Opinion: Too little is being done to fix Vancouver’s hotel crisis | Daily Hive

Opinion: Too little is being done to fix Vancouver’s hotel room shortage crisis

Hyatt Regency Vancouver Hotel in downtown Vancouver. (Hyatt)

Vancouver is facing a serious hotel shortage. Tourism numbers are rebounding and reaching new heights, hotel room prices are soaring, and visitors are struggling to find places to stay.

Despite this, new hotels simply aren’t being built at the pace required to meet demand.

While the City of Vancouver continues to approve hotel projects on paper, the reality is that few, if any, are breaking ground, and without a renewed effort from City Hall, this will be the case for a long time going forward. This inaction will cost the City of Vancouver billions of dollars.

This inaction isn’t just a problem for tourists. A lack of hotel supply puts financial strain on local businesses, hurts Vancouver’s global competitiveness, and fuels an over-reliance on short term rentals, further worsening the city’s housing crisis. Meanwhile, visitors who find Vancouver’s hotel rates too high are staying in surrounding municipalities, taking their spending and tax revenue with them.

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For all the discussion about needing more hotels, the question remains: why isn’t the private sector building them? The answer is simple, the economics don’t make sense, and the City’s policies are doing nothing to change that.

The illusion of progress: proposals and approvals aren’t enough

Vancouver does have a growing number of hotel proposals that have received the municipal government’s approval. Among those that have been approved, not a single one has moved into the construction phase.

Among the 100% high-rise hotel tower proposals are the 292-room Stanley Park hotel tower at 2030 Barclay Street, a 460-room hotel at 717 Davie Street, and a 578-room hotel at 534 West Pender Street. On paper, these select number of proposals represent over 1,300 hotel rooms.

One of the largest 100% high-rise hotel tower approvals was in December 2023, when Vancouver City Council approved the rezoning application for the 30-storey, 393-room hotel at 848 Seymour Street. When this project was first announced in 2022, the proponents made it clear that they would like a timely review and approval to build it in time for the 2026 FIFA World Cup. But construction has yet to begin, now making this timeline impossible to achieve.

Hotel concept for 848 Seymour Street, Vancouver. (Perkins & Will Architects/Forme Development/Paul Y. Construction)

888-896 Cambie Street Vancouver Marriott NPG hotel

Concept for the mixed-use tower with a Marriott hotel at 888-896 Cambie Street, Vancouver. (McKinley Studios/Nonni Property Group)

A growing number of hotel projects will remain nothing more than concepts in limbo because developers simply cannot justify the growing cost of building them.

Most recently, a new 30-storey, mixed-use hotel and residential tower was proposed at 888-896 Cambie Street, which would bring a Marriott-branded hotel with 225 rooms to Yaletown alongside residential strata units.

This is precisely the type of development model — combining residential units in the upper levels and hotel rooms in the lower levels — that has made other hotel projects financially viable in the past, including the Sheraton Vancouver Wall Centre, Shangri-La Hotel Vancouver, and Fairmont Pacific Rim Hotel. It is also no coincidence that the first two projects were the tallest buildings in Metro Vancouver at one point in time.

We can even look to Metro Vancouver’s suburbs as an example. The 54-storey 3 Civic Plaza tower — built by the City of Surrey as an economic development project for its emerging downtown area, and the tallest building in Surrey — has 349 condominium homes in its upper levels to subsidize the 144-room Marriott-branded hotel in the lower levels.

Yet, even if mixed-use hotel and residential projects like this are approved, there’s no guarantee construction will begin without significant changes to City policies.

If approved, the proposed project that has the best chance of crossing the finish line of completion and opening is next to the Vancouver Convention Centre — only because this 250-room property would be a permanent floating hotel on a pre-fabricated barge towed into the harbour, a project that does not have local building construction and land acquisition costs in its pro forma equation.

Concept for a floating hotel at the Vancouver Convention Centre. (Sunborn International Holding)

The economics of Vancouver hotels increasingly don’t work

A common misconception is that Vancouver’s high room rates mean hotel owners are making massive profits. That assumption couldn’t be further from the truth.

Yes, room rates have climbed significantly in the past decade, but the cost of both building and operating a hotel has grown even faster. The capital costs alone — land acquisition, construction, permits, and taxes — have skyrocketed. On the operations side, labour costs have surged, with downtown hotel housekeepers now earning close to $40 per hour through the latest collective agreements, while food supply, utilities, and maintenance expenses have all increased sharply.

With land, construction, and numerous government charges in Vancouver being among the highest in North America, this makes large-scale hotel only construction prohibitively expensive. At the same time, the cost of labour and materials has surged in recent years due to supply chain issues, inflation, and an ongoing shortage of skilled trades. Adding to the financial burden are high City-imposed development charges and taxes, which further increase the cost of building.

