Too many beds, too few bums?

The former Carlton Inn, with the Winnipeg Convention Centre visible in the background. (Source: Google Maps)

The former Carlton Inn, with the Winnipeg Convention Centre visible in the background. (Source: Google Maps)

When CentreVenture Development Corp. bought out the Carlton Inn in downtown Winnipeg in 2013, it was expected that the lacklustre property would be demolished and replaced by a “signature hotel” of up to 300 rooms around the end of 2016.

As 2015 gets under way, there is little more than a vacant lot where the Carlton Inn once stood, adjacent to the RBC Convention Centre Winnipeg, which is in the midst of a major expansion — and no specific plans for what should be built on that lot.

As the Winnipeg Free Press noted Saturday, construction of such a hotel would be expected to take two and a half years, meaning that the original target of a late-2016 opening will be overshot by at least a year.

Yet, as political pressure increases to “get the job done”, care must also be taken to step back and consider what the effect of adding, say, a 300-room hotel to the Winnipeg market might mean to the overall health of the local hospitality industry.

In a 2014-15 industry outlook released last September by PKF Consulting Canada, which specializes in analysis of the hospitality and tourism industries, it was noted that the Winnipeg market is expected to have the lowest average per-night guestroom revenues in 2015 among the 13 major Canadian markets examined: $76 per room-night, 20 percent lower than the Western Canada forecast of $95 per room-night.

This calculation, known in the hotel industry as revenue per available room, or RevPAR, is based on dividing the total revenues extracted from the renting out of a hotel’s rooms on a given (or average) night by the number of rooms available for rental, regardless of whether or not those rooms were occupied. It is a basic measurement of a property’s health and productivity, but it does not include revenues from out-of-room services such as restaurants.

With occupancy rates expected to average out to about 60 percent, Winnipeg is also expected to have the lowest percentage of occupied rooms over the course of 2015 among the 13 markets examined in the report.

This news sends a signal to hoteliers that, compared to other large Canadian cities, Winnipeg is not hungering for new hotel capacity.

Indeed, the expansion of the Convention Centre could be seen as justification for the hotel industry to sit on its hands instead of adding additional rooms, hoping that more visitors will push occupancy rates up five or ten percentage points, bringing fatter profits for all and putting smaller players like The Marlborough in a better position to invest in upgrades. Then, if Winnipeg’s average occupancy rates start to hit 70 percent or revenues exceed $100 per room-night, then the industry could start questioning whether there’s a shortage of rooms at peak times.

Alternately, we could go ahead and build a large hotel next to the Convention Centre, adding perhaps 100,000 annual room-nights to the Winnipeg hotel market. The construction would be good for some: for the Convention Centre certainly, as well as for the tradespeople needed to undertake such a grand project. But if new visitors don’t come to Winnipeg with the same alacrity, there is a risk that adding so many hotel rooms could cause occupancy rates and average revenues per room-night to fall even further. That could leave Winnipeg’s hotel market looking downright sickly.

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

2 Responses to Too many beds, too few bums?

  1. johndobbin says:

    I didn’t comment right away about the site but it looks like there is a developer in the wings and if rumours are true, it is True North. If this is the case, then I suspect that it fits into the business model for the hockey team and could indeed by successful.

    Place Louis Riel is getting out the business of hotels. The Sheraton/York hotel is already out. If any hotel is likely to close or change dynamics, it is the Marlborough, The Holiday Inn Express, The Charter House and a few others.

  2. theviewfromseven says:

    PLR’s retreat has been known about for a while, so the Sept. 2014 analysis presumably has that factored in.

    A tightening up of available rooms seems to be in order for the Winnipeg market, though the question remains of what to do with any abandoned properties, as even True North, the U of W and Crown Corps. only need so much space. A pause to allow demand to catch up with supply might still be helpful.

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