BURST
Construction on a 30-storey hotel on Seymour Street near the Pacific Centre mall is to start this week.
It will add about 400 rooms in downtown Vancouver and feature two Marriott International brands when it is completed in 2028.
The site joins a short list of downtown hotel projects under construction, but comes as there are more rezoning applications and proposals for hotels to be built in downtown than there have been for many years.
In April, Vancouver city council updated its policy for hotels and encouraged developers by reducing or removing the minimum site size for mixed-use developments.
“I haven’t seen the pipeline for hotels this large since the 1990s,” said Carrie Russell, a Vancouver-based, senior managing partner with HVS Global Hospitality Services. She specializes in valuation, market and feasibility consulting.
Russell said it has been a quiet market for years, with just a few major projects adding hundreds of rooms. The Shangri-La Vancouver was completed in 2008 and the Paradox Hotel Vancouver (which opened as the Trump International Hotel Vancouver) was completed in 2016.
“There are a lot of developers who are looking at hotels right now because the market has shifted,” said Jacqueline Ho, executive vice-president of development for Paul Y. Construction (B.C.) Ltd., which is developing the hotel on Seymour Street.
The Vancouver company has owned the site for about 30 years. In 2018, it had considered building a mixed-use project with condos and offices, according to Ho.
It pivoted to a hotel between 2022 and 2023, which made sense in hindsight as offices become harder to rent out after the rise in working from home during the COVID-19 pandemic.
“There was more skepticism back then about building hotels,” said Ho.
Other hotel projects under construction include a boutique hotel on Keefer Street, Bosa Properties’ redevelopment of the Listel Hotel on Robson Street, and the Arts & Crafts Hotel on Seymour Street, which will add 73 rooms when it’s complete in 2026.
Two other projects that are targeting completion in 2027 and will add hundreds of rooms are a 33-storey hotel on Davie Street, which will add 460 rooms, and a 32-storey hotel on West Pender by Marcon, which will add 578 rooms.
There has long been demand for more hotel rooms in Vancouver. And B.C.’s limits on short-term rentals, large major events and growth in domestic travel are increasing that demand.
But the biggest driver behind more proposals is that developers are pivoting away from office and residential condo projects where the market is facing significant challenges, said Russell.
Not all these hotel projects will get built, said Russell, noting there’s a limited amount of financing available.
High construction costs, elevated interest rates, and stricter underwriting standards means that new hotel construction projects are very hard to underwrite, according to Michael Stathokostopoulos, senior director of hospitality analytics at CoStar Group.
“This is especially true for larger, full-service hotels,” said Stathokostopoulos.
As a result, many proposals will remain in planning for a long time before they are built, he said.
Despite this, developers are increasingly looking at hotel proposals outside the downtown core of Vancouver, according to Steven Chen, hospitality investment sales at NAI Commercial.
“Bosa (Properties) alone has 14 hotel projects with some in the (planning) pipeline and some under construction,” across Metro Vancouver, he said.
Hotel occupancy rates are expected to return to pre-pandemic levels this year, according to a Destination Vancouver study on hotels in Metro Vancouver.
From there, the study predicts an increase from 6.9 million room nights to almost 8.2 million room nights by 2030 for an average growth rate of 2.7 per cent per year.