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Home , Qualicum Beach, Tourism

Qualicum and Gap and Opportunity Analysis

May 2009

Prepared for: Town of Qualicum Beach

By: Coriolis Consulting Corp.

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

Table of Contents

1.0 Introduction ...... 1

2.0 Retail and Market Analysis ...... 2

2.1 Qualicum Beach’s Role in the Regional Retail and Service Market ...... 2 2.2 Area Population Trends and Projections ...... 2 2.2.1 Existing Population and Recent Trends ...... 2 2.2.2 Population Projections ...... 4 2.3 Retail and Service Market Conditions in Qualicum Beach ...... 4 2.3.1 Types of ...... 4 2.3.2 Vacancy ...... 5 2.3.3 Recent Development ...... 6 2.3.4 Commercial Character ...... 6 2.3.5 Demand for Retail and Service Floor Space ...... 6 2.4 Economic Viability of Retail Development ...... 9 2.5 Prospects for Retail Growth ...... 9

3.0 Tourism Market Analysis ...... 11

3.1 Study Area ...... 11 3.2 Existing Accommodation Inventory ...... 11 3.3 Indicators / Trends ...... 12 3.3.1 Room Revenues ...... 12 3.3.2 Highway Traffic Volumes ...... 13 3.3.3 BC Ferries Passenger Volumes...... 14 3.3.4 Passenger Volumes ...... 14 3.4 Recent Tourism Development in the ...... 15 3.5 Prospects for Growth in the Regional Accommodation Market ...... 16 3.6 Qualicum Beach’s Advantages & Disadvantages for Tourism Development 16 3.7 Conclusions ...... 18

4.0 Comments from Chamber of Commerce and Tourism Association ...... 19

5.0 Conclusions and Recommendations ...... 20

CORIOLIS CONSULTING CORP. PAGE I

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

1.0 Introduction

The Town of Qualicum Beach commissioned Coriolis Consulting Corp. to complete an analysis of the existing retail and tourism market conditions in Qualicum Beach, identify gaps in the current market, evaluate new retail and tourism opportunities, and suggest strategies that the Town could consider to take advantage of the opportunities. The Town intends to use this analysis as an input to planning, economic development plans, and evaluating any future proposals for the redevelopment of lands that are used for commercial or tourist accommodation. We have structured this analysis in four main sections:

 First we analyze the retail market, including a description of the existing situation and a forecast of development potential over the next decade.

 Second, we analyze the tourism market, including a description of the existing situation and an outline of development opportunities over the next decade.

 Third, we summarize the input we received from some local interested in the retail and tourism sectors.

 Finally, we summarize our overall conclusions and recommendations, including some suggestions for planning directions.

CORIOLIS CONSULTING CORP. PAGE 1

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

2.0 Retail and Service Market Analysis

2.1 Qualicum Beach’s Role in the Regional Retail and Service Market

The Town of Qualicum Beach is located within a large geographic retail and service trade area that spans from about on the south to Courtenay on the north and inland to . The dominant urban centres within this regional trade area are Nanaimo and Courtenay, which offer a wide selection of major retail and service chains, department stores, big box retailers, retailers, and /. Retail and service businesses in Qualicum Beach (and nearby smaller ) mainly cater to the day-to-day needs of the local community and to tourists. The Qualicum area does not include the destination-oriented retailers that draw trade from a large regional area. These kinds of businesses are concentrated in Nanaimo and Courtenay.

2.2 Trade Area Population Trends and Projections

2.2.1 Existing Population and Recent Trends

The large central- regional trade area that contains Qualicum Beach is made up of three Regional Districts (Nanaimo, Comox-Strathcona, and Alberni-Clayoquot) in which the main urban centres are the of Nanaimo, Courtenay, and Port Alberni. Table 1A shows that the 2008 population of this entire region is about 284,000. Over the decade from 1998 to 2008, the entire regional population grew at an average annual rate of less than 1%, although the Regional District of Nanaimo was by far the fastest growing part of the area. During the more recent past (2003 to 2008), growth has been more rapid than the decade average, and the Regional District of Nanaimo (which contains Qualicum Beach) was again the fastest growing part of the whole region. Table 1B shows that the 2008 population of Qualicum Beach was about 8,700 people, which is about 3% of the total of the three Regional Districts and about 6% of the population of the Regional District of Nanaimo (compared to the of Nanaimo which, in 2008, had about 57% of the population of the Regional District of Nanaimo. Table 1C shows the population growth trend in Qualicum Beach compared to the Regional District of Nanaimo. This table uses Census data instead of the BC Stats data in Tables 1A and 1B because the BC Stats data is not adjusted for municipal boundary changes but the Census data is. Qualicum Beach annexed some adjacent residential areas, so the BC Stats data would show an artificially high growth rate based on annexation versus real growth. Table 1C shows that

CORIOLIS CONSULTING CORP. PAGE 2

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

Qualicum Beach has been growing at close to the same rate as the whole Regional District of Nanaimo. In addition to the 8,700 people who live in Qualicum Beach, there are other people who live in very nearby residential areas including Deep Bay, Bowser, Dunsmuir, and Errington. We estimate that these areas have a combined total population of about 6,400, meaning that Qualicum Beach has a total local trade area population of about 15,000 people.1 These small nearby communities do not have much commercial space and they are close enough that residents can conveniently to Qualicum Beach for day-to-day retail and service needs. Of course, they also live close enough to Nanaimo or Courtenay that, like residents of Qualicum Beach, they spend some of their retail and service dollars in these larger communities.

