A new report by Destination Vancouver warns demand for hotel rooms in the Lower Mainland could outstrip supply as early as the summer of 2026, forcing up prices and putting our ability to host world-class events at risk. Paul Haysom reports – Mar 6, 2023

A new report from Destination Vancouver warns a lack of hotel capacity could cost the city billions in economic impact and thousands of ‘unrealized’ full-time jobs, with demand set to outpace supply in as little as three years.

The report estimates about 20,000 new hotel rooms are needed in Metro Vancouver by 2050, about half of which would be in the city of Vancouver.

From the Rugby 7s, Grey Cup, Laver Cup and the Invictus Games, to the FIFA World Cup in 2026 or something as simple as the Canucks and Whitecaps weekend home games, Destination Vancouver says the economic impact would be extensive.

It warns not keeping up with demand would cost the region more than $30 billion by 2050 and more than 168,000 full time jobs.

“It’s a conversation we need to have around strategy with the federal government, First Nations, the City of Vancouver, so everyone is well aware of it,” said Minister of Tourism Lana Popham.

“We’re going to be looking for solutions,” she said.

The City of Vancouver itself is down 1,500 hotel rooms since 2010. 550 were also purchased by the city and B.C. Housing to convert rooms into supporting housing.

“We’ve lost hotels as they have converted due to the high cost of real estate, into housing. We’ve lost hotels with the use of them being turned into supportive housing, with programs that came forward during the pandemic, but what we really want to see is flexible, more nimble policies that allow hotel use across the city,” said Coun. Sarah Kirby-Yung.

It says significant investment is needed to recoup the losses, and existing development applications and permits submitted are currently insufficient.

Airbnb, which currently offers about 3,500 listings in the area., would like to play a bigger role.

“I’m thinking all these events coming to Vancouver, people are looking towards those as opportunities to leave town, and opportunities to make extra money by engaging in short-term rentals even for short periods of time,” said Nathan Rotman, Airbnb Regional Lead for Canada and US Northeast.

One of the biggest issues, the report points out, is space. One idea being floated is a hotel barge in Coal Harbour, that the city is open to.

Annual Resonance Consultancy ranking lists five Canadian cities among the 100 best metro regions on the planet in its annual report released November 28.

Resonance is a leading advisor in tourism, real estate and economic development, and its Best Cities rankings quantify the relative quality of place, reputation and competitive identity for the world's principal cities with metropolitan populations of 1 million or more,

Bloomberg calls it “the most comprehensive study of its kind; it identifies cities that are most desirable for locals, visitors, and business people alike, rather than simply looking at livability or tourism appeal.”

In Canada, Toronto is ranked No. 24; Montreal is No. 57; Calgary is No. 65, Vancouver is No. 69 and Ottawa came in near the bottom, ranked at No. 96, just ahead of Hanoi.

Calgary, the top-ranked city in Western Canada, topped Vancouver due to the Alberta city's business acumen, according to Resonance.

A wildly successful tourism season has Western Canadian hoteliers looking to build on the lessons of the past three years as a recession looms.

Occupancies rose 60 per cent nationally in the nine months ended September versus a year ago, pushing average daily room rates to $183.76, or 34 per cent above last year. This boosted revenue per available room (RevPAR) to $110.11, up 113 per cent versus a year ago.

“It’s been a remarkable recovery, and for us it’s been right across the country,” said Brian Leon, CEO of Choice Hotels Canada, speaking at the Western Canada Lodging Conference in Vancouver on October 25. “We’re going to end this year with RevPAR probably a little more than 10 per cent higher than it was in 2019. We would never have expected that.”

Vancouver led the country, with an average occupancy rate of 70.3 per cent in the period. Room rates followed suit, rising 49 per cent to a nation-leading $243.72 a night. RevPAR increased a stunning 153 per cent to $171.34 from just $67.69 a year earlier despite ongoing border closures.

“This market has really seen great recovery over the past year,” said Jim Chu, executive vice-president and chief growth officer of Hyatt Hotels Corp. “And that’s without China.”

The strength of demand in Vancouver stands out next to Calgary, where hotel performance continues to lag Western Canada. Occupancies averaged 57.1 per cent in the first nine months of 2022 while room rates are also below average at $153.63 a night. This compares to 62.5 per cent occupancy in the same period of 2019 when rates averaged $145.92.

