Entering Ottawa’s hotel market through the back door

Mark
Mark Brownlee
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Lack of downtown land forcing hospitality firms to turn to mixed-use developments, conversions

When it comes to investing in hotels, it’s hard to beat Ottawa – at least on paper.

Since 1992, the value of hospitality properties in the nation’s capital have climbed  faster than most other Canadian markets. That’s according to a study by Colliers International, which also forecasted that Ottawa hotels would grow in value more quickly this year than in any other city in the country.

The challenge for investors, however, is entering the local market, especially downtown. Among the difficulties is that developers often see more value in building condominiums and office towers than hotels, making available land scarce in the core.

However, some hotel operators are finding creative solutions and adding hundreds of new local guest rooms to the city’s inventory in the process.

Quebec City-based Groupe Germain Hospitalité publicly advertised its interest in finding a development site in central Ottawa for its boutique hotel chain, ALT.

It’s partnering with Broccolini Construction to include 148 hotel rooms in the developer’s condominium project at 199 Slater St., between Bank and O’Connor streets. No property in Ottawa currently contains residential and hotel units within a single building, although Ashcroft is constructing a similar mixed-use development on Sparks Street.

Partnering with Broccolini made sense because the hospitality group wasn’t looking to build a huge number of rooms and couldn’t justify using a whole piece of land by itself.

“To make the project more viable, we’re sharing with someone else and, at the end of the day, you end up with two happy guys,” said Jean-Yves Germain, the company’s co-president.

One analyst said these combinations will be the model for future downtown hospitality properties.

“The only way you’d be able to justify a new hotel is if it was part of a residential development or some sort of a mixed use,” said Alam Pirani of Colliers International.

Meanwhile, a local homebuilder is rumoured to be converting a recently acquired ByWard Market office building into a hotel.

Claridge Homes purchased a three-property portfolio from the Union of Canada that included the latter’s namesake office building near the corner of York and Dalhousie streets, as well as an adjacent development site and bar.

Claridge vice-president Neil Malhotra told OBJ the company hasn’t decided what to do with the property. Hyatt did not return requests for comment.

However, sources say tenants inside the 10-storey office building have started receiving lease termination notices.

Organizations: Colliers International, Groupe Germain Hospitalité, Broccolini Construction Hyatt hotel Union of Canada

Geographic location: Ottawa, Quebec City, York

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  • Jayme
    December 04, 2012 - 09:23

    How many companys are still in the union building?