Hotel Marketplace Set to Expand Dramatically

21 Sep 2012

By Daniel MacEachern, The Telegram
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Hotel development in St. John’s — relatively stagnant for years — is set to explode over the next few years, with several hundred rooms about to enter the marketplace.

Cathy Duke, CEO of Destination St. John’s, credited a strong local economy and rising tourism numbers for the sudden interest from hotel developers.?Comfort Inn Airport added about 40 rooms.

“Business is very strong here in St. John’s and the surrounding area,” she told The Telegram. “A lot of that, we speculate, is related to the oil and gas industry particularly, and mining, just generally the industrial development in the province,” she said.

“As well, tourism to the province is growing all the time.” Newfoundland and Labrador is leading the country in non-resident visitation, Duke said.

With the St. John’s Convention Centre doubling its available space, developers are jumping into the market to the tune of eight hotels in various stages of development, from being just about to be proposed to St. John’s city council, to already under construction. At more than $100 million in hotel development and more than 700 rooms, travellers will soon have many more options.

St. John’s City Coun. Tom Hann said development like Hebron and Vale is filling the hotels and driving the sudden explosion in planned and in-progress hotels.

“With all of that, it brings associated business as well, so I think what you’re getting is a lot of businesspeople coming to town, wanting to do business with the companies with the offshore and Vale, and of course the mining industry is taking off in the province as well, and that has an impact on St. John’s and people coming in,” he said.

Tourism revenues are up 65 per cent over the last 10 years in the city, said Hann, the other major factor getting construction cranes moving.

“We had the third-highest hotel occupancy rate, 72 per cent, in Canada last year,” he said. “So the occupancy rate has increased, and they see a lot of potential in this market.”

Twelve-storey Hilton Garden Inn

Sukhdev Toor of Manga Hotels is bringing a big chunk of the new hotel space, with a planned 12-storey Hilton Garden Inn (155 rooms) downtown and a five-storey Hampton Inn and Suites (130 rooms) on Stavanger Drive.

Toor, president and CEO of the Toronto-based company — which is also planning an 86-unit condo development on Henry Street — said there’s a lot of opportunity in St. John’s right now.

“We look at feasibility of room rates and occupancy,” he said. “It seems like St. John’s has been doing very well for the last number of years, and there’s a need for good quality hotels.” The airport area is particularly underserved, he said, with the Comfort Inn’s recent addition of 40 rooms evidence of the need as well as the first trickle of what will be a flood of available suites.

Manga’s airport development is underway, while the downtown project is currently wending its way through city council’s approval process — Toor estimates once it gets the greenlight, construction will take about two years.

The business need for accommodations is not limited to rooms, but reflected in the amount of meeting space. The St. John’s Convention Centre will double its amount of convention space, and developers hope to capitalize on growing demand for meeting space.

Between its two properties, Manga will add 7,500 square feet of conference and meeting space, and the Fairfield Inn — being built by SilverBirch Hotels and Resorts to replace the Travellers Inn on Kenmount Road, scheduled to open early next year — will have 4,000 square feet of conference space in addition to 148 new rooms.

“You need meeting space for corporate people to have meetings and accommodations at the same time,”?said Toor, noting that the downtown project will be close to the convention centre. “We don’t need too much space, but we’ll still need to accommodate small corporate groups and parties.”

Hann said the expansion of the convention centre will allow the city to attract larger conventions, too.

“Right now our convention centre can only hold certain-sized conventions, and we’re missing out on a lot of the major ones that are looking at Destination St. John’s and looking at the city and saying, ‘Well, we have a large convention that we want to bring in, but you can’t handle us.’ So that’s why we made the decision that we’re in the process now of doubling the convention centre.”

Toor said he’s not too concerned about the number of players entering the market.

“You need a good product. People are always looking for new, better accommodation,” he said. “It’s a good addition for the city. It’s good for the city.” The new hotels will add badly needed parking for downtown, he said, in addition to the rooms badly needed when conventions suck up most of the available space downtown.

Hann said the developers are careful with their investments, and work closely with groups like Destination St. John’s and the city’s economic development department to avoid flooding the marketplace.

“They put all the research together and they figure, ‘Well, it’s worth it, and we can do business in that area,’” he said. “If they’re willing to make the investment, then come and let’s see what can happen. I don’t think we should be worried, because over the next 10 to 20 years, there will be a lot of activity in this city, and in this province.”