Table 1A: Population Growth in the Regional Trade Area by Area (BC Stats data)

Average Annual Growth 1998 2003 2004 2005 2006 2007 2008 98 to 08 03 to 08 RD of Nanaimo 128,912 133,502 135,099 138,248 141,246 143,020 145,870 1.2% 1.8% Comox-Stratchona RD 101,827 98,885 99,732 101,365 103,128 104,769 107,104 0.5% 1.6% Alberni-Clayoquot RD 32,168 30,501 30,704 30,865 31,077 31,102 31,280 -0.3% 0.5% Regional Trade Area 262,907 262,888 265,535 270,478 275,451 278,891 284,254 0.8% 1.6% BC Total 3,983,113 4,122,396 4,155,170 4,196,788 4,243,580 4,310,305 4,381,603 1.0% 1.2% Source: BC Stats (2009 data)

Table 1B: Qualicum Beach’s Current Share of the Regional Trade Area’s Population, 2008 (BC Stats data)

2008 Regional Trade Area 284,254 Qualicum Beach 8,666 Qualicum Beach as % of Regional Trade Area 3.0%

Table 1C: Historic Population Growth in Qualicum Beach, 2001 to 2006 (Statistics data)

2001 2006 Annual Growth Rate RD of Nanaimo 127,016 138,631 1.8% Qualicum Beach 7,802 8,502 1.7% Source: Statistics Canada Note: Statistics Canada figures for 2001 and 2006 reflect municipal/regional district boundaries as of 2006.

1 This figure includes the population of Electoral Area H (Deep Bay, Bowser, Dunsmuir, Dashwood) plus 50% of the population in Electoral Area F (Coombs, Errington, Hilliers).

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RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

2.2.2 Population Projections

BC Stats completes detailed population projections for Local Health Areas (LHA). Qualicum Beach is part of a LHA that includes Parksville, , Bowser and other nearby communities to the north of Nanaimo and to the south of Courtenay. The population projections for the LHAs that make up the regional trade area are summarized in the following table (the total 2008 population is slightly higher than the regional trade area estimate as the LHA boundaries include some additional communities).

Table 2: Population Projections by Local Health Area Average Annual Growth Local Health Area 2008 2011 2016 2026 08 to 16 16 to 26 Qualicum - Parksville 45,028 47,685 51,662 58,858 1.7% 1.3% Nanaimo 101,207 106,428 114,959 131,424 1.6% 1.3% Alberni 31,279 30,932 30,509 30,371 -0.3% 0.0% Courtenay 63,239 66,218 71,647 83,149 1.6% 1.5% Campbell River 41,199 42,210 44,020 48,334 0.8% 0.9% Total 281,952 293,473 312,797 352,136 1.3% 1.2% Source: BC Stats

The notable points from the table are as follows: 1. The Qualicum-Parksville area is anticipated to grow at a rate of about 1.7% per year from 2008 to 2016, and slightly slower following 2016. 2. The regional trade area population growth rate is expected to average between 1.2% and 1.3% per year over the long term. This is slightly slower than recent growth (2003 to 2008), but higher than growth from 1998 to 2008.

2.3 Retail and Service Market Conditions in Qualicum Beach

2.3.1 Types of Businesses

Retail and service space in Qualicum Beach is focused in the Downtown portion of the Town, with some additional space along the old (Highway 19A) near the waterfront tourist accommodation.

CORIOLIS CONSULTING CORP. PAGE 4

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

We reviewed the types of retail and service businesses currently located in Qualicum Beach. Based on our , Qualicum Beach includes all of the typical retail and service businesses that generally serve the day-to-day shopping needs of local residents, such as:

(Qualicum Foods).  Pharmacies.  Medical supplies.  store.  rental.  Local hardware store and supplies.  Cafes.  Restaurants.  Hair salons.  Florists.  store.  Electronics.  Dollar store.  Small clothing/boutiques.  Delis.  store.  Retail banking branches. The Town also includes some retail and service businesses that cater to tourists/visitors as well as local residents, such as gift shops and galleries. Qualicum Beach does not have department stores, large building supply stores, chains, destination restaurants, warehouse club stores, and other retail businesses that require large trade area populations. These types of businesses are located in the larger centres of Nanaimo and Courtenay, where they serve the entire regional trade area.

2.3.2 Vacancy

Based on our fieldwork, overall vacancy in existing ground level commercial space in Qualicum Beach is low, but there are some pockets of vacant grade level commercial space in Downtown, primarily in that are not on the main retail streets.

