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Downtown hostel to be sold

Not enough income to sustain backpacker inn

By: Bartley Kives

Posted: 07/17/2012 1:00 AM | Comments: 0

The HI Winnipeg Downtowner helped improve area, residents say. (BORIS MINKEVICH / WINNIPEG FREE PRESS ) Photo Store

Hostel conditions in the Winnipeg hospitality market have forced The Forks-North Portage Partnership to put one of its downtown properties up for sale.

Within weeks, a for-sale sign will appear on the HI Winnipeg Downtowner, a 120-bed Ellice Avenue hostel that's served as Hostelling International's only Manitoba operation for the past four years.

In 2008, The Forks-North Portage Partnership purchased the former Downtowner hotel on behalf of Hostelling International Manitoba, which converted the low-end establishment into a backpacker hostel.

The purchase and renovation cost $3 million. While grants covered a portion of the tab, revenue from the hostel -- which signed a 50-year land lease -- was supposed to make up the difference.

That cash proved insufficient to pay for the construction cost, as the hostel's business plan proved too optimistic, said Claire MacKay, vice-president of marketing and communications at Forks-North Portage.

"It's too much space for them," she said, referring to capacity that rarely exceeds 45 per cent. "They underestimated the amount of money it would take to fully renovate the building. They can't afford to operate in that location any longer."

The hostel is carrying approximately $500,000 in debt, said HI Manitoba spokesman Bob Somers, adding it's possible a new owner could find a way to continue to run the property under the Hostelling International brand.

"We're looking at many ways to try to keep it going," he said. The three-storey structure has 20 private hotel rooms and 18 dorm-style rooms for backpackers.

The original business plan also predicted some traffic from visitors to the Canadian Museum for Human Rights. But its opening has been delayed to 2014 at the earliest.

MacKay said the hostel's business has been decent nonetheless, only not to the point where the organization could afford to service and pay down its debt. The hostel and two businesses on the premises -- the Lo Pub bar and Lo Bistro restaurant -- will continue to operate until the property is sold, she said.

Jack Jonasson, who manages the pub and restaurant, said he hopes they will survive a change in ownership.

"I'm optimistic that there's a possibility whoever buys the building will see there are two profitable businesses here they can take on as anchor tenants, no matter what they do with the rest of the building," Jonasson said.

MacKay said Forks-North Portage will attach conditions to the sale. Chief among them will be a promise not to reopen a beer vendor in the building, which is located north of Portage Place.

The closure of that beer vendor was welcomed by nearby residents and businesses, who considered it a sore spot on this stretch of Ellice Avenue.

"We're not just going to sell it for the sake of selling it.

"It has to fit the social fabric of the neighbourhood and have some positive impact," MacKay said.

The conversion of the former Downtowner hotel into a hostel has improved the neighbourhood, Somers insisted.

"It took a year to get cabs to come back, but now they come back, happily," he said.

In 2008, tourism officials also welcomed the conversion, maintaining Winnipeg has a shortage of budget accommodations aimed at travellers. The city has two other hostels: Backpackers Winnipeg on Maryland Avenue, which flies the Guest House International brand; and UWinnipeg Hostel, which operates out of the University of Winnipeg's McFeetors Hall residence on Langside Street.

bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition July 17, 2012 B1

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