Manitoba’s hotel industry is about to go through another growth spurt, with at least five new projects underway or in the works for the next few years, a report from Stevenson Advisors says.
The projects include the construction of four hotels and the expansion of an existing one to create a dual-hotel property.
The new builds are a Hyatt House luxury hotel planned for 700 Sterling Lyon Parkway; a new Best Western hotel on Regent Avenue West; the Sutton Place Hotel that will be part of True North Square in downtown Winnipeg; and the previously announced hotel that CanadInns plans to built adjacent to the McPhillips Station Casino.
The report says work on that project is expected to get underway next year, and to be completed sometime in 2019.
The hotel-expansion project, which is already underway, will see a new Marriott Residence Inn extended-stay hotel added onto the existing Fairfield Inn & Suites by Marriott Winnipeg, at 1301 Ellice Ave.
"The hotel property will be dual branded," Jordon Lanthier, director of sales for the Fairfield Inn & Suites, explained in an interview.
"There will be Marriott Fairfield Inn and a Marriott Residence Inn within one complex."
Lanthier said there is room in the Winnipeg market for another extended-stay hotel that caters to business travellers staying in the city for an extended period, doctors who are visiting the city and leisure travellers who want a room that includes a kitchenette.
He said work on the six-storey, 90-room expansion got underway about two weeks ago and is expected to be completed in early 2019.
Stevenson Advisors vice-president Aaron DeGroot and Bryce Witherspoon, an appraisal consultant with the Winnipeg firm, admitted they were surprised to discover there are that many new hotel projects in the works.
They noted there was a slowdown in hotel development in 2015 and 2016, as investors and developers waited to see how well the market absorbed the rooms that were added during the last growth spurt.
That saw eight hotels built or redeveloped in the airport/Polo Park area, one new hotel built on the Health Sciences Centre campus and two new boutique hotels built in the downtown between 2011 and early 2015.
By comparison, there were only two new hotels under construction in the city in 2016 — the Super 8 Winnipeg at 1486 Niakwa Rd. E., and the Hilton Garden Inn at the corner of Kenaston Boulevard and Sterling Lyon Parkway.
"But (the market) reacted quite positively," DeGroot said.
"So investors are looking to Winnipeg again and here we are. We’ve got another kind of mini-boom of hotel development happening."
The previous building boom added about 2,000 new hotel rooms to the market, but DeGroot said they’re not sure how many new rooms will be added with these five new projects.
"But we are talking a significant number of rooms... We’re probably pushing 600 or so."
He said a number of factors are helping to drive the new development, including investor confidence in the health and stability of the local economy, low mortgage rates and a thriving local tourism industry.
"We’re experiencing in Winnipeg right now a bit of a tourism spike that we haven’t seen in quire some time," DeGroot said.
Not only does Winnipeg have an abundance of annual festivals and cultural events to help draw tourists, but it also has hosted a number of big-ticket sporting events such as the 2015 FIFA Women’s World Cup soccer game, the 2015 Grey Cup football game, the 2016 Heritage Classic hockey game and the upcoming 2017 Canada Summer Games, he noted.
"Some of the fashion magazines also are writing about us, and National Geographic (magazine) said it (visiting Winnipeg) was one of the best trips on Earth in 2016," DeGroot added. "So we’re seeing a bit of a lure to Winnipeg and a bit of curiosity, I think, about our market place in terms of a tourist destination. Also helping to fuel that is the low Canadian dollar relative to the U.S. (dollar)."
Another contributing factor, Witherspoon said, is that large institutional investors are now looking to invest in secondary markets such as Winnipeg.
"When investors look at our market, they know what they’re getting in terms of demand and in terms of economic stability, and I think that’s a huge factor," DeGroot added.
While these new projects will add hundreds of more rooms to the market, he and Witherspoon said the market should be able to handle it.
"We looked at the last time all those new hotel rooms came on line and they were absorbed quite nicely," Witherspoon said. "So, all around, we’re in a kind of a sweet spot, it seems."
DeGroot said revenue per room in Winnipeg’s hotel industry climbed from $77 in 2014 to $82 in 2016 and the occupancy rate rose by 5.2 per cent to 67.3 per cent.
"So it’s our belief that these rates should stabilize for maybe a year or two," he added.
He and Witherspoon said if any existing hotels are negatively impacted by addition of these new properties, it will likely be some of the older ones which haven’t been upgraded or modernized in many years.
"I think the onus is going to be on the Class B and C providers to renovate their product to stay competitive," DeGroot added.
Stevenson Advisors (stevensonadvisors.ca) is a full-service appraisal firm which specializes in hotel and lodgings evaluations and consulting services in Manitoba and Northwestern Ontario. It is a division of Stevenson Real Estate Services.