CORIOLIS CONSULTING CORP. PAGE 5

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

2.3.3 Recent Development

There has been a small amount of new retail and service development in Qualicum Beach in recent years. A mixed-use residential and commercial building was recently completed in the 200 block of Second Avenue (Villa Rosa). This project includes grade level commercial space, but much of the space is occupied by office users and a branch, not retailers. Other than this project, we are not aware of any other recent retail projects completed in the Town.

2.3.4 Commercial Character

Qualicum Beach has done an excellent job of maintaining a strong, attractive, compact, -oriented Downtown that contains most of the community’s commercial space and civic facilities. There is a small amount of highway-oriented development and waterfront-oriented development, but these complement Downtown.

2.3.5 Demand for Retail and Service Floor Space

We estimate demand for retail and service floor space by using a ratio of retail and service space per capita. Based on data from a variety of other communities, residents of large regional trade areas support in total approximately 42 square feet of retail and service space per capita. This space generally falls into two categories based on the sorts of locations that businesses prefer:

 Typically, a little over half of the space (about 22 sq.ft. per capita) is concentrated in major commercial and regional shopping locations that serve a large regional trade area. This space is occupied by businesses such as department stores, big box retailers, large building supply stores, large electronics and appliance businesses, warehouse clubs, entertainment uses, fashion retailers, and major chains, as well as some businesses that might serve the local area but prefer a location within a major commercial node (e.g., large scale food and drug stores).

 The remainder (about 20 sq.ft. per capita) of the space is spread throughout the local/neighbourhood-oriented commercial districts of a community. This space is typically occupied by businesses that meet the day-to-day needs of the community, such as grocery stores, drug stores, liquor stores, video rental, hair salons, delis, butchers, cafes, local restaurants, neighbourhood hardware and building supplies, florists, sporting , fitness studios, and other local oriented businesses.

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RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

This ratio of 42 square feet per capita can be verified by looking at retail data. Table 3 shows figures for annual spending per person in BC on retail goods and selected services that tend to occupy ground floor commercial space in retail districts (e.g. restaurants, dry cleaning, hair care, movie rental).

Table 3: Estimated Annual Retail and Service Spending per Person, BC Provincial Average 2007/2008 Annual Retail Spending by Category Annual Sales per Capita 1 new car dealers $2,092.70 2 used and rec motor and parts $435.57 3 gas stations $1,696.62 4 stores $289.21 5 home furnishing stores $241.12 6 computer and software stores $54.91 7 home electronics and appliances $503.97 8 home centres and hardware $667.88 9 specialized building materials and garden stores $200.50 10 supermarkets $2,313.13 11 convenience and specialty foods $207.64 12 ,wine, liquor $677.88 13 pharmacies and stores $700.18 14 clothing stores $567.94 15 shoes, accessories and $171.22 16 general merchandise $1,445.20 17 sporting goods, , music, $435.09 18 miscellaneous stores $386.55 19 services (2005 data) $1,672.92 Total $14,760.23 Totals Excluding Auto Related (items 1, 2, 3) $10,535.34 Source: Based on Statistics Canada and BC Stats data

Excluding automotive related uses (which often have limited floor space but large site requirements), retail and service expenditures total about $10,535 per person. Annual sales figures vary considerably across different geographic locations and different types of stores, but the overall average tends to be in the range of $200 to $300 per square foot per year. Using the mid-point of about $250 per square foot per year, spending by the average BC resident would support 42 square feet of retail and service space ($10,535 per person/$250 per square foot = 42 square feet per person). Based on typical patterns, we would expect residents of Qualicum Beach to support about 20 square feet per capita of ground floor commercial space that would be located in the Town, meeting the day-to-day needs of residents. In addition, we also would expect residents to support

CORIOLIS CONSULTING CORP. PAGE 7

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS another 22 square feet per capita of retail demand that would be located in larger regional- oriented commercial centres such as Nanaimo and Courtenay. In other words, we would expect that Qualicum Beach would just over half (as measured in terms of floor space, not necessarily dollars) of its retail demand to nearby larger centres. Detailed commercial floor space data is not available for the Town of Qualicum Beach, so we compiled an estimate using air photos and field work. We estimate that there is about 250,000 square feet of ground level retail and service space, not including tourist accommodation and grade level space that is actually occupied by office-type tenants such as medical or uses. This inventory of 250,000 square feet of space is equivalent to about 29 square feet per Qualicum Beach regional trade area resident (250,000 divided by 8,700), which is more than we would expect based on typical patterns. This means that either Qualicum Beach is not exporting as much retail potential to larger centres as we would expect, or the Town is importing some retail trade from other sources. If we divide the 250,000 square feet by 15,000 people (our estimate of the total local trade area for Qualicum Beach) the ratio is 17 square feet per capita. This means that some of the local-oriented spending of the small surrounding communities is leaking out, likely to Parksville or Nanaimo. Based on looking at the floor space inventory and the kinds of retail and services businesses in the community (and considering the kinds of businesses that are not located in the Town but are located in Nanaimo and Courtenay), we think the current local retail situation can be characterized as follows:

 Qualicum Beach is retaining almost all of its resident local-oriented retail demand (i.e. the 20 square feet per capita that is typical in small local trade areas).