RevPAR in most major markets has yet to return to pre-pandemic levels but hoteliers have also reopened with an eye to keeping costs in check. Shorter wine lists, smaller menus, and offerings tailored to visitors  – primarily leisure and group stays – have been critical.

“A lot of job-sharing, a lot of engineering of processes and tasks” took place, said Jiri Rumlena, president of SilverBirch Hotels & Resorts, which saw its workforce fall to 18 per cent of normal during the pandemic. It rebuilt its staff to 80 per cent of normal this summer, but guest experiences took longer to recover. “Standards didn’t come back in certain areas as they normally should have,” Rumlena acknowledged.

Labour woes

While consolidation of roles has helped address the labour shortage, and cutbacks in housekeeping helped control costs, Cindy Schoenauer, vice-president, hospitality and gaming with Cushman & Wakefield, isn’t sure it’s a strategy for long-term success.

“I don’t know if that’s something hotels want to keep doing because at the same time you’re talking about really rapid [room rate] growth,” she said. “There needs to be value to what you’re paying as well.”

The sector’s revival should be good news for workers after two years of turmoil.

“We’re not blind to the fact that the entire hospitality industry, ski included, have been in the forefront of media over the past two years and the basic narrative has been lack of stability,” said Christopher Nicolson, CEO of the Canada West Ski Areas Association, based in Kelowna. “As stability returns, that will definitely help recruiting as well.”

It won’t be easy, though. The sector was down 400,000 workers during the pandemic but recouped about 200,000 people this summer before returning to a deficit of 300,000 workers this fall.

While the federal Temporary Foreign Workers program has been tweaked to allow the sector to bring in up to 30 per cent of the workers it needs, the sector needs to continue working to secure domestic workers.

“We have to get out and tell our story,” said Susie Grynol, president and CEO of the Hotels Association of Canada.

Part of that story is that 90 per cent of hoteliers increased wages this past summer to attract workers.

“We want to be the sector people want to work in,” she said.

“We’ve seen leisure recover, but we have yet to see corporate [incentive travel] and meeting, conference group demand recover,” Schoenauer added. “It’s started, it’s just taking a little longer.”

Asset sales

Leon believes this year’s recovery will support fresh investment in properties that will improve the guest experience and position hotels for the future.

“Our hotels this summer, from a financial perspective, are in a lot better shape than they were a year ago,” he said.

The market is also benefitting from the removal of 6,800 rooms, primarily older product, since 2020, when governments stepped in at the onset of the pandemic to snap up properties for alternative uses, primarily social housing.

“You have rooms coming out that’s going to help our recovery,” McCluskie said.

However, with urban hotel markets still challenged by a lack of business travel, many of the 15 sales seen in B.C. this year have been in smaller, secondary markets outside the main centres. An example is the Kanata Hotel & Conference Centre in Kelowna, which sold this year for what is said to be highest price paid for a hotel in the region.

Just one hotel property changed hands in Vancouver, that was not purchased for redevelopment or an alternative use.

(Looking for Hotel for sale BC , we are happy to help.)

Well located and well-maintained apartment building, built in 1949, with stunning ocean views along desirable Crescent Road, Victoria, B.C.

Type of property; Multi-family

Location: 1860 Crescent, Victoria, B.C.

Number of units: 8

Property size: 14,857 square feet (approx.)

Sale price: $3.6 million

As a ­­­­commercial tenant, the monthly base rent you pay your landlord for leasing commercial space may not be the only rent you pay! Many commercial tenants will also pay a secondary amount for property operating costs. The good news is that both these rents are often negotiable. 

What Do I Pay for When I Pay Operating Costs?

To clarify, operating costs (also referred to as Common Area Maintenance/CAM, Triple Net/NNN Charges, or Additional Rent) are the costs of maintaining and managing a property. Examples of valid operating costs include property taxes, property insurance, maintenance, utilities, landscaping (which includes snow removal), and garbage collection. Valid operating costs will benefit all of the tenants in a commercial property—not just one or two. Commercial tenants need to understand and remember that operating costs are charged proportionately to all tenants. Therefore, a tenant occupying seven percent of a commercial property will, typically, pay seven percent of the total operating costs.

