IT’S CHECKOUT TIME
MONTREAL HOTEL ROOMS are disappearing as buildings close or are converted to student housing. The downtown Holiday Inn and a Quality Inn on Parc Ave. are two of the latest.
Quebec’s largest Holiday Inn will close in April — shedding 60 jobs — after the downtown hotel was acquired by a joint venture eager to expand its stake in Montreal’s growing student housing market.
Quebec’s Rosdev Group sold the 488-room hotel for $65 million this month to Europe’s Beaumont Partners SA,
“Right now, the (student housing) choices are very limited.” HENRY MORTON, PRESIDENT,
CAMPUS SUITES INC.
and U.S.-based Campus Crest Communities Inc.—the same joint venture that is now converting the former Delta Centre-Ville hotel into a student residence slated to open this fall, a company press release said Wednesday.
“With its proximity to McGill University, we once again believe we have acquired an asset in an irreplaceable location at a discount to replacement cost,” said Ted Rollins, chief executive of Campus Crest, which has a 35 per cent stake in the new housing project.
“Our teams look forward to opening both Montreal assets for the 2014-15 academic year.”
The Holiday Inn Midtown on Sherbrooke St. W., is the city’s third hotel to be converted into housing aimed at Montreal’s estimated 200,000 post-secondary students, as U.S. and Canadian real estate investors continue scouting locations to tap into what they call an underserviced market.
“What’s driving (interest) are the foreign students who are growing year over year,” said Andrew Maravita, managing director for Colliers International’s Quebec operations.
“It’s going to be an up and coming market and an alternative to the traditional multi-residential sector.”
One privately held U.S. fund is in the late stages of a separate deal to buy yet another downtown hotel — a property that would be the fourth building converted into student housing, an industry source told The Gazette.
“Right now, the (student housing) choices are very limited,” said Henry Morton, president of Toronto-based Campus Suites Inc., which is working with a privately held U.S REIT to convert a former Quality Inn hotel on Parc Ave. into a 140-bed student housing complex called Parc Cité.
“Expectations by students and parents are changing (over housing). It’s a combination of demand from foreign students and local students who are looking for a nicer lifestyle than what’s available in the regular (housing market).”
And with the Harper government last week announcing a $20-million fund to boost the number of foreign post-secondary students in Canada, demand for housing will only grow in both Montreal and Toronto, predicted Morton, whose company is also developing an 800-bed residence at York University.
Prices for a room at Parc Cité, which combines dwellings with on-site amenities like study areas, kitchens and laundry facilities, will be competitive with the cost of renting a one-bedroom apartment in the area, he said.
The increase in student residences is expected to generate competition with the lower end of Montreal’s downtown apartment market, but not with the new condo units being purchased by investors for use as rentals.
“I don’t think it would take away from the condo market,” said Alexandre Sieber, senior vice president and managing director of CBRE Ltd.’s Quebec operations. “It’s just additional competition for the apartment sector. It’s going to have an impact, but I don’t think it will drastically change the city’s vacancy rate.”
The student residence boom comes at a time when Montreal’s hospitality industry — reeling over the last few years from rising operating costs and stiff competition for fewer clients — is in consolidation mode. Since the second half of 2012, a half dozen downtown hotels have either closed, or are to shut their doors — eliminating a combined 2,000 rooms. That’s about 10 per cent of Montreal’s estimated 21,000 hotel rooms.
Over the past few years, Montreal hotel owners have struggled with rising property taxes and labour costs, as European and U.S. tourists stayed away because of the economic crisis of 2008 and 2009. The then-high-flying loonie also hurt Montreal tourism.
Fierce industry competition prevents owners from charging more for rooms.
According to data from Tourism Quebec, the average nightly rate to stay at a Montreal hotel in November 2013 was $123. Ten years earlier, in November 2003, that room rate was just under $111.
Union leaders from the Confédération des syndicats nationaux, which represents 6,500 Quebec hotel workers, including Holiday Inn employees, will soon be holding a news conference to address the industry trend toward consolidation.
The Holiday Inn employees had been negotiating a new collective agreement at the time the hotel was sold.
While the weakening Canadian dollar, which dipped below 91 cents to the U.S. dollar on Wednesday, is generating optimism in Montreal’s tourism industry, the Quebec Hotel Association remains cautious.
“We hope that there will be more U.S. tourists but it’s still very, very fragile,” said Danielle Chayer, president and CEO of the Quebec Hotel Association.
“The hotel industry, tourism, is not like the education or health sectors where there will always be kids to teach and where sadly, there will always be sick people to care for,” she said. “As there are fewer clients, there has been a rationalization in the sector. Hotels’ fixed costs are very high, so the revenues must also be there. We need (labour) flexibility.”
alampert@ montrealgazette.com Twitter: RealDealMtl