 Qualicum Beach is exporting most of its regional-oriented sales potential to larger stores to the north and south.

 Qualicum Beach is importing some convenience retail sales potential from surrounding small communities, but it is competing with Parksville for these dollars.

 Qualicum Beach is importing some specialty retail potential from tourists. We looked at the inventory of retail businesses in Qualicum Beach and we do not see any gaps in the roster of local-oriented, convenience retail and service businesses that would typically be found in a community of this size. Larger retailers are not located in the community, as these are located in the larger centres to the north and south. We do not see any major “missing pieces” that would be supportable in a community of this size (with this relationship to nearby larger centres) and that would make Qualicum Beach a stronger retail centre. This does not mean there are not opportunities for additional small businesses. The retail and service sector is very competitive and there are almost always opportunities for individual new businesses, especially if they are specialized or particularly strong competitors. By saying we see no gaps, we simply mean that we do not think that Qualicum Beach is under-supplied with commercial space and we

CORIOLIS CONSULTING CORP. PAGE 8

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS see no major opportunities to add businesses that would significantly reduce the amount of sales leakage out to the larger centres.

2.4 Economic Viability of Retail Development

We completed a preliminary evaluation of the potential economic viability of new retail and service development in Downtown Qualicum Beach to determine whether developers are likely to be interested in pursuing new retail projects in the foreseeable future. rates for good quality ground level retail space in the Downtown area are in the range of $12 to $20 per square foot. We constructed a simple economic model of a new mixed use development in Downtown (ground floor retail with 3 floors of residential above) and we estimate that new retail space would have to achieve a rent of at least about $30 per square foot in order for the development to be financially viable. Currently, therefore, retail rent rates appear too low to warrant including new retail space in mixed use projects in which parking must be provided in underground structures, with the exception of prime locations that can command high (by Qualicum Beach standards) rents. New retail development in single storey buildings makes financial sense because parking can be provided with low-cost surface stalls, but (other than in prime retail locations) new retail on the main floor of mixed-use buildings with underground parking does not appear to be economically attractive due to the high costs associated with the structured parking. Therefore, we would not expect most developers to be interested in pursuing new retail development in mixed use multi-storey buildings in Qualicum Beach in the foreseeable future. Developers will likely be interested in building single storey commercial buildings (with surface parking) or in building new residential projects.

2.5 Prospects for Retail Growth

Considering the size of Qualicum Beach’s population (less than 9,000), there are no major gaps in the retail inventory. The Town is not large enough to support the full range of retailers found in larger centres. There may be small niche opportunities for additional specialty stores and for additional restaurants/dining along the waterfront. Therefore, over the next 10 years or so, we would expect demand for additional space in Qualicum Beach to grow at a rate that is consistent with the rate of population growth in the Town and the adjacent small communities. Based on the historic population growth in the area and on

CORIOLIS CONSULTING CORP. PAGE 9

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS available population forecasts, it is reasonable to assume that the local trade area population will likely grow at about 1.7% per year on average. If the population grows at this pace, it would increase from 9,000 to nearly 11,000 in a decade. This addition of about 2,000 people should support at least about 40,000 square feet of new commercial space. If the ratio of 29 square feet per capita holds (i.e. Qualicum Beach continues to pull in retail sales from surrounding residents and tourists), then up to about 60,000 square feet of additional space would be warranted over the decade. This growth rate works out to about 4,000 to 6,000 square feet per year, which is quite modest. Because the pace of retail development in the Town is likely to be modest, the Town should strive to maintain Downtown as the retail centre and should not approve any significant retail space on peripheral sites. An exception would be retail/restaurant space associated with tourist accommodation along the waterfront or at any new /accommodation development. The Town should only insist on ground level retail space in new projects in strong retail locations where it is critical to the retail health/character of the Downtown. If residential development (without commercial) is permitted in specific locations in (or near) Downtown it will add to the stock of housing in the core and increase the customer base for the existing businesses.

CORIOLIS CONSULTING CORP. PAGE 10

RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

3.0 Tourism Market Analysis

3.1 Study Area

Qualicum Beach is part of the larger central/northern Island tourism market, stretching from Nanaimo to the northern end of the Island and across to the west . In addition to Qualicum Beach, this market area includes a wide variety of communities and tourism destinations including Nanaimo, the Qualicum/Parksville/French Creek area, the Pacific Rim (, , Long Beach), Mount Washington, the northern gulf , Strathcona Park, and the coastal communities on the northern end of the Island. Our analysis of gaps and opportunities in the Qualicum Beach tourism market concentrates on the portion of this large region that is between Nanaimo and Courtenay/Comox.

