The Great Potential of a Growing Downtown Executive Summary

The Hotel Industry in Downtown Edmonton THE GREAT POTENTIAL OF A GROWING DOWNTOWN EXECUTIVE SUMMARY 1 In addition to being the place to ''live, work, shop, play and learn'', “Tomorrow belongs to people who Downtown Edmonton is the place to STAY when you are a visitor!! The Business Recruitment Committee's 2015 communication plan presents prepare for it today.” an overview of the hotel industry in the Downtown core. It evaluates not only the performance and the economic impact of the Downtown hotels but also explores the development strategy aimed at increasing the demand in the Downtown core advocating, therefore, the city center as the place to stay for visitors and to invest for entrepreneurs. The DBA project also appraises potential visitors' opinions and preferences. As a result, it seems tremendous to communicate about the misleading perceptions to reposition the city center in the market. Hotels' development is closely related to the demographic and economic development of the Downtown, and it is probably the reason behind the AUTHOR slow growth of the industry for almost 40 years. Khedija Hentati, PharmD MBA Candidate (2016) In fact, the emergence of the LRT in 1978 transformed the architecture of University of Alberta, School of Business the city where people moved from Downtown to the suburbs. E: [email protected] P: 780 862 7466 However, today, the Downtown core is growing at an outstanding rate. Indeed, the population growth is estimated at 20.4% in Downtown against DESIGNER 8% in Edmonton (2011-2014). Meanwhile, in 2014, the city issued roughly Karrone Stephenson, Dip. Des + DM $2.6 billion worth of building permits for the Downtown core where 58% of E: [email protected] the total $10 million-and-more projects are planned. THE HOTEL INDUSTRY IN THE DOWNTOWN CORE: OVERVIEW AND ECONOMIC IMPACT Downtown total capacity is estimated at 2,472 guest-rooms in 14 locations including 1 residence, 5 limited-service and 8 full-service hotels. This EMPLOYMENT TAXES represents only 16% of the total capacity of Edmonton and the surrounding 6,873 jobs $208 million area. However, in 2014, hotels in Downtown captured roughly 28% of the city's demand, secured 660,000 room-nights, and generated an estimated $420 million in direct expenditure including $96 million in revenue for hotels. ECONOMIC IMPACT OF DOWNTOWN HOTELS (2014) ESTIMATED DOWNTOWN TOURISM’S DIRECT EXPENDITURE GENERATED BY THE HOTELS IN DOWNTOWN (2014) Accommodation, food and beverage $168 million VALUE ADDED GROSS OUTPUT Transportation $ 59 million $504,000 $1.15 billion Auto rental $92.5 million Entertainment $29.5 million Retail and other $70 million Total estimated Tourism’s direct expenditure $420 million 3 THE PERFORMANCE OF THE THE DEVELOPMENT STRATEGY OF DOWNTOWN HOTELS THE HOTEL INDUSTRY IN DOWNTOWN Downtown's hotels performance has been higher that the average The growth of the hotel industry in Downtown relies on 4 principals: the performance of the city and the province for two consecutive years 2013 development of hotels' capacity and quality, the improvement of the and 2014. Based on the Revenue PerAvailable Room and the Occupancy access to the city and to the Downtown, the alignment of the consumers' Rate, Downtown-Edmonton's hotels outperformed even Downtown- expectations and the services/attractions provided, and the promotion of Calgary' hotels. the Downtown and the city in the region and overseas. Not only the performance was outstanding but also the growth of the The implementation of the development strategy can be perceptible Downtown performance metrics has been the highest in the region. through new projects, and argues for the future increase in demand. THE GROWTH IN THE PERFORMANCE METRICS BETWEEN 2013 AND 2014 THE DEVELOPMENT OF HOTELS’ CAPACITY AND QUALITY: The two new hotels under construction, the first Hyatt Place in Canada and Downtown Downtown Edmonton Alberta the luxury hotel in the ICE-District, are estimated at $200 million and will Edmonton Calgary city add diversity and capacity to the Downtown core. RevPAR 7.2% 3.4% 4.3% 3% Occupancy Rate 0.3% -1.9% -0.9% -0.4% 4 Direct impact of the two new branded hotels: Indirect impact of the new projects: renovating and upgrading the existing hotels: Additional guest rooms 617 The two hotels have increased the competitiveness and led to a huge investment in renovation. Consequently, 8 out of the 13 hotels located Capacity increase (guest room) Almost 25% in the Downtown core are undergoing renovations. The upgrading is estimated at $45 million to be spent between 2014 and 2016 and includes Additional meeting space 32,000 SF 950 guestrooms and suites, which represents 38% of the total capacity of Downtown. Probable outside Downtown market share to 43% be captured The extent of renovation (2014 - 2016): Additional night-rooms to be booked per year 165,000 Hotel undergoing renovation in Downtown 8 out of 13 (based