City expected to continue adding hotel rooms downtown to meet demand
Robust demand and revenue at Vancouver’s hotels this year suggests the downtown core is ready for more hotel rooms, commercial real estate and tourism stakeholders say.
The hotel industry in Canada’s big cities has become the envy of commercial asset classes, according to a new report by Cushman and Wakefield. It says there has been a 11.3 per cent year-to-date rise in room revenue countrywide as of June.
Vancouver, Montreal and Toronto’s room revenues have experienced the most increase, rising by 7.2 per cent, 11.4 per cent, and 11.8 per cent respectively, the 2017 second-quarter Cap Rate Report said.
There has also been a 3.7 per cent rise in occupancy rates in the same cities in the first half of 2017.
“We’ve seen a significant pick-up in room demand and in the average rates ... based on the strength of the Canadian economy in general, and also the strength of tourism,” said Brian Flood, Cushman and Wakefield’s practice leader for hospitality and gaming.
He said Canada’s relatively low loonie and international marketing for Canada’s 150th birthday have also gone over well.
“The New York Times in January identified Canada as the numberone destination to visit in 2017, and that was based in part on the fact that it was Canada’s 150th anniversary.”
Flood said the strong tourism industry may also be boosted by political factors, meaning Canada has maintained open and welcoming appearances to international visitors.
“We’ve seen very significant gains in tourism from the U.S. over the past three years and more recently we’re seeing an uptick in international tourism as well,” Flood said.
He said domestic travel is also up, with Canadians spending more of their travel dollars in Toronto, Montreal and Vancouver.
In Vancouver, hotel companies are boosting prices amid rising demand. Postmedia recently searched on Booking.com for a one-night stay for one person in downtown Vancouver for the date of Friday, Sept. 8.
Of available rooms, and with “travelling for work” selected, the Hotel Ambassador was the cheapest at $239 for the night. That was followed by the Rosedale on Robson Suite Hotel for $289; GEC Granville Suites Downtown ($297); Days Inn Vancouver Downtown ($314); and Ramada Vancouver Downtown ($333). The priciest downtown room available that night was at the Fairmont Pacific Rim for $3,799.
“Hotels have the ability to adjust rates to coincide with market demand,” Flood said. “And a lot of hotel bookings are done well in advance. … You end up with a certain amount of inventory that’s available, and so in a market like Vancouver where it’s a high-demand market, those last 10 per cent or 20 per cent of the room-nights that are available are going to be sold at a significant premium.”
The numbers suggest downtown Vancouver is ready for more hotel rooms.
“I think we can expect to see continued growth,” he said. “We will see more hotel supply because the numbers are fairly compelling to justify new development,” he said.
There are 12,320 hotel rooms in downtown Vancouver, according to Tourism Vancouver. The 147 rooms at the Trump International Hotel & Tower are the most recent additions.
Tourism Vancouver expects about 820 new rooms to be added downtown by the end of 2019, including the combined 518 rooms at the two new luxury hotels that are part of the Parq Vancouver complex, expected to open this fall. (Tourism Vancouver’s total does not include the loss of 357 rooms when the Empire Landmark Hotel closed at the end of September to give way for two new condo towers.)
Over the first half of 2016, Tourism Vancouver tracked a 75 per cent occupancy for downtown Vancouver, and an average daily rate for rooms sold of $210. However, July, August and September are Vancouver’s strongest tourism months, meaning the second half of 2017 should be stronger.
“Continued growth of visitors to Vancouver presents a very strong case for additional investment in the hotel sector,” Ty Speer, president and CEO with Tourism Vancouver, said in an email.
He said 2016 marked the third year in a row Vancouver tourism broke visitation records with more than 10 million visitors last year.
That number will be surpassed in 2017, Speer said. He said travel from Australia is particularly strong, with an increase of 31 per cent over 2016, followed by Mexico (up 29 per cent), Germany (16 per cent), China (13 per cent), and the U.K. (11 per cent).
“Such strong demand, particularly in the second and third quarter, is driving very high occupancy rates for Vancouver hotels across the Metro region,” he said. “These occupancy rates, along with room rate growth, should be attractive to investors and developers.”