3.2 Existing Accommodation Inventory

We compiled an inventory of the existing tourist accommodation in the study area stretching from Nanaimo to Courtenay/Comox2. We estimate that there is a total of about 3000 units of tourist accommodation in this area. Of this total, there are about 200 rooms in Qualicum Beach (excluding facilities that are no longer operating, such as the Qualicum College ), or just under 7% of the regional inventory. Qualicum’s share of the regional inventory has been declining in recent years as some local facilities have closed and have not been replaced by new operations. Meanwhile, expansion of the accommodation inventory has occurred in other parts of the region. The existing accommodation properties in Qualicum Beach tend to be modest in quality and price (other than the waterfront units), consisting mainly of smaller . In comparison, some of the other nearby communities in the region include higher quality or resort properties. For example, Qualicum Beach does not include properties that are comparable to the Kingfisher Resort (near Courtenay), the Beach Club Resort (Parksville), Tigh-na-mara (Parksville), or some of the higher end properties in other nearby parts of , such as the Wickaninnish in the Pacific Rim area.

2 This inventory excludes campgrounds, RV sites and bed and breakfasts.

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RETAIL AND TOURISM GAP AND OPPORTUNITY ANALYSIS

3.3 Indicators / Trends

We examined a variety of indicators of trends in the Central Vancouver Island tourism market to help gauge Qualicum Beach’s existing and potential role in the tourism market and the potential growth in the overall regional market. Indicators that we examined include:

 Historic trends in room revenues and room inventories in BC, Vancouver Island, and the study area.

 Traffic volumes on Highways 19 and 19A near Qualicum Beach.

 BC Ferries passenger volumes.

 Vancouver Island airport passenger volumes.

3.3.1 Room Revenues

The following table summarizes trends in total accommodation room revenue, the number of rooms, and the average revenue per room per year in different geographic locations.

Table 4: Annual Room Revenues and Number of Rooms by Location Comox-Strathcona Nanaimo Vancouver Island/Coast BC

(Regional District) (Regional District) Total Total

Room Avg per Room Avg per Room Avg per Avg per rooms rooms rooms Room Rev rooms Rev Room Rev Room Rev Room Room

1998 $14,928 1,625 $9,186 $28,133 2,616 $10,754 $201,254 13,752 $14,635 $2,079,192 126,558 $16,429 1999 $16,726 1,706 $9,804 $28,191 2,729 $10,330 $215,545 14,370 $15,000 $2,297,628 132,208 $17,379 2000 $16,821 1,787 $9,413 $28,295 2,570 $11,010 $218,120 15,028 $14,514 $2,487,937 141,534 $17,578 2001 $16,926 1,830 $9,249 $30,761 2,627 $11,710 $227,114 15,220 $14,922 $2,513,393 144,834 $17,354 2002 $17,688 1,807 $9,789 $32,786 2,684 $12,215 $236,280 14,825 $15,938 $2,544,791 144,765 $17,579 2003 $18,598 1,770 $10,507 $34,422 2,758 $12,481 $237,325 14,912 $15,915 $2,480,397 143,029 $17,342 2004 $19,451 1,741 $11,172 $36,655 2,893 $12,670 $257,075 15,527 $16,557 $2,666,365 147,649 $18,059 2005 $19,585 1,811 $10,814 $39,067 2,668 $14,643 $270,544 15,383 $17,587 $2,830,469 149,680 $18,910 2006 $22,456 1,776 $12,644 $41,258 2,595 $15,899 $281,935 15,742 $17,910 $3,044,996 152,089 $20,021 2007 $25,947 1,680 $15,445 $45,104 2,570 $17,550 $304,013 15,079 $20,161 $3,294,348 148,286 $22,216 Growth Rate 6.3% 0.4% 5.9% 5.4% -0.2% 5.6% 4.7% 1.0% 3.6% 5.2% 1.8% 3.4% 98 -07 Notes: includes revenue as motels, hotels and rentals Source: BC Stats

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This data shows that:

 Total room revenues and average revenue per room increased in BC and on Vancouver Island between 1998 and 2007 at about the same rate (between 3% and 4% per year).

 Total room revenues and average revenue per room in the Regional District of Nanaimo (which includes Qualicum Beach) and Comox-Strathcona Regional District both increased at a faster pace than the Provincial and Vancouver Island averages. Accommodation revenues in the region that includes Qualicum Beach have been growing and have outperformed BC and the rest of Vancouver Island. However, Qualicum Beach has not enjoyed the same performance as the rest of the Regional District of Nanaimo. Based on data from the Oceanside Tourism Association, total accommodation revenues for facilities in Qualicum Beach increased between 2000 and 2006. However, since 2006 revenues in Qualicum Beach have been declining. In comparison, total accommodation revenues in Parksville have steadily increased each year since 2000.

