Vancouver's severe hotel room shortage looms over tourism recovery

Rosewood Hotel Georgia in downtown Vancouver. (Shutterstock)

Written for Daily Hive Urbanized by Sarah Kirby-Yung, a Vancouver City Councillor and former tourism industry executive.

The news late last week that fully vaccinated Canadians won’t be required to provide a negative COVID-19 test when returning from cross-border trips of 72 hours or less is more than welcome news for tourism. It’s a huge step toward lives returning to a state of normalcy after the seemingly endless challenges of the pandemic.

Fully vaccinated Canadians have already been able to cross into the United States for leisure trips by land since early November. And on the American side, free drive-thru PCR testing – available at Washington State pharmacies such as Walgreens – means relatively free-flowing cross-border traffic can now resume, a boon to the BC and Washington State tourism industries alike.

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But a threat looms over the full recovery of our local Vancouver tourism industry as the world slowly emerges from the strains of the pandemic. A critical shortage of hotel rooms threatens the industry’s continued vitality.

For the last 15 years, the number of hotel rooms in Vancouver has been in decline due to several overlapping factors, including hotel closures and conversions to residential uses, the land economics (and the high cost of running hotels) that make building new standalone hotel properties financially unviable, as well as geographically limited zoning restrictions for hotel uses. Layered on top of these significant challenges has been the recent trend of governments purchasing hotels for use as social housing and homeless shelters through programs like the Federal Rapid Housing Initiative.

Artistic rendering of the Landmark On Robson residential complex and a photo of the now-demolished Empire Landmark Hotel, which had 357 lower-end guest rooms. (Left – PDP London/Musson Cattell Mackey Partnership/Asia Standard International Group; Right – Clive Hicks/Flickr)

1176 granville street vancouver howard johnson

The former Howard Johnson hotel at 1176 Granville Street has been turned by BC Housing into the Lugaat supportive housing building. (Kenneth Chan/Daily Hive)

Destination Vancouver released a study in late 2019 warning that Vancouver risks losing its competitive edge as a tourism destination due to the declining number of hotel rooms. This room shortage – based on pre-pandemic tourism levels – would equate to $2.646 billion in lost economic impact in Vancouver over 10 years, over 22,000 lost jobs, and $355 million in forgone tax revenue.

The inevitable upward pressure on the market that the loss of hotel supply has led to has resulted in an average nightly rate that remains consistently amongst the highest in Canada. If that trend continues, it means only wealthy travellers will be able to visit the city. It also means that Vancouver becomes less competitive in bidding for conferences, large sporting events, and leisure group travel due to room costs that aren’t competitive, or simply because there aren’t enough rooms to host these events and meet the demand.

Vancouver’s hotel room stock changes between 2008 and 2018. These figures do not account for the major changes that occurred between 2018 and 2021, resulting in major further losses in hotel room capacity. (City of Vancouver)

Vancouver’s hotel shortage compared with rising overnight visitation, leading up to 2017. These figures do not account for the major changes that occurred between 2018 and 2021, resulting in major further losses in hotel room capacity. (City of Vancouver)

Tourism is a major part of the Vancouver and Metro Vancouver regional economies. It contributes approximately $4.8 billion annually to the economy, and prior to the pandemic, it supported over 70,000 full-time jobs. In order to sustain these jobs and the robust economic activity that flows from tourism, an adequate hotel room supply and visitor accommodation are essential.

The question is how and where Vancouver can satisfy the need for a renewed supply of hotels and hotel room inventory. One solution is modernized zoning policy that better enables multiple uses in a single building such as commercial office and hotel or residential rental and hotel, or on a development site. The only new hotels built in Vancouver in recent years that were economically viable were mixed hotel and strata developments downtown.

Another solution to reversing the city’s hotel room shortage is to expand the City’s Interim Hotel Zoning Policy by extending the geographic area covered by the policy, and opening up new areas around the city for hotel development and traveller accommodations.

Areas in downtown Vancouver covered by the 2018 Interim Hotel Development Policy. (City of Vancouver)

The good news here is that Vancouver City Council has the jurisdictional tools to help stem the decline in the city’s hotel room inventory and ensure that our vital tourism industry is able to realize its full economic potential for the city and the region.

The Employment Lands and Economy Review work currently underway at City Hall, which is intended to develop a long-range land use policy plan to ensure that we have an appropriate supply of land for businesses and jobs to support the future growth of our economy, is a key piece to combating the shortage of hotel room supply, as is the Broadway Planning Process.

The City has tools it can use, but flexing the policies and approaches will require the support and political will of Council. If we fail to show the leadership needed to sustain our tourism sector and to create the conditions for its resilience and success, we risk the loss of tourism’s vital contribution to our city’s economic strength and its ability to create jobs. For me, that’s not an option.

As we head into the post-pandemic rebuilding and reimagining of our city and our region, it’s incumbent on local governments such as the City of Vancouver to ensure that enabling policies are in place to prepare for our post-COVID-19 future. The tourism industry, our city’s economic health, and the jobs that depend on them are something we simply cannot afford to lose.

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