Metro Vancouver needs 20,000 more hotel rooms to meet demand over the coming decades

Mar 6 2023, 9:45 pm

Without increasing the pace of new additional hotel construction over the short- and long-term, Metro Vancouver faces overwhelming economic opportunity losses from the inability to meet the real demand from growing tourism.

Hotel room capacity is key to supporting the tourism industry, which is one of Vancouver’s largest economic sectors and strengths — supporting tens of thousands of jobs in hospitality, restaurants, retail, and services.

Newly released findings today by Destination Vancouver, the local tourism bureau, show 20,000 new additional hotel rooms will be needed in Metro Vancouver by 2050, including 10,000 within the City of Vancouver.

As of 2022, Metro Vancouver has a hotel supply of 23,292 rooms across 163 properties, including 13,290 rooms in 78 properties within the City of Vancouver.

But before there can be a net gain, there is a lot of capacity to catch up on from rewinding the significant pre-pandemic hotel room losses to residential conversion and redevelopment — such as the major supply losses of the Empire Landmark Hotel and the Coast Plaza Hotel — and the major pandemic-time losses from governments acquiring properties for rapid housing for the homeless. More specifically, 550 rooms were lost from Vancouver from their conversion into supportive housing earlier in the pandemic.

The City of Vancouver’s number of hotel rooms reached an all-time high of 15,242 rooms in 2002, and there was an attrition of 1,100 rooms between 2008 and 2018. The region as a whole is down by about 2,000 hotel rooms since 2010.

Nearly all of the losses in Vancouver are located within the downtown area.

Currently, based on publicly posted development applications and building permits, the region is expected to see 3,452 new additional hotel rooms from new building developments, including 670 within downtown Vancouver and 1,045 in other areas of the city. This additional capacity is not guaranteed, of course, given the steps needed to receive various approvals, and construction timelines.

But this new capacity will be far from sufficient to meet growing short- and medium-term demand through the end of this decade.

Furthermore, if the supply of hotel rooms remains at current levels, real demand will exceed supply in the summer months in the City of Vancouver starting in 2026, the summer months in the rest of Metro Vancouver by 2028, and every month of the year across Metro Vancouver by 2040.

Vancouver will also be hosting major international events over the coming years that have significant accommodations capacity needs, including tennis’ Laver Cup in 2023, the Invictus Games in 2025, and the FIFA World Cup in 2026. As well, in 2025, Vancouver will host Alcoholics Anonymous — the largest convention in the history of the region, with over 50,000 delegates from around the world.

It is forecasted that Vancouver’s visitation volumes will return to pre-pandemic 2019 levels by 2025, and the growth will be at rates slower than the growth in visitor volume in the decade before the pandemic. In 2019, the region saw a record of over 11 million overnight visitors.

Destination Vancouver president and CEO Royce Chwin warns the persistent supply-demand imbalance means hotel prices will see significant upward pressure. With only expensive hotel rooms to offer, this also limits the type of visitor to Vancouver and reduces the region’s competitiveness in landing the rights to host tourism- and visitor-generating events.

“This is crucial for our global destination competitiveness,” said Chwin. “Lack of available hotel rooms will make visiting Vancouver even more expensive, and the city will be less competitive in attracting major conferences, large sporting events and leisure group travel. Vancouver is running short on time to prepare for the influx of visitors and the economic impact they contribute to the city. Those visitors will just go elsewhere.”

Tourists may skip BC altogether, given that Vancouver is the gateway to the rest of the province, and choose other parts of Canada for their travel. The economic losses in Metro Vancouver would also be felt in smaller cities and communities across the province.

Between 2022 and 2050, as a result of the wide gap between real demand and hotel supply, the cumulative economic impacts are projected to be $30.6 billion in foregone output, $16.6 billion in foregone GDP, over 168,000 in full-time equivalents of foregone employment, and $7.5 billion in foregone tax revenue for the municipal, provincial, and federal governments.

About half (53%) of the foregone visitor spending is expected to be on accommodation, while about one quarter (23%) is expected to be on food, which is a major customer group in the equation to sustain the breadth of restaurant businesses in the city — in addition to the customers who are local residents and office workers. Transportation, retail, and entertainment expenditures account for 9%, 8%, and 7%, respectively.

As can be expected, most of the foregone spending occurs during the five summer months of May to September, when peak season demand far exceeds available supply.

“I think it’s fantastic that Destination Vancouver has quantified the economic impact of not having enough hotel rooms, and it just shows how much opportunity we have ahead if we actually expedite and become more flexible, and maybe have hotels across the city,” said Vancouver City Councillor Sarah Kirby-Yung in an interview with Daily Hive Urbanized.

“Imagine all of the great events that Vancouver has in its future, and what the strong tourism industry we can have if we just delivered the capacity needs of hotels.”

She says Vancouver City Council’s recently approved expedited area planning process for the Granville Entertainment District will help catalyst new hotels in downtown Vancouver, and the Broadway Plan also includes strategies to encourage new hotels near the future SkyTrain stations opening in 2026.

High land costs, especially in the downtown Vancouver peninsula, are one of the major challenges for catalyzing new hotel building developments.

Some of the potential hotel projects in the pipeline include a new proposal to build a 32-storey hotel with 587 rooms replacing the parkade at 516-534 West Pender Street (at Richards Street), which would be the largest new hotel in terms of total room count in Vancouver in more than two decades since the completion of the Sheraton One Wall Centre.

There is also a proposal for a 30-storey hotel tower with 393 rooms at 848 Seymour Street, immediately east of the Orpheum Theatre.

The former Four Seasons Vancouver Hotel tower at CF Pacific Centre is expected to reopen in 2024 or 2025, following an extensive renovation and reconfiguration for a new upscale operator. The hotel in its previous configuration had 372 rooms.

Within the Broadway corridor, two new hotels are planned immediately adjacent to the future SkyTrain Oak-VGH Station — a replacement of the existing Park Inn & Suites with a new 156-room hotel to the east, and a brand-new 12-storey hotel tower with 147 rooms to the north.

A mixed-use development at 5910-5962 Cambie Street — immediately east of the new Oakridge Centre mall and SkyTrain Oakridge-41st Avenue Station — will include a 270-room hotel.

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