3.3.2 Highway Traffic Volumes

We examined traffic volumes on Highway 19A (the old Island Highway) and Highway 19 (the inland Highway) in the Parksville-Qualicum Beach area. Based on available data: 1. Traffic volumes on Highway 19A declined by about 50% after the opening of Highway 19 (completed to Courtenay in about 1998). This reduced the amount of traffic flowing through Qualicum Beach. 2. Since opening, traffic volumes on Highway 19 have increased steadily at an average annual rate between 1.5% and 2.0% between 1998 and 2007. 3. Current data is not available on the amount of traffic going from Highway 19 eastbound on Memorial into Qualicum Beach. However, the data that is available for the period from 1998 to 2002 indicates that there was little or no traffic increase into Qualicum Beach on Memorial over this time frame. Although the traffic volume data has gaps, the data indicates that volumes have been growing on Highway 19 at a rate that is similar to the regional population growth rate. However, traffic volumes on Highway 19A (which goes through Qualicum Beach) dropped dramatically after Highway 19 opened and there is no evidence that traffic flowing into Qualicum Beach from Highway 19 has been increasing. Fewer regional residents and fewer tourists are driving through Qualicum Beach, which has an impact on retail and tourism potential.

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3.3.3 BC Ferries Passenger Volumes

We examined passenger volumes on BC Ferries routes between the Lower Mainland and Vancouver Island. The available data is summarized in the following table.

Table 5: BC Ferries Annual Passenger Volumes by Route

Route 2003 2004 2005 2006 2007 Horseshoe Bay to Departure Bay 3,528,588 3,514,507 3,600,358 3,589,209 3,704,200 Tsawassen to Duke Point 1,361,543 1,341,917 1,358,686 1,361,921 1,392,073 Tsawassen to Swartz Bay 6,214,118 5,968,303 6,263,312 6,104,728 6,050,038 Other BC Routes 10,241,127 11,129,466 10,567,723 10,634,313 10,543,351 Total Passengers (All BC Routes) 21,345,376 21,954,193 21,790,079 21,690,171 21,689,662 Source: Compiled by Coriolis Consulting Corp. based on Annual Reports to the BC Ferry Commissioner, BC Ferries and Tourism BC

Based on this data: 1. Volumes between Horseshoe Bay and Nanaimo increased between 2003 and 2007, at an average rate of about 1.2% per year. 2. Volumes between Tsawassen and Nanaimo increased between 2003 and 2007, at an average rate of about 0.6% per year. 3. Volumes between Tsawassen and Victoria declined over the same period. 4. Volumes on all other BC Ferries routes increased at an average rate of about 0.7% per year between 2003 and 2007. Overall, the growth in Ferry traffic throughout BC was low between 2003 and 2007. A lack of capacity at peak periods on the high volume routes was likely a constraint on growth. It is notable that growth on the Horseshoe Bay to Nanaimo route significantly outpaced growth on other routes, which is a good tourism indicator for the whole central and northern Island region. However, the highway traffic data suggests that the growth has not translated into higher numbers of visitors moving through the Town of Qualicum Beach.

3.3.4 Airport Passenger Volumes

We examined passenger volumes at the main on Vancouver Island and at Vancouver (for comparative purposes).

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Table 6: Annual Passenger Volumes at Selected Airports 2000 2001 2002 2003 2004 2005 2006 2007 2008

Comox 70,581 131,930 148,742 166,799 184,879 209,668 238,612 310,504 304,069 Nanaimo 138,120 116,127 103,036 113,195 121,393 123,863 137,703 139,449 154,761 Victoria 1,139,262 1,158,113 1,102,247 1,182,821 1,249,976 1,207,295 1,390,128 1,361,739 1,427,006 Vancouver 16,032,531 15,476,762 14,877,536 14,321,504 15,725,694 16,418,883 16,925,342 17,495,049 17,852,459 Source: Compiled by Coriolis Consulting Corp. based on data from Tourism and Vancouver Airport Authority

Based on this data: 1. Volumes at the Comox airport increased dramatically between 2000 and 2008, at an average rate of about 20% per year. The growth rate was 12.7% from 2002 to 2008. This is largely explained by the substantial expansion and improvement in this airport, which has resulted in higher service levels including daily flights to/from Calgary. 2. Volumes at the Nanaimo airport increased at an average rate of about 1.4% per year between 2000 and 2008. The growth rate was 7.0% per year from 2002 to 2008. 3. Volumes at the Victoria airport increased at an average rate of about 2.9% per year between 2000 and 2008 and at 4.4% per year from 2002 to 2008. 4. Volumes at the Vancouver International airport increased at an average rate of about 1.4% per year between 2000 and 2008 and at 3.0% per year from 2002 to 2008. Overall, passenger volumes have been growing at all of the major airports on Vancouver Island. These trends suggest expansion in the total regional tourism market. However, passengers landing in Nanaimo and then transferring to cars are not (based on the highway traffic data) going through Qualicum Beach and passengers landing in Comox are likely staying in the local area or heading to destinations to the north or west.

3.4 Recent Tourism Development in the Region

There have not been any additions to Qualicum Beach’s accommodation inventory in recent years. In fact, some of the stock has been closed. However, there have been significant additions in the regional market over the past several years, including:

 The 149 room Beach Club Resort recently opened on the waterfront in Parksville.

