A plan to build a new 578-room hotel in downtown Vancouver comes at a time when the business case for adding new lodgings to the city is as strong as ever, say the developers of the project along with tourism and real estate stakeholders.
Marcon has submitted a rezoning application to build a 32-storey hotel at 516-534 W Pender St. and 509 Richard St. that would reach 318 feet in height and would include roughly 20,400 square feet of commercial space and 44,000 square feet for office use in addition to the hotel rooms.
Two heritage buildings currently sit on the site: Lumbermen's Building at 509 Richards St. and Captain Pybus Building at 534 W Pender St.
“We've actually felt that the hotel supply and demand dynamics (in Vancouver) have been mis-aligned for some time,” said Nic Paolella, executive vice president, the developer and builder of the proposed project. This proposal is the “genesis of a number of years of work to identify the market opportunity,” he told RENX in an interview.
Adding new hotel rooms would be healthy for the city, Paolella said, noting his team is in the process of finding a hotel operator partner for the project.
Stats make a strong case to add hotel rooms
The business perspective to add more hotel space is remarkably strong, agree tourism officials and property experts.
Destination Vancouver research estimates summertime demand for hotel rooms will surpass available rooms by 2028 if new supply doesn’t increase. By 2040, demand would outpace available rooms year-round if the number of rooms fails to go up significantly.
The tourism office says the cumulative lost visitor spending in Metro Vancouver could reach $20.8 billion by 2050 if hotel room availability can’t match demand.
The region requires nearly 21,000 new rooms by 2040 to keep pace with that demand and mitigate the lost spending, the report said.
The post-COVID performance of hotels in Vancouver has been improving, said Curtis Gallagher, principal, Canadian hospitality lead, with Avison Young.
Leisure and business travel habits are beginning to return to strength among individuals and smaller groups.
The market is still waiting to see what will happen with larger city-wide events and conferences that would help to balance out annual occupancy,” Gallagher told RENX.
Hotel room occupancy in Vancouver touched 73 per cent in 2022, according to Avison Young data.
That was up 50.4 per cent year-over-year. Meanwhile, revenue per available room (RevPAR) in that same time frame climbed by 117 per cent to $170.61, according to the firm’s 2022 year-end Canada Hotel Market Report.
"Despite mixed opinions in the marketplace regarding the depth and severity of a potential recession, occupancy results in 2023 are expected to surpass 2022 levels and approach pre-pandemic results," the report said.
"Stronger group and international demand will likely continue and bolster outcomes, while performance for Average Daily Rate (ADR) and RevPAR could grow beyond 2022 levels – but not at the same pace as in the prior year, as inflationary pressures start to ease."
Some hotel space in Vancouver in recent years have been either demolished or repurposed, Gallagher said. “There’s a bit of a supply challenge, especially when you're trying to attract . . . large, city-wide tech conferences. It takes a while to get new supply online.”
The last large-scale new hotel opening in downtown Vancouver was in 2017 at Parq Vancouver, which included 517 total rooms in the JW Marriott and Douglas hotels.
While demand for rooms is making hotels more profitable, and likely attractive to buyers, there were no notable hotel transactions in Vancouver in 2022, the Avison Young report showed.
That is why it makes sense a developer like Marcon would build its own.
Marcon aims to add new hotel space elsewhere
Marcon got its start in the Fraser Valley about 38 years ago, Paolella said.
"Today, we operate as a large multifamily mixed-use builder. We've got over 4,000 homes under construction currently.
"We're now . . . invested in the residential space, commercial space, rental homes and hotel — a pretty diverse mix of developments," Paolella said, describing Marcon as a fully integrated developer and builder.
Meanwhile, another focus for the company is a master-plan project in Coquitlam.
Called TriCity Central, the proposed mixed-use development in the Coquitlam City Centre area is a multi-phase project being co-developed with QuadReal Property Group.
The plan aims to develop a total of nine towers including six market condo towers, two purpose-built rental towers and a 27-storey office, commercial and hotel tower that will add 150 hotel rooms and a conference centre to the market.
The build-out at the Coquitlam site is expected to take 10 to 15 years.