on 2014 occupancy rate) Additional revenue for the hotel industry/year Renovated guest rooms and suites 950 $24 million (based on the 2014 ADR) Percentage renovation in the Downtown guest rooms 38% Additional direct expenditure in Tourism in $105 million* Downtown/year Emergence of concierge floors 65 rooms Estimated jobs to be created in the hospitality Probable market share to be captured by the renovated 1,718 83% industry in Downtown hotels (excluding the new hotels) Estimated cost of renovation $45 million Additional tax revenue per year $52 million Additional value-added $126 million Additional gross output $287 million *The additional direct expenditure in Tourism can be categorized as following: $14.7 million added expenditure in transportation, $42 million in the accommodation, food and beverage, $7.35 million in the entertainment, $23.1 million in auto rental and $17.85 million in retail and other. 5 Probable impact: capturing outside-Downtown market shares: On the other hand, the city is working on facilitating to access to the The assessment of the consumer behavior reveals that 43% of outside- Downtown. Downtown visitors will be attracted to the city center with the two new Projects: branded hotels. • Replacement and optimization of the This can result in 730,000 additional night-rooms booked/year, $464 million Access from the South ''Waterdale'' Bridge generated in direct expenditure/year, $106 million in revenue for the hotel • LRT Valley Line industry/year as well as the creation of 7600 jobs in the hospitality industry Access from the North • Extension of the Metro line and $230 million in tax revenue/year. • Stony Plain road improvement • Replacement of the bridge on 102nd THE DEVELOPMENT OF THE ACCESS TO THE CITY AND TO THE DOWNTOWN: Access from the West Avenue over Groat Road Facilitating the access to the city and to the Downtown is a major factor • River Valley/ Groat Road interchange to attract visitors to the Downtown core. Fortunately, both the city of • West Rossdale Arterial Roadway Edmonton and the EIA are working toward improving the access. Access from the East Improvements On the one hand, EIA has been the fastest growing airport in the country for the last decade. A master plan for the airport development (2010-2030) The alignment of supply and demand: includes the extension of terminals, the improvement of the transit from The assessment of the consumers' expectations (the demand) shows that the airport to the city and the Downtown, and the increase in the capacity 77% of the potential visitors prefer to buy a tour, 88% are attracted by by planning for a third runway. special events (festivals), 62% look for a cultural experience and 44% are interested in the urban experience. The good news for the international Tourism is that the number of overseas non-stop flights is increasing after the introduction of the direct lines On the other hand, the Downtown core is undergoing changes that target Edmonton-Iceland and Edmonton-Amsterdam. The Direct lines along the consumer demand. with an extensive marketing overseas and a low Canadian Dollar resulted in the increase of international travelers. The growth in international air- passengers reached 16.3% for the first quarter of 2015 with a pic of 21.8% in April. 6 Facts and upcoming projects in Downtown: In conclusion, the alignment of the consumer expectations and The Demand The Supply the existing services as well as the upcoming projects argues for the • Pioneer in hosting sport's events: First Western Canadian city to host the Red Bull potential growth of the hospitality Iced Crashed event Special events and hotel industry in the Downtown • Festivals' home core. • ICE district, the new attraction in Downtown • 90,000 people work in Downtown MARKETING AND PROMOTION • 65% of the offices in town are located in the Downtown core The marketing investment for 2015 • 60% of the residents are under the age of 34 is estimated at $9.3 million and • 15% of the restaurants in town are located Downtown Urban experience is expected to generate $22.32 • Access to more than a 1,000 boutique (in less than 20 min) million within the coming year • $2.6 billion worth of building permits issued in 2014 including at least $1.5 million for • 58% of the $10 million-and-more projects approved in 2014 are located in Downtown hotels Downtown. • $2.5 billion development related to the Rogers-Place On the other hand, the community • 82% of the museums in the region are located in a 20 min radius from Downtown engagement through the • Festivals, events and exhibitions take place in The Art District, City Hall, and Churchill destination activation program Square. • 37 festivals/ year take place in the Downtown differentiates Edmonton as a city Cultural experience • The development of the new Royal Alberta Museum: the biggest Museum in that fully embraces the excitement Western Canada around major events.

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