 The Sunrise Ridge Resort in Parksville recently opened.

 Tigh-na-mara Resort in Parksville expanded its facilities, including a new 20,000 sq.ft. over the past few years.

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 The 64 unit Kingfisher Oceanside Resort and Spa near Courtenay completed a major expansion to its facilities and is interested in a further expansion that would add over 100 rooms plus additional facilities.

 A new 91 room Inn opened in Courtenay.

 The Best Western in Courtenay is currently completing an expansion.

 A new 65 room Ramada hotel opened in Nanaimo. In addition, the City of Nanaimo recently completed the new 38,000 sq.ft. Vancouver Island Conference Centre. Although Qualicum Beach did not add to its accommodation inventory over the past several years, the Town has seen growth in its inventory. The golf course at the Pheasant Glen Golf Resort was completed in 2005 (the former course was re-built and expanded). Pheasant Glen is a high quality destination golf course that caters to visitors as well as the local community. The Golf Resort does not include accommodation at this point, but there are plans for accommodation and a conference centre.

3.5 Prospects for Growth in the Regional Accommodation Market

The regional tourism and accommodation market is growing and should continue to grow over the long term. Based on historic growth in the regional room inventory, historic trends in the indicators we examined, and the general outlook for the BC tourism , we would anticipate growth in the regional accommodation market to average between 1% and 2% per year over the longer term. This would result in growth of about 300 to 600 additional rooms in the Nanaimo to Courtenay area over the next ten years (2009 to 2019), which would likely translate into some combination of new properties and expansion of existing properties. Qualicum Beach could compete for a share of this growth, provided there is a strong enough destination to pull visitors to the Town.

3.6 Qualicum Beach’s Advantages & Disadvantages for Tourism Development

Qualicum Beach has the following advantages for tourism related development: 1. Qualicum Beach is located in Central Vancouver Island, which is a successful and growing tourism market. The Town is on the route to destinations to the north and west, although on a secondary highway.

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2. It is a charming, characterful, pedestrian-friendly community and its retail/commercial area offers businesses that cater to tourists, such as galleries, cafes, and gift shops. 3. It has an attractive marine waterfront and beach. 4. The Town has 3 golf courses, including one high quality destination golf course (Pheasant Glen), plus proximity to other destination courses in the region (Morningstar and Fairwinds near Qualicum Beach plus Crown Isle and Storey Creek further up the Island). Qualicum Beach’s disadvantages include: 1. Parts of Vancouver Island have developed strong and high profile brands or niches for specific kinds of experiences (e.g., fishing, whale watching, , hiking, kayaking, high quality destination golf courses, outstanding , ). The Town of Qualicum Beach does not have the same kind of strong appeal as other locations in the region that have become strongly identified with specific kinds of visitor experiences. 2. Although Qualicum Beach’s waterfront is attractive, there are also attractive beaches in other nearby locations. Beaches to the south tend to have much larger and wider sand beaches which appeal more to families. 3. Qualicum Beach has about 200 units of overnight accommodation, about 7% of the regional total, but the accommodation is generally modest and has few amenities. There are not any destination resorts in Qualicum Beach of the calibre found in Pacific Rim, Parksville, or Courtenay. 4. Accommodation room revenue has been increasing at nearby communities on Vancouver Island, but not at Qualicum Beach. 5. Qualicum Beach is not a major entry point to the Island (as are Nanaimo and Courtenay/Comox) and it is on the old Island Highway, so much tourism traffic bypasses the community. 6. Qualicum Beach does not have a high quality resort and has not achieved a strong profile as a major destination in a particular niche (e.g., high end restaurant, spa, specific outdoor experiences). Because of Qualicum Beach’s geographic location it is not likely to be a strong competitor for wilderness , whale watching, salmon fishing, or kayaking. However, Qualicum Beach could be a stronger competitor for golf, spa/wellness, art/cultural, meetings, dining, and low-key relaxation if the right facilities are developed.

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3.7 Conclusions

Our assessment of the regional tourism market leads to these main conclusions:

 The regional tourism market has been growing and is expected to grow at a moderate rate of the next decade or so.

 Parts of the Island have developed strong and high profile brands or niches for specific kinds of experiences (e.g., salmon fishing, whale watching, beaches, hiking, kayaking, high quality destination golf courses, outstanding resorts, spas). The Town of Qualicum Beach does not have the same kind of strong appeal.

 Qualicum Beach is a charming, characterful, pedestrian-friendly community and it has some advantages for tourism including proximity to some good golf courses, an attractive marine waterfront, and galleries.

