Booming downtown development is threatening the future of the city’s thriving convention business as mid-priced hotels are converted to condos and others are rebranded and renovated to justify higher nightly rates.
Toronto risks losing 4,000 rooms and 2,500 unionized jobs if it doesn’t protect its stock of convention accommodation, warns a report by a union representing about 1,000 hotel workers.
“It’s not simply a loss of hotel space that will be a challenge for attracting (convention) business, but the change in product mix. Toronto used to have a much larger supply of affordable rooms, which are now being replaced with luxury or boutique hotels,” said Unifor 7575 researcher David Anderson, author of the report, The Impact of Unrestricted Hotel-To-Condo Conversions on Toronto’s Meetings, Convention and Incentive Travel market: The Case for a Hotel Preservation Strategy.
“Many hotel owners are using renovations as a chance to up-brand as well as upgrade their properties,” said the report to be published Tuesday.
It cites the conversion of the Comfort Inn on Charles St. to the Anndore House and the transformation of the Holiday Inns on Bloor St. W. and King St., to the Kimpton St. George and Hyatt Regency, respectively.
Anderson said a search on Monday found the lowest rate for a three or four-star property was $ 303. That compares to more than $ 600 per night at luxury hotels such as the Ritz Carleton or the Shangri-La.
Redevelopment proposals for the Marriott Courtyard on Yonge St., north of College St., and the Chelsea Hotel on Gerrard St. W., would take 1,500 moderately priced rooms off the market, said Unifor.
The union is recommending the city pursue a proposal raised at City Hall to establish a downtown convention district that would protect the number of hotel rooms from other types of development.
San Francisco put a moratorium on condo conversions in its convention district and implemented a charge on the sale of hotel rooms that helped fund a new convention centre, said Anderson.
The Marriott and Chelsea wouldn’t be the go-to spots for visitors attending events at the Metro Toronto Convention Centre, but the loss would contribute to the overall lack of downtown supply that is pushing up room rates, said David Chisholm, the centre’s vice-president of sales.
The lead time for large conventions is four to six years.
“The rates that we’re being quoted are substantially higher than they used to be. That is based on what the current demand is right now and the assumption the current demand will continue,” he said.
Meeting planners typically reserve large blocks of rooms for convention delegates. Two years ago, organizers could find those blocks within five major hotels downtown; now it takes 10 or 12 hotels, he said.
Increased demand from leisure and business travellers is also reducing hotel availability.
“Hotels want to be able to protect their loyal customers,” said Chisholm. “They want to make sure their individual business traveller has the ability to stay on the night they want to come. One of the (hotels’) strategies is to reduce the number of rooms they commit to a convention.”
With the exception of the opening in 2014 of the Delta on Lower Simcoe St., the trend has been to build high-end boutique properties, said Chisholm.
“They serve a certain niche, but they don’t necessarily fit the niche of the traditional convention you might be bringing into the city,” he said.
Toronto’s hotel industry is like that of other global cities where land values are climbing, said York University Professor Steven Tufts.
“Real estate value has increased which makes (condo) conversion more profitable for developers. Running hotels — unless you’re doing high end — labour costs and other costs are too high. It’s just more profitable to turn it to development,” he said.
New mid- and lower-priced hotels are being built, but they’re going up in the suburbs. Airbnb and online accommodation platforms are filling the gaps downtown, said Tufts.
Toronto hosted 18 conventions last year that used 618,111 hotel room nights and generated $ 634 million, according to the Unifor report. Among the big events were the Invictus Games and the Microsoft Tech Summit.
A CBRE Hotels report presented to the city in 2016 by the Greater Toronto Hotel Association said there have been 13,100 rooms built in the Toronto area since 2000. It put Toronto’s 44,000 hotel rooms against 167,000 in Las Vegas, 117,000 in New York and just over 50,000 each in Boston and Miami. But Tufts says Toronto is losing market share to other cities.
Despite the large number of conventions the city has attracted, Toronto is losing market share to other centres, said Tufts.
“You talk about a hotel in Las Vegas — at that scale we’re looking at 5,000 rooms — and we’re not even talking about building hotels with 500 rooms in Toronto,” he said.
Newer hotels in Toronto tend to be financed as joint residential buildings — mostly condos, not affordable housing or purpose-built apartments.
Tess Kalinowski is a Toronto-based reporter covering real estate. Follow her on Twitter: @tesskalinowski