Airport expansion drives hotel growth in Calgary

canada

Beyond the Airport

Calgary’s downtown central business district is very landlocked, which limits hotel development by the city’s convention center, according to Eichler. “While some hotels are coming in, the area won’t see a lot of new development in the future because it is zoned for high-density residential buildings.” While the southern part of the CBD may grow, its train tracks create another barrier. “There is lots of development downtown across the tracks, but that is considered outside of the CBD,” he said. The fact that the city is not getting many new hotels downtown by the convention center, Eichler said, has damaged the city’s appeal for large-scale conferences and events.

Marriott’s Fairfield Inn & Suites brand made its Calgary debut in June 2015, and as of press time was poised to be followed by both a Courtyard by Marriott & Residence Inn by Marriott in the southeast community of Seton in early December. The three hotels increase Marriott’s Calgary portfolio by nearly 350 rooms. Widewaters Group, meanwhile, is expected to bring a 315-room dual-branded Hilton Garden Inn and Homewood Suites to the city’s East Village in July.

Farther out, Canada’s first Marriott Renaissance Sports Club is also being planned for Calgary. The 232-room hotel would be close to the Calgary Stampede event space and could open in 2017.

And for a more boutique option, Groupe Germain Hospitalité is set to open the Alt Hotel Calgary in the city’s East Village next year at a cost of $34 million.

Who’s Investing?

Adele Rankin, a senior associate with B+H Chil Interior Design, has noticed an influx of American hotel brands in Calgary. When Marriott purchased Canada’s Delta Hotels brand in mid-2015, three Calgary hotels joined the American company. “That’s bringing a new flavor to the city,” she said. Marriott, Rankin notes, is bringing both a JW Marriott and an AC hotel to the city, both of which BE+H Chil will help design.

BE+H Chil oversaw the renovation of Calgary’s Hotel Arts and the Fairmont Palliser, and feels that these renovations are also indicative of the city’s changing hotel scene. “What Calgary is doing with its boutique offerings is giving choice,” Rankin said. “That’s the most competitive thing you can do. If people want to stay at a Fairmont, they can. If they want to stay at a 15-room boutique hotel, they can. That’s most successful thing Calgary is embracing right now.”

With more options, she noted, both branded properties and independent hotels are looking to establish a clear personality to attract savvier travelers. And in doing so, they are changing their neighborhoods. “On the weekends, the downtown area was abandoned,” Rankin said. “But a lot of development is bringing people downtown. There are restaurants, rental housing and condos. Hotels are part of that flow as well. They will help create a new Calgary feel and look.”

Calgary’s Future

Calgary still faces challenges, however. The decline in oil prices has caused a slowdown in Alberta’s overall economy, with a quarter of the province’s gross domestic property tied to the energy industry. As of press time, the Provincial Monitor report by BMO Capital Markets said that the province’s real GDP was expected to contract 1 percent in 2015.

While hotels that were signed before prices dropped will likely remain on course to open, Eichler wondered if the current troubles would not cause a development downturn in the future:  “I would venture to guess that if developers knew a year in advance how much oil prices would fall and how much the economy would slow, we would not have 10 hotels on the ground,” he said.

Still, Pamela Tchida Kupidy, executive director of the Calgary Hotel Association, does not believe that the economic situation has caused “many or any” of the proposed projects by the airport to be put on hold.

On the plus side, Eichler said, the downturn means that both labor and supplies are available and less expensive than they would be during boom times. “Some people may not be thrilled about the economy, but they can finish a hotel cheaper now as opposed to when the economy was firing on all cylinders,” he said. “It was expensive to build a hotel, and hard to retain contractors.”

Despite the downturn in the area’s economy, for the first eight months of 2015, occupancy rates in Calgary’s hotels only dropped about 3.3 percentage points. Average daily rate dropped 2.7 percent. “I think that’s pretty favorable, considering there was new supply coming into the market,” Eichler said. “We saw demand rise and occupancy drop, but to the surprise of many, it was counterintuitive. How can we only be off 3.3 percentage points when demand is falling off and new hotels are coming in? The sky is not falling,” he said, then added: “Yet. And I don’t believe it will fall. There is some resilience to market because of how much Calgary has diversified over the years.”

The low dollar may attract more U.S.-based developers, he added. “There are still brands to be had in Calgary. Some brands are not represented yet.” Still, he noted, most owners and lenders looking to build in the city are Canadian.

Pictured: The Hampton by Hilton and Homewood Suites by Hilton Calgary Airport is a dual-brand property.

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