as well.”
He said a lot of growth is coming from U.S. visitors and from China, which has become Vancouver’s largest source of visitors outside of the U.S. Pearce said the federal government’s recent decision to eliminate visa requirements for Mexicans is also expected to give the city’s tourism sector a boost.
“Moving people off peak season is one of the things that’s important to us,” he said. “There’s lots of availability and great prices year round, but particularly trying to get people to pay attention to the fall and the spring and winter.”
Pearce wouldn’t say definitively if Vancouver needs more rooms. “There is a lot of availability at other times of the year,” he said.
A relatively low Canadian dollar might not have the effect on local visitors that people expect, he said. “Does exchange rate drive visitation? To a limited extent I think it does. But I think that it’s overrated.”
He said Americans from more distant states are coming here more than ever. “They’re not as dialed into the exchange rate differences,” he said. “It’s not uncommon to get visitors coming into our information centres wondering which way it goes. Do they get more or do we get more?”
Tourism is a business that can turn on or off very quickly, he said. “As ripples of insecurity percolate through one economy, we need to be looking at ways to offset that by an emphasis on other areas.”
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