Operating costs are not, however, used equally. For instance, we are familiar with one tenant who created only one bag of garbage per week. He chose to load this bag into his own van, take it home, and place it outside with his own trash. Despite this, he was still obligated to pay his proportionate share of operating costs. In this case, it may be possible to exclude these charges for an individual tenant who can argue they are receiving no benefits from such operating costs.

What Shouldn’t I Be Paying For?

Any costs that are not covered by the commercial tenant’s contribution to Operating Expenses become the responsibility of the landlord. Understandably, landlords want to ensure that tenants’ fees cover all the building costs. What is wrong, however, is when all the tenants within a commercial property are paying needlessly to subsidize capital improvements on the building. The capital improvements costs could mean the construction of a new building or the installation of new pylon signs on a property when none existed before.

Another common scenario when operating costs can increase dramatically is when a new landlord purchases a building that has a large amount of deferred maintenance to be completed. The landlord’s motivation to complete this maintenance is to charge higher rents and fill vacancies, but this comes at the expense of higher operating costs for the current tenants. Commercial tenants should be looking at other similar buildings in the area to compare operating costs. If operating costs at one particular building are quite low and the property appears in need of updating, it is reasonable that these costs may rise significantly in the future.

How Do I Protect Myself from Paying Too Much?

A commercial property’s operating costs need to be completely spelled out in a tenant’s lease agreement. When this occurs, a tenant can examine, question, and negotiate each listed item. Beware that commercial landlords can be quite creative when it comes to listing operating costs. We have seen cases where landlords require all of their tenants to pay an annual fee to have a pool of money available for damage not covered by insurance. In most of these cases, the tenants were required to pay this fee for the entire duration of their tenancy. If damage occurs during a tenancy, a landlord will tap into this reserve fund; if a tenant relocates, the money that he/she paid into the pool will not be refundable.

When a building is fully occupied (or close to fully occupied), the landlord may be less motivated to try to charge their tenants more than their fair share. Before signing the lease, a tenant must ensure that there is no language within the lease permitting the landlord to charge back shares of operating costs for any vacancies to the tenants currently occupying the property. Even if your lease does not permit this, tenants must review their Operating Statements closely every year to ensure that they are not absorbing operating costs that should be attributed to any vacancies.

When it comes to deciphering operating costs, read carefully! These are a few of the potentially detrimental issues that can negatively affect commercial tenants: 

• Administration/Management Fees: If tenants are paying the property manager’s salary through operating costs, but the landlord adds a further 15 percent management fee to CAM costs, this can be considered double-dipping (or double-billing for essentially the same service). If the landlord levies administration fees on property taxes and/or insurance, it may be possible to exclude these items from the fee as there is very little landlord’s administrative work involved with these.
• Utilities: Electricity, natural gas, and water may be provided by the landlord or be separately metered for each tenant. In some cases, the landlord may have one meter on the property and a check meter on each tenant’s unit to measure consumption. If you’re paying your own utilities to the utility company, you’ll have your own meter. Often, the landlord bills back utilities to tenants in operating costs. Make sure that you know in advance what your lease agreement calls for so you don’t pay twice.
• Tenant Audit Rights: The landlord has a fiduciary responsibility for accountability to the tenants for the money collected from and spent on behalf of the tenants. Your lease should include tenant audit rights which allow you to examine the landlord’s books, if necessary.

Multifamily cap rate movement unremarkable in Q1

Sales activity in the Lower Mainland’s commercial real estate market reached the second-highest annual total on record in 2021.

There were 2,659 commercial real estate sales in the Lower Mainland in 2021, a 65.3 per cent increase from the 1,609 sales in 2020, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

Last year’s sales total is the second highest on record behind 2016 when 2,848 sales were recorded.

The total dollar value of commercial real estate sales in the Lower Mainland was $14.396 billion in 2021, a 66.7 per cent increase from $8.635 billion in 2020.

There were 148 restaurant business ONLY sold in 2021 in Greater Vancouver area including 2 restaurant spaces For Lease. Price range $100,000-$200,000 has the most restaurant business sold, next in line was total 49 restaurant businesses sold under $100,000.

TOP 1, Vancouver - 62 SOLD

TOP 2, Surrey - 17 SOLD

TOP 3, Burnaby - 12 SOLD

FULL REPORT