“Demand is definitely off this year; year-to-date through July it is down about 2 percent,” said Carrie Russell, managing director-Canada, for HVS. “With demand down 2 percent and supply up by 3 percent, there is downward pressure on occupancy. People were building into what they thought was a great hotel market; then oil prices took a particularly sharp downturn and demand isn’t keeping pace.”
While demand, occupancy, average daily rate and revenue per available room are down year to date through June, the market still commanded the highest ADR ($159.65) of the six major markets in Canada. During that period, occupancy for the Calgary market fell to 63.4 percent, from 67.4 percent year-to-date through June 2014.
According to Statistics Canada, business in the country’s mining and energy-extraction industries was down 4.5 percent, which contributed to a second straight quarter of declining gross domestic product for the country.
Russell said the energy industry, which is centered north of the city, is the main driver of hotel demand for Calgary.
“It’s all about oil and gas, although to some degree, there is a connection between Calgary and Banff, as the Calgary airport is the place you fly into to go to the Banff tourist areas,” she said. “Banff is having a great year because the value of the Canadian dollar is very beneficial. Year-to-date RevPAR in that market is up 14 percent, and Calgary benefits from some of that.”
At the end of the second quarter, the hotel development pipeline in Calgary comprised 22 hotels with 3,615 rooms. If all those rooms open, the market will see a 26-percent jump in supply.
Eighteen of the properties in the pipeline are either under construction or will begin construction in the next 12 months. The upper end of the market dominates the pipeline with nine upscale and three upper-upscale hotels under development.
Five hotels are scheduled to open this year, with five more next year. In 2017, 11 properties are scheduled to open.
According to Russell, labor supply is one issue that’s keeping even more hotels from being built in Calgary and throughout Alberta.
“There have been about 35,000 jobs lost in the oil sector, but overall employment in the province has been flat,” she said. “There has been a significant shortage of labor, and that’s part of the reason we didn’t see more hotels built in Alberta. It is so expensive to build there because construction is competing with the oil patch for labor.”
The airport market
Russell said the airport submarket is a center of hotel development for Calgary. A new, $1.4-billion international terminal under construction at the airport has been delayed and will now open in the fall of 2016. A new 318-room Delta Hotel is part of the new terminal development.
While new construction is expected soon in downtown Calgary, a new-construction Fairfield Inn & Suites opened in August in the central business district. Parke Seville Mortgage Ltd. owns the 124-unit property, which is managed by Luxury Hotels International of Canada.
Several dual-branded projects are under construction in Calgary submarkets. Superior Lodging Corp. is building a Courtyard by Marriott/Residence Inn property southeast of Calgary in Seton, Alberta. The 225-unit hotel complex opens in December. A related company, Superior MasterBUILT, said it plans a Microtel Inn & Suites on land adjacent to the Courtyard/Residence project.
WideWaters Group is developing another dual-branded hotel in the city’s East Village neighborhood near downtown. The project combines a 118-room Homewood Suites with a 198-room Hilton Garden Inn.