CITY HOTEL ROOM BOOM
Has it reached its peak?
Calgary is undergoing a hotel room boom despite a recent decline in occupancy rates.
Colliers International, in a report this week, said hotel supply in the city will grow by 4.7 per cent, or 1,703 rooms, this year, compared to an expected 1.1- per- cent increase nationally. Most of those new city rooms — more than 900 — will be at hotels going up near the Calgary International Airport.
Colliers said 11 hotels are under construction in Calgary — six around the airport, three downtown and two in the south. Seven are scheduled to be completed this year with the other four to be finished in 2016. The 103- room Hotel Clique opened near the airport last month.
The Alberta government’s Tourism Market Monitor said Calgary’s hotel occupancy rate was 70 per cent in 2014, a 2.9- per- cent decline from 2013. The average daily room rate rose 2.8 per cent to $ 166.67.
Tourism Calgary chief executive Cindy Ady said developers are taking a long- term view of the local market, which has been underserved.
“Up until just this year, we’ve been under a lot of pressure because of lack of hotels,” she said. “It’s needed.
“Have we had slight interruption? Sure, but they’re still continuing because they know as soon as recovery comes we’re going to be right back at the same spot again.”
The Calgary Hotel Association has said hotel rooms will increase by 20 per cent over the next three years. The city had 13,106 rooms at the end of 2014, following a 3.9- per- cent increase in rooms.
Alam Pirani, executive managing director with Colliers International Hotels, said Calgary has long been a resilient hotel market.
“This whole issue with the oil crisis is obviously something that’s going to have an impact. Two months don’t tell an entire story, but for the two months in 2015 compared to 2014 the market has seen a decline on the ( revenue per room) basis of 5.6 per cent,” said Pirani.
“In our opinion, the Calgary market has always been a very strong market. It’s got a very strong diversified corporate, as well as tourism, base.
Of the new hotel rooms, 914 will be added near the airport, where a $ 2- billion expansion project is continuing. Another 444 rooms will be added downtown, with 345 in the city’s south.
Ady said hotel expansion near the airport speaks to the importance of business travel, which accounts for 25 per cent of local tourism, compared with about 12 per cent for most Canadian cities.
“That’s a big piece of business. I think it’s moderating right now but it will recover. Anyone who has lived in Alberta knows it’s coming back,” said Ady.
Marc Staniloff, chief executive of Superior Lodging Corp., said the company will be open a new Courtyard Marriott and Residence Inn Marriott in the southeast community of Seton by December.
That project will boast 225 rooms. The company also plans to build a Microtel hotel in the area in the future, said Staniloff.
“Downtown Calgary has a huge shortage of rooms,” he said. “That’s one of the reasons people are looking at it. At the airport typically whenever you get an airport doing what Calgary’s doing you see a big influx of hotels because it’s doubling in size.”
However, Staniloff said he believes proposed hotel expansion near the airport may be too bold.
“The problem with the airport is there’s I believe 22 hotels planned for the airport region. All of those cannot get built. That would kill the market. Everybody’s rushing to get in there,” he said.
“With the downturn in the oil, you’re going to see a lot of those projects probably slow down a little bit but after having said that, the airport needs rooms.”
Canmore- based Clique Hotels & Resorts opened a 103- room hotel on airport property last month. “The reality is that Calgary has the strongest occupancies in Canada as well as the highest average rate,” said Jim Muir, the firm’s principal shareholder and president.
He said barriers for new hotels in the downtown core include land prices and the cost of development.
Calgary Chamber of Commerce spokesman Scott Crockatt said the organization has often heard the city does not have enough hotel rooms. “We’re thrilled to see any time Calgary industry is growing dramatically,” he said. “The hotel industry, in particular, is experiencing some dramatic growth,” he said.
“( Hotels) are very important for the vacation traveller and also for the business traveller and we’ve heard that absolutely there’s certainly periods during the year when there is very, very low or no availability in Calgary.”
The Colliers report found 23 per cent of hotel transactions last year involved Alberta properties. The most, 35 per cent, occurred in Ontario. The 27 hotel sales in Alberta totalled $ 328 million and involved 3,175 total rooms.
Colliers estimated new hotel room supply in Canada’s 17 major markets grew by 0.9 per cent in 2014, slowing from 1.1 per cent growth in 2013.
Calgary’s four hotel transactions totalled $ 88.3 million in 2014, up 23 per cent from the previous year, and an average price per room of $ 120,700.