Lack of Hotel Capacity in Vancouver Could Significantly Impact Visitor Economy [Interview]

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Destination Vancouver is warning that a lack of hotel capacity in the West Coast city could cost it billions of dollars in lost economic impact and thousands of unrealized full-time jobs.

In a recent report, the organization said 20,000 new hotel rooms are needed by 2025 in Metro Vancouver, and 10,000 of those in Vancouver, to meet the projected demand.

“Metro Vancouver’s infrastructure is not keeping up in delivering on our global profile,” said Royce Chwin, Destination Vancouver’s President & CEO. “This is critical because on our doorstep over the next few years are tennis’s Laver Cup, the Invictus Games, next year’s Grey Cup and in 2026 we’re a Host City for the world’s largest single sport event, the FIFA World Cup.

Royce Chwin

“This is crucial for our global destination competitiveness. 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.

“The story is bigger than simply the hotels and the profitability of hotels. It’s all the indirect and induced impacts whether it’s construction jobs, whether it is retail, whether it is hospitality and restaurant suppliers, the restaurants themselves, food producers, farmers, wineries – all the peripheral retail businesses are also impacted by a lack of accommodation space here.”

Fairmont Hotel Vancouver (Image: Lee Rivett)

According to a new study Economic Analysis of Hotel Supply and Projected Demand in Metro Vancouver, 2023 to 2050, released by Destination Vancouver, without new investment, the lack of hotel supply in Metro Vancouver will translate into significant losses to the provincial economy.

Between 2022 and 2050, the cumulative economic impacts are projected to be:

  • $30.6 billion in foregone output.
  • $16.6 billion in forgone GDP.
  • 168,000+ FTEs of foregone employment.
  • $7.5 billion in foregone tax revenue for all three levels of government.

If the supply of hotel rooms remains at current levels, demand will exceed supply by:

  • 2026: in the summer months in the City of Vancouver.
  • 2028: in the summer months in the rest of Metro Vancouver.
  • 2040: every month of the year across Metro Vancouver.

Destination Vancouver said Vancouver’s hotel supply has been contracting with Metro Vancouver down roughly 2,000 rooms since 2010, with 1,500 of those rooms lost in Vancouver.

The pandemic removed an additional 550 rooms from the city’s inventory, with purchases by BC Housing and City of Vancouver which converted those rooms to supportive housing, it said.

Artistic rendering of the hotel tower at 516-534 West Pender Street, Vancouver. (Henriquez Partners Architects/Marcon)
Artistic rendering of the hotel tower at 516-534 West Pender Street, Vancouver. (Henriquez Partners Architects/Marcon)

Chwin said there are three reasons that have contributed to the lack of hotel room supply in the Vancouver area.

The first is the cost of real estate. The second is some hotel properties have turned in supportive housing.

“And number three is previous versions of city council, bureaucracy, red tape and a lack of really defined policy as it relates to supporting the visitor economy through accommodation builds,” he said. “Those three things are what we’ve been able to really define as the critical issues.”

Recently, media reported that Vancouver developer Marcon plans to build the city’s largest new hotel in decades – a 32-storey, 578-room building at 516-534 West Pender Street and 509 Richards Street.

“We look at Vancouver as a destination and a gateway and what we’re concerned about is as capacity limits are reached, rates go up, we really don’t want to cut out a segment of the traveling population,” said Chwin. “That decision to come through Vancouver and go through somewhere else, if people look at that and say that’s just too expensive and they don’t come to Vancouver and therefore BC, then we all lose because we know that Vancouver is an anchor tenant.

“If you think of that analogy of the mall, for BC we’re an anchor tenant. We’ve got a bunch of other great businesses out there, destinations of the province, that’s what also concerns us as well because compression will only carry you so far in terms of pushing visitors out to accommodations farther out of Vancouver as the city gets full.

“We know that in 2019 which was the high water mark for Metro Vancouver, its visitor economy was worth just over $15 billion in impact. That would be Metro Vancouver and the Lower Mainland.”

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training. Mario was named as a RETHINK Retail Top Retail Expert in 2024.

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