Finally five-star: Canada gets deluxe hotels
Mixed hotel-condo developments defray costs of building luxury
Tuesday, May 3, 2005 Page B10Key
Special to The Globe and Mail
Canada's major cities, although world class in other ways, are
lacking one thing: the highest level of luxury hotel and condo
It has been prohibitively expensive to build either of these. But
now, with a growing pool of sophisticated business travellers and
condo owners who expect a certain level of luxury, developers have
found that five-star hotels and luxury condos can play off each
other's strengths. Condo selling prices can subsidize the hotel
construction costs, while the hotel's amenities and cachet can help
sell the condos. Niche appeal will even allow several to exist in
one market, developers say. Toronto will soon have at least three of
each, and Vancouver one, with strong prospects for other cities.
"I think you are likely to see maybe five more projects, which
combine luxury hotels and luxury condominium suites in certain key
markets," says Joel Rosen, chairman of Toronto-based hotel and
leisure consulting firm Horwath Horizon Consultants. "Toronto can
support more of them; Calgary may well be able to; Vancouver already
has one under way; and Montreal may be able to support one as well."
The demand exists thanks to the growing internationalization of
business, says David Larone, a director of PKF Consulting,
hospitality industry consultants with offices in Vancouver and
"The people who will fill the hotel
rooms and the people who will buy the condominiums are well
travelled and sophisticated in their tastes," he says. "They are
used to staying in five-star hotels in other major cities and they
want the same when they come to Toronto and Vancouver."
But the problem has been one of cost, according to Mr. Larone.
"There is no way you can afford to build a five-star hotel on a
standalone basis today."
The same applies to building a luxury condominium with all the bells
and whistles, Mr. Rosen adds. Costs of providing residents grace
notes like room service, housekeeping, top-flight restaurants and
bars would drive monthly maintenance fees into the stratosphere.
Putting a five-star hotel and a luxury condominium in a single
structure, however, readily solves those problems, both consultants
say. Condo selling prices can subsidize hotel construction costs,
while hotel amenities and even the name can provide the marketing
sizzle that sells this particular steak.
"Luxury condos on the Toronto market today may sell in the $400- to
$500-a-square-foot range," Mr. Larone says. "If you include the name
and amenities of a five-star hotel, you can charge $800 or more a
square foot. That gives you a spread of $300 a square foot to
finance the hotel's capital costs."
In Vancouver, the new Shangri-La Hotel & Residence is now being
built at West Georgia, Thurlow and Alberni streets.
The 64-storey tower will have 120 luxury hotel rooms, 245 live-work
units and 66 top-end residences.
The project could not have been done as separate luxury hotel and
luxury condo towers, says Stephen Darling, regional operations
vice-president for the chain.
"We just couldn't afford to build either with this level of service.
There are major benefits by putting both in a single tower. In a way
they feed off each other."
Construction costs are only one part of the business equation,
however. Toronto and Vancouver's new luxury hotels will have to
charge up to twice the cost of today's average hotel room to be
profitable. The average room rate in downtown Toronto last year was
$154.40 a night; top hotels charged upwards of $200, Mr. Larone
"These new luxury hotels will probably have to charge double that to
be successful," he says. "Toronto has long been one of the world's
great travel bargains. Hotel rooms are underpriced. I think
well-heeled travellers will certainly pay a lot more for the
standard of service and luxury they are used to elsewhere."
Luxury hotels can appeal to different markets, allowing for several
to exist in one city without stepping on each other's toes.
Toronto, for instance, will have the Trump International Hotel and
Tower at Bay and Adelaide streets, the Ritz-Carleton, Toronto, on
Wellington Street between Simcoe and John streets, and the Hazelton
Hotel and Private Residences on Yorkville Avenue.
The city can accommodate all three new projects because each aims at
a different niche market, says Barry Landsberg, director of
marketing for the 70-storey Trump Tower.
"We are not going to have the ballroom, meeting rooms and proximity
to convention facilities the Ritz-Carleton will have," he says.
"The Ritz will appeal to a different market. The same applies to the
residences. What are Ritz-Carleton residents going to do when the
entrance to the parking garage is jammed by people going to a big
wedding at the hotel?
"We won't have those kinds of problems."
Michael Beckley, vice-president of lodging development for both the
Marriott International and Ritz-Carleton International chains,
agrees that his new project appeals to a different market segment
than either the Trump or the Hazelton projects.
"The Ritz names stands for something," he says. "It has been an
internationally recognized brand for 100 years and is identified
with a certain level of luxury. We believe Ritz hotel guests and
Ritz condo residents are a different group."
The Hazelton stands distinctly apart from the other two in size and
services offered residents. It will have just 77 rooms and 18
residential units and offer all hotel services to residents,
according to Rachel Haar, vice-president of public relations.
"We are an intimate project and because of our boutique approach can
offer residents everything we offer hotel guests," she says.
Both the Ritz-Carleton and Trump Tower, by comparison, will offer
things like room service and housekeeping on a selective basis.
"We just couldn't afford to have the size of staff that would
provide room service to all residents at any time," Mr. Beckley
The financial benefits of combining a hotel with a condo are not
restricted to the top end of the market. Maple Leaf Sports and
Entertainment Ltd. will include a 171-room mid-range hotel along
with 900 condo units in two towers at its recently announced Maple
Leaf Square project adjacent to the Air Canada Centre in Toronto.
"The hotel becomes part of the lure for condo buyers as is the
shopping area and the ACC itself," says Ian Clarke, executive
vice-president and chief financial officer.
"Putting them all together also helps finance the project; it helps
spread out the cost of the land."
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