 Qualicum Beach does not have a high quality resort and has not achieved a strong profile as a major destination in a particular niche (e.g., high end restaurant, spa, specific outdoor experiences). Because of Qualicum Beach’s geographic location it is not likely to be a strong competitor for wilderness recreation, whale watching, salmon fishing, or kayaking. The Town could be a stronger competitor for golf, spa/wellness, art/cultural, meetings, dining, or low-key relaxation. Some key elements are missing: higher quality resort style accommodation (e.g., Wickaninnish, Kingfisher) or (e.g., Harbour House), fine dining, meeting facilities, selection of waterfront restaurants. For Qualicum Beach to grow as a visitor destination, these gaps need to be addressed. A high quality accommodation property in Qualicum Beach should be on the marine waterfront or at a high quality golf course, not on a run-of-the-mill site. Given the outlook for growth on the order of 300 to 600 rooms in the whole region over the next decade or so, and given that new destination resort properties tend to have at least 75 rooms, it seems likely that the most Qualicum Beach could hope to see is the development of one new good quality tourist accommodation property over the next decade.

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4.0 Comments from Chamber of Commerce and Tourism Association

After we reached our preliminary conclusions about retail and tourism market conditions and prospects, we contacted representatives of the Chamber of Commerce and the Oceanside Tourism Association. We explained our preliminary findings and invited feedback. We also sought comments and opinions about opportunities and constraints. The representatives of both organizations generally agreed with our assessment of the situation and prospects. Growth potential is modest in both the retail and tourism sectors, largely due to Qualicum Beach’s location in the region and the lack of destination quality assets. In addition, the following observations were provided: 1. Qualicum Beach could capitalize more on the potential as a stopping point for visitors en route to the Pacific Rim. We agree, although we note that this would create an opportunity for increased sales volume in food/beverage and specialty shopping, but not likely in overnight accommodation as the travel time from Nanaimo to Pacific Rim is not long enough to warrant dividing the trip into two segments. To take advantage of this opportunity, Qualicum Beach needs to enhance its reputation for restaurants, art, and and needs to make sure that Pacific Rim bound travellers realize it is a worthwhile stop that is not far out of their way. 2. While Qualicum Beach has a charming downtown, many visitors in this area are primarily interested in waterfront experiences. The Town should have more tourist oriented food/beverage and retail at the waterfront if possible. 3. New residential development in Downtown will add residents who inject spending for local businesses. While retail should be included in the ground floor of new projects in prime retail locations, there is not enough retail demand (and retail rents are too low in non-prime areas) to support retail growth at all locations. The Town should refine its expectations regarding ground floor retail and perhaps shrink the area in which this is a requirement, so that new residential development is not constrained by the requirement for ground level commercial. We agree with this view. 4. There was a suggestion that the operating hours of local businesses are too short to appeal to tourists. Businesses should be encouraged to stay open later. In our view, this is a chicken- and-egg challenge. Retailers are usually reluctant to stay open late (and incur increased staffing costs) unless there are customers, but customers don’t visit areas that are closed. This should be discussed with the local community, which might be interested in experimenting with gradual increases in opening hours during peak times.

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5.0 Conclusions and Recommendations

There are no significant gaps in Qualicum Beach’s inventory of retail businesses. The Town has an attractive, compact, pedestrian-oriented successful downtown that contains the full range of businesses to meet the day-to-day needs of the community. The Town a significant amount of retail sales potential to the larger centres of Nanaimo and Courtenay, but little can be done about this as these larger centres contain the regional-oriented retail concentrations that draw from a large surrounding trade area. Because of its location on the regional highway system, the strong appeal of destinations elsewhere in Central and Northern Vancouver Island, and the lack of major destination attractions within the Town, Qualicum Beach is not a major tourism location. There has been little investment in tourism accommodation and there is not likely to be much potential for new development in the future. We see the following retail and tourism opportunities for Qualicum Beach:

 Some potential for additional specialty retail, restaurant, and convenience retail aimed at local residents and visitors.

 Potential for at most one destination-oriented hotel development, which will need either a waterfront or golf course location to be viable and which will need facilities (such as spa/wellness, golf, meeting rooms) to make it a viable destination.

 Potential for small specialty inn or bed-and-breakfast accommodation, likely run by owner- operators. Qualicum Beach is an excellent location for small characterful inns of this type, catering to people looking for a quiet getaway, gallery shopping, good food, and time outdoors.

 Some potential to draw more visitors into the community, particularly those travelling up Island or to the Pacific Rim. This will require some which should emphasize the attractiveness of the community, opportunities for food/beverage and specialty shopping, and the fact that the Town is a very short detour from the main highway. We suggest the following policy directions for community planning:

 Continue to concentrate retail development in Downtown, although the requirement for grade level retail in mixed use developments should be refined. Grade level retail should only be required in prime shopping locations; other projects should be allowed to be all residential.

 Do not expect that all existing or tourist accommodation properties will remain viable in this use or will be redeveloped to higher quality accommodation. There is not enough demand to support new accommodation on all existing properties. Qualicum Beach should ensure that sites are available for accommodation development on the waterfront or in conjunction with a destination attraction such as a golf course, but should not be concerned about protecting run-

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of-the-mill motel sites for this use, particularly if there are alternate viable uses that will inject other economic activity.

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