Renderings of Element by Westin, an extended-stay hotel renovation of a former office space in downtown Calgary.Westin Hotels and Resorts
Nearly two years after the announcement of the first office-to-hotel conversion project in downtown Calgary, the retrofit of the 170,000 square-foot Canadian Centre building into an extended-stay hotel, Element by Westin, has begun.
Initially conceived to include a range of housing options, including long-term rental apartments and short-term rental units, the conversion project, led by Calgary-based land developer and property manager PBA Group, has pivoted to take advantage of a growing trend: extended stays.
“This offering doesn’t exist in the downtown core,” says James Scott, senior vice-president of planning and development at PBA Group, adding that business travellers are the primary market of this segment. “We really saw an opportunity to satisfy the growing demand for additional room capacity in downtown Calgary.”
According to CBRE, extended-stay hotels also offer sizable margins which, when combined with lower development costs, can generate higher returns on investment.
When Element by Westin is completed in the summer of 2025, the renovated 12-storey building will comprise 226 fully furnished and equipped suites, a setup akin to an apartment.
The new hotel will also feature exclusive services for guests, such as a signature “studio commons”, where those travelling in a group can share a fully equipped kitchen and a living area. To serve the community, a lobby lounge and café will be located on the main floor, and an upscale restaurant on the second.
“We want to be part of the neighbourhood,” Mr. Scott says. “This location offers some unique characteristics on the western gateway to downtown, the Bow River Pathway, the Eau Claire area – we hope our hotel will be able to contribute to that community.”
When completed in the summer of 2025, the 12-storey building will comprise 226 fully furnished and equipped suites.Westin Hotels and Resorts
Attracting a variety of people and activities to the downtown core is the very reason the city’s Downtown Calgary Development Incentive program, which is currently on pause, listed hotels, schools and cultural facilities as alternative uses for vacant office space.
“Part of our overall policy vision was to create a far more diverse mix of uses within that area that would make it more lively,” says Thom Mahler, director of downtown strategy at the City of Calgary. “People do more around the clock, which creates more activity on the street and help create a better sense of safety.”
PBA Group is set to receive $9.8-million from the development incentive program, and the new hotel will join parent-company Marriott’s growing share in the extended-stay market across North America.
Hotels aren’t the only businesses capitalizing on the growing popularity of extended stays – vacation rental operations increasingly focus on stays that last between one and 12 months, or mid-term rentals.
“We’ve seen a substantial increase in the number of longer-term stays in short-term rental units in cities around the world as guests look to use these units for temporary housing,” says Jamie Lane, a senior vice-president of analytics and chief economist at AirDNA.
Calgary is no exception. Since 2022, the number of vacation rentals offering stays of at least 28 days in Calgary has doubled from 200 to 400 units, according to AirDNA data.
Beth and Duncan Haldane, who manage 95 properties through their vacation rental management company, Your Key, have witnessed the evolution of this trend in Calgary firsthand.
“From the owners’ perspective, one of the benefits of mid-term rentals is a higher rate of return than a long-term rental.” Mr. Haldane says.
AirDNA estimates the average nightly rate for mid-term rentals in Calgary at $124, or $11 less than a unit in the short-term market, but there are many savings associated with longer stays.
“Because there’s no gaps in the booking calendar, there’s going to be a lower cleaning fee, lower insurance fees,” Mrs. Haldane explains, adding that many hosts alternate between short- and mid-term rentals, depending on the season.
“In the winter, when rates are lower, mid-term rentals are a very safe bet.”
Moreover, costs such as the provincial tourism levy and municipal licensing fees only apply to properties offering stays shorter than 30 days, incentivizing hosts to list their property in the mid-term market.
“Even if you do discounted stays that are longer in duration, costs are partially offset by not having to pay that levy,” Mr. Haldane says.
But as hotels increase their presence in this corner of the market, not all vacation rentals are set to thrive.
In Mr. Haldane’s view, hosts with larger units, such as detached homes or townhouses, and high-end apartments in new condo buildings are the most likely to remain.
“When you have a unit with four bedrooms, big living area, big kitchen and dining – a lot of those things a hotel can’t really compete with,” he says, noting that the price differential between vacation rentals and hotels is narrowing. “Short- and mid-term rentals are not as cost effective as they once were.”
Although increased competition raises the barrier to entry, and drives down prices for guests, it won’t do much to relieve the pressures on Calgary’s long-term rental market, as vacation rental hosts aren’t seeking to become landlords.
“Most people still have some interest in using their homes,” Mrs. Haldane says.
Many hosts, such as snowbirds or those who travel extensively for work, continue to use their property when they’re in Calgary, while others just want to avoid additional hassles.
“There’s a lot of horror stories with tenants out there,” Mr. Haldane says. “So I think dealing with guests makes it a little bit less stressful for hosts.”