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City assessor said hotels’ economic rebound contributed to higher property values
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It’s a less drastic increase than originally expected, but Calgary’s hotel operators might still feel some shock when they open their property assessment notices this month.
After previously indicating that hotel properties’ values could be as much as 42 per cent higher in 2024 than the year before, city assessor Eddie Lee said Wednesday the increase should be closer to 23 per cent.
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In early November, when presenting the city’s preliminary tax roll assessment to city council, Lee said the combined assessed values of Calgary’s 108 hotels and motels had shot up to $1.18 billion in 2023 — up from $832 million the year before‚ a 42 per cent hike.
“Hotel and motel market value assessments are steadily rising, with occupancy, average daily rate and revenue per available room showing improvements over the previous year,” stated a Nov. 1, 2023, report to city council’s executive committee.
“This suggests significant market value increases in the accommodation sector, with two-thirds of the hotels approaching pre-pandemic market values and the remainder surpassing pre-pandemic market values.”
The resulting valuations would have resulted in significant property tax increases for hotel owners this year, with hoteliers taking on more of the city’s tax load.
But at a media availability Wednesday, Lee said city staff were able to gather more income information from hotel property owners during the pre-roll consultation period, which has led to a lower increase.
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“When we presented our preliminary information, more hotel owners came forth with some of the income information they had on their properties,” Lee said. “With that new information, the assessments we mailed out today reflect that.”
Even though Calgary’s hotel sector has largely rebounded from the pandemic, Lee said property valuations are still lower now than during the pre-pandemic era.
“Hotels have still been negatively affected, but there is definitely optimism,” he said. “They did have a sort of banner recovery year in 2023 that had helped drive those values up. It’s still a significant increase.”
As a result of the higher assessed values, Lee said hotel owners’ property tax increases “would be similar” this year.
In total, the city’s non-residential property market value increased by three per cent in 2023.
‘It’s forecasted to be pretty flat’
Still, hotel industry representatives say a property tax hike north of 20 per cent could have significant effects on hotels’ operations.
Sol Zia, executive director of the Calgary Hotel Association, said the local group appreciates the lower assessments from the estimates in November, but still feels the values are too high.
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While local hotels did experience improved economic conditions last year, Zia argued the sector is anticipating a relatively flat year in 2024 compared to 2023.
He also expects the increased property assessments will be uneven for Calgary hotels this year.
“I think some hotels will be satisfied with the assessments, but I also think a large number will still be outraged, especially those who have rate increases greater than 30 per cent,” he said.
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Karim Ismail, area director of operations for First Canadian Management Corp. — which owns and manages hotels across Canada — said hoteliers will need to try to recoup the cost of higher taxes elsewhere. That could mean cutting employees’ hours or laying off staff.
Ismail said hotel operators are also grappling with higher utilities, insurance, food and labour costs.
“Anytime there’s a significant (tax) increase of that magnitude, it’s going to result in hoteliers and operators trying to reduce costs,” he said. “The first thing one would look at is, what is your variable cost? That becomes labour. Now we’re trying to pay the city at the expense of letting someone go or reducing hours.”
Ismail argued that 2023 was a “one-off” year, in terms of the hospitality and tourism sectors’ rebound, caused by pent-up demand from the pandemic. Despite some large-scale events on the horizon and the impending completion of the BMO Centre later this year, he doesn’t anticipate the same revenue growth for Calgary’s hotels in 2024.
“It’s forecasted to be pretty flat,” he said.
— With files from Chris Varcoe
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