(Source: Globe and Mail)
While new projects are being shelved, sales of existing properties could see a rise as investors look for deals
The challenges of finding financing during a global credit crunch, along with uncertainties about short-term demand from both business and recreational travellers, has meant that almost all new projects in the planning stages, and even those in the early stages of construction, have or will be shelved to wait for better days, experts say.
“Over all, we are not worried right now,” says David Larone, director of PKF Consulting Inc., which tracks the hotel industry.
“The situation is not like the meltdown of the early nineties, when we had 30-per-cent oversupply in many urban centres. Projects which are above grade in the construction cycle are likely to go ahead, especially smaller 80- to 120-room business hotels, which have represented the bulk of activity in the past two years,” he says. Canada had 360,000 hotel rooms in properties with 25 rooms or more at the end of 2008.
In the first quarter of last year, there were 265 projects totalling 30,000 rooms in the planning or construction stage across Canada, according to CBRE Hotels. By comparison, by January of this year, those figures had dropped to 237 projects and 29,000 rooms.
At the same time, large new luxury hotels already under way will undoubtedly be completed, he adds. In Toronto, mixed-use projects such as the Four Seasons, Ritz-Carlton, Shangri la and Trump Tower will continue apace. The condominium element of those projects has reached the stage in the sale cycle to justify construction financing.
The only major hotel project cancelled to date is Vancouver’s Ritz-Carlton. In that city, the new condo market has taken a nosedive in both buyer demand and market prices.
Despite concerns about the effects the current recession will have on business travel – the life blood for many hotels across the country – vacancy rates in January and February are down only marginally from the same months last year, according to PKF Consulting.
Read Terrence Belford’s full article “Recession puts skids on hotel construction” in the Globe and Mail (March 24 2009).