Despite the high room rates, hotel owners are seeing shrinking margins, not growing profits. The financial burden of running a hotel in Vancouver is higher than ever, and for developers, the numbers make it difficult to justify new construction.

sheraton one wall centre glass replacement

2013 glass replacement project of the Sheraton One Wall Centre. (RDH Building Science)

For a city experiencing record-high tourism demand, it may seem surprising that hotels aren’t being built. But the reality is that for developers, hotel projects simply don’t pencil out. The return on investment for a new hotel in Vancouver is lower than what an investor would get from a Guaranteed Investment Certificate (GIC), making hotels an unattractive option compared to other types of development

Even if a developer is willing to take on the risk, securing financing for a hotel project is another major obstacle. Banks and financial institutions are hesitant to lend for hotels because they see them as extremely low return, but high-risk investments. Unlike secured purpose-built rental housing, which provides steady long-term income, hotels face seasonal fluctuations, labour cost challenges, and volatile market conditions.

Without financial incentives or alternative revenue streams, private developers have little reason to invest in hotel projects when they could build condominiums or rental housing buildings instead.

The policy roadblocks holding Vancouver back

Beyond the financial challenges, the City’s own policies are making it even harder to build hotels. The City’s outdated planning and engineering requirements add unnecessary complexity and cost, slowing down projects before they even begin. This is starting to sound like a broken record and yet there is no apparent urgency from City staff.

While rental housing developments receive tax breaks and density bonuses to encourage construction, hotels are given no such incentives. There is no waiver on development cost levies, no property tax relief, and no streamlined approval process. Hotels are treated the same as any other commercial development, despite the fact that they are an essential part of the city’s economy.

Adding to the problem is the City’s reluctance to approve the building heights necessary to make hotel developments financially viable. The only way most hotels have been built in Vancouver in the past decade is by incorporating strata market ownership condominium homes into their projects to help offset costs. Yet, the City remains hesitant to approve taller buildings, despite the fact that greater height is necessary to make strata-supported hotels feasible. Without this flexibility, developers are left without the financial tools they need to make hotel projects work.

One of the biggest myths is that hotels can be built and sold like condominiums. While condominium developers can pre-sell units and move on, hotels require long-term operational management. Hotel owners must deal with fluctuating demand, marketing, rising labour costs, building maintenance, and continuous reinvestment. Unlike rental apartments, hotels require far more active management, making them riskier investments.

Fairmont Pacific Rim in downtown Vancouver. (Fairmont)

Another misconception is that major hotel brands like Marriott and Hilton are responsible for building hotels. They aren’t. These brands operate on a fee-based model, taking a percentage of revenue while leaving developers and owners to absorb all the financial risk.

Perhaps the most damaging misconception is that because hotel applications exist, Metro Vancouver is on track to solve the shortage. Having hotel approvals on paper does nothing if those projects aren’t moving forward.

Without major policy changes, the number of hotel rooms in Vancouver will continue to stagnate, making it harder and more expensive to visit the city.

If the City is serious about addressing Vancouver’s hotel shortage, it needs to introduce real incentives to make hotel development attractive.

The City must allow condominiums to be integrated into hotel developments, providing an essential financial cushion for developers. At the same time, building height restrictions need to be relaxed — without taller buildings, there’s not enough strata residential use to subsidize hotel construction.

Policymakers should also introduce financial incentives, such as waiving development cost levies (DCLs) for new hotels and offering long-term property tax breaks. Just as incentives have been introduced to encourage rental housing, similar measures are needed to boost hotel development.

Regulatory barriers must also be removed. Vancouver’s planning and engineering requirements need modernization to reflect today’s economic reality. Fast-tracking approvals and cutting bureaucratic red tape would help hotel projects move forward faster.

Soaring hotel room rates are a symptom of this crisis

Vancouver’s hotel shortage is already impacting the city’s economy. High room rates are making the city less attractive to visitors, pushing tourists to stay in surrounding municipalities instead. If this trend continues, Vancouver will lose out on valuable tourism, convention, and event revenue, while local businesses suffer as a result.

Without immediate action, short-term rentals will continue to fill the gap, further driving up housing costs. But even that is now restricted after the provincial government’s new short-term rental restrictions, curbing Airbnb and Vrbo listings. Meanwhile, the lack of hotel supply will keep prices high, damaging the city’s reputation as an accessible and welcoming destination.

The city is expected to complete a hotel study by March 2025, but by the time it’s done, Vancouver will have spent years stuck in endless debate and inaction. The solutions are already clear — what’s missing is the political will to act.

City officials must recognize that it’s not enough to approve hotels on paper.

Real policy changes are needed now or Vancouver’s hotel crisis will deepen — at a cost that will be felt by residents, businesses, and the city’s entire economy. After all, the tourism industry is one of Vancouver’s largest and most significant economic strengths, especially since the region as a whole has relatively few other major economic drivers.

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