Expected hotel shortage in Metro Vancouver could mean billions in foregone tax revenue: report

A file photo shows Vancouver's skyline before the sun fully sets. (CTV/ Pete Cline)

The government could lose out on billions in tax revenue over the coming decades if the supply of hotel rooms across Metro Vancouver doesn’t keep up with demand, a new study has found.

According to a report released Monday by Destination Vancouver, the annual demand for hotel rooms is predicted to return to pre-pandemic levels by 2025, then start growing at an average rate of 2.7 per cent per year.

If Metro Vancouver does not dramatically expand its hotel capacity, the study predicts demands will exceed supply by the summer of 2028.

“By 2040 demand is projected to exceed the current supply for every month of the year,” the report reads. “Although some excess demand may shift to short-term rental, most of it is likely to be foregone.”

The expected lack of hotel capacity could result in $16.6 billion in foregone GDP, 168,590 unrealized full time positions in the hotel sector, and $7.5 billion in foregone tax revenue for all three levels of government by 2050, according to the report.

Accommodations are projected to account for about 53 per cent of the foregone visitor spending, with food purchases making up 23 per cent.

“Transportation is expected to account for nine per cent, while retail and entertainment expenditures are expected to account for eight per cent and seven per cent, respectively,” the study details.

Councillor Sarah Kirby-Yung says Vancouver needs to be bullish in enabling new hotel projects.

“If we don’t meet that number, we’re going to be leaving billions of dollars in economic impact and hundreds of thousands of jobs on the table,” Kirby-Yung told CTV News Monday.

She says the city is working to expedite projects by allowing hotels to apply for permits while the planning process is underway, instead of requiring them to wait until the process is complete.

In addition, Kirby-Yung says there’s opportunity to build more hotels outside the downtown core, including along the route of the Broadway SkyTrain expansion.

She pointed to data showing the city’s hotel supply has been dwindling for years.

The number of hotel rooms has dropped by 12.8 per cent since 2002, when there were 15,242 rooms in the city, according to the study.

“I think this report is a really great opportunity to work with Destination Vancouver and other municipalities, this is a regional problem,” Kirby-Yung said.

She added that options on the table include mixed-use projects, such as models that combine full service hotels with both commercial and office spaces.