The hotel industry is just getting back on its feet after some lean years following the 2010 Winter Olympics and is seeing an improvement in gross operating income back to more historical levels.
This is at least partially driven by strong bookings from U.S. customers due to the strength of the U.S. dollar and consumer confidence south of the border.
There are a number of hotel openings planned for 2017, including the Marriott Autograph in Surrey, the Marriott Autograph in Vancouver, the JW Marriott and the recently opened Trump Hotel. However, two hotel closures have also been announced: the Coast Plaza at Stanley Park and the Empire Landmark Hotel. With these changes market supply will grow less than 1% in 2017 while we expect demand to increase beyond that.
The convention schedule for 2017 is not as strong as 2016’s; however, 2018 will be a relatively strong year in the city of Vancouver. The result of this will be an opportunity to improve performance in the hotel sector, where we are anticipating 6% to 7% increases in retail pricing. This price increase is much needed because hotel rooms in Vancouver have been a relative bargain when compared with other global cosmopolitan cities.
One of the challenges that many businesses in Vancouver have is the inability to recruit employees from other markets and retain top talent due to the lack of affordable rental housing in the Greater Vancouver region. The vacancy rate is often near zero, and many businesses are frustrated over their inability to assist new or existing employees to find affordable monthly rental accommodation.
In some cases, our businesses have lost potential employees due to this chronic rental shortage. In particular, there are significant labour shortages of first cooks, housekeepers and night staff.
Millennials who would normally enter these positions are often leaving Vancouver to seek out cities with a more affordable housing market. On the flip side, this is also an opportunity for hotel owners. For example, some of the Lotus Hotel’s units have been converted to longer-term rental units.
In terms of what is happening internationally and south of the border, Canada is viewed very favourably as a great place to do business, to visit and to live. These are all positive indicators for our industry, so on that front we are very optimistic. Vancouver continues to be favourably viewed by real estate developers; however, we do not see many additions to supply in the near future due to land acquisition costs. Any supply that does come into the market is bound to be on the luxury end because those are the only types of properties in Vancouver that can generate sufficient returns for an investor.
Zahra Mamdani is president of Jamal Retail Ventures. The Young Professionals Organization (YPO) member will be appearing at the YPO’s March 1-3 conference in Vancouver.
