Hoteliers discuss the state of development at the Western Canadian Hotel & Resort Investment Conference

While Western Canada is teeming with opportunities, investors are realizing development comes with a number of challenges. This past October four hoteliers shared their wisdom with 220 attendees at the Western Canadian Hotel and Resort Investment Conference, organized by Big Picture Conferences, and held at the Sheraton Vancouver Wall Centre.

Speaking on the Hotel Leadership Panel, moderated by Steve Ladurantaye of The Globe and Mail, Manlio Marescotti, vice-president of Lodging, Development for Marriott Hotels Canada, said, “There are many development opportunities in Western Canada, especially Alberta.” Many of those opportunities are fuelled by a surge in the oil and gas sector. “We’re looking at opportunities not only in Calgary and Edmonton, but also in secondary markets,” said Marescotti. Marriott boasts 69 properties in Canada, 12  of which are in Western Canada, with an additional four slated to open in Vancouver, Vernon, Kamloops and at the Edmonton airport within the next 18 months.

Marescotti was joined on the panel by Marc Staniloff, chairman and CEO, Superior Lodging Corp.; Jean-Yves Germain, Groupe Germain; and Bob Pomeroy, president, Pomeroy Group. Like Marescotti, Staniloff is looking to add locations in oil-rich Alberta, B.C. and Saskatchewan. He’s hoping to add 75 Microtel hotels in the next 10 to 15 years.

“We have four hotels on the go now,” added Germain. “Our goal is to put three more in the pipeline next year and establish ourselves across Canada as soon as possible.” Germain’s limited-service Alt brand is being developed in downtown Winnipeg and Montreal, and at the Halifax and Toronto airports.

“Don’t under-estimate the condo owner”

Panellists focused much of their discussion on mixed use projects. During the last decade, the residential market has driven the increase in hotel real-estate sales. That reality has made building and operating a standalone hotel in a primary market, such as downtown Vancouver, virtually impossible. “Mixed-use projects are a necessity for downtown real estate,” said Germain, adding hotel, residential and office mixes in Calgary and Edmonton show greater volatility than those in Vancouver.

In the past, building residences as part of a mixed-use development seemed like a panacea. “The hotel was seen as being almost a secondary component with the driver being residential,” Marescotti explained. “Now you have a residential market that isn’t as strong in, for example, Calgary and Edmonton, so those cities have to look at other mixed-use components such as office, retail and restaurant space.”

When done right, Marescotti says mixed-use projects can have residential benefits.

“Don’t under-estimate the condo owner,” added Germain. “They’re buying a lifestyle, such as paying for the hotel concierge if they choose, but they must also pay a monthly fee.”

“My concern is that five to seven years from now, if the hotel is not successful, and the original euphoria of residential  sales is a memory, the owner may not be prepared to invest the necessary capital to improve or even maintain the hotel,” said Marescotti. “Therefore it’s important that with mixed-use projects, all the components, including the hotel, be financially viable.”

Panellists concurred that Western Canada’s expansion comes with a number of challenges, yet all remain optimistic — at least for the next few years. The economies of Alberta and Saskatchewan are booming, so tremendous development is needed there. As Monique Rosszell, senior vice-president, HVS, Toronto, noted in her concluding comments, sometimes you can’t even get a room in Saskatoon or Regina — every hotelier’s dream challenge.

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