Varcoe: Calgary hotel owners 'stood up', and sky high property tax hikes came down

It’s been a gruelling period for hotel owners since the outbreak of COVID-19 nearly four years ago

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Calgary hotel operators sat down for a roundtable meeting last week and a chance to meet face-to-face with the City of Calgary’s assessor.

Just a few months ago, the tone would likely have been tense as the sector faced massive tax increases. Instead, it was productive.

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“The mood was buoyant. They were happy to have him there,” Sol Zia, executive director of the Calgary Hotel Association (CHA), said Thursday.

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The gathering was an opportunity to discuss the annual property assessment process, one that left the sector infuriated last November.

At the time, hotel operators faced the prospect of a massive 40 per cent tax hike — on average — for 2024. The change was due to rising property values as the industry recovered from a historic collapse tied to the pandemic.

Early last month, as property assessment notices went out in the mail, the values had moderated, increasing by an average of 23 per cent — an improvement, yet well above the rate of inflation.

The CHA had called for mass appeals by its members.

With assessments now in hand, many increases are closer to 15 per cent as owners have seen downward revisions, and the group is no longer expecting sector-wide appeals, said Zia.

“There were some major swings,” he said.

“How I personally feel is the hoteliers stood up . . . I’ve never seen anything like it, to be honest.”

It’s been a gruelling period for hotel owners since the outbreak of COVID-19 nearly four years ago.

Sol Zia
Sol Zia, Executive Director of Calgary Hotels Association, poses in front of Hotel Arts In Calgary on Sunday, July 11, 2021. Jim Wells/Postmedia

Rising preliminary assessments last fall arrived as the sector was bouncing back from the pandemic and travel restrictions that clobbered their businesses.

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Assessed values from hotel and motel properties plunged 35 per cent between 2019 and 2022.

The average occupancy rate in a Calgary hotel in January 2021 crumbled to single digits, but averaged 64 per cent throughout last year. That’s up from 58 per cent reported in 2022.

Revenue generated per room, a key measurement of the industry’s health, rose to $112 a day from $91, according to a year-end report by CBRE Hotels.

Yet, it’s still trailing Canada-wide levels.

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In December, occupancy rates in the city sat at 47 per cent, down two percentage points from the same time in 2022.

So far this year, the local sector has been “flat, at best” compared with 2023, said John O’Connell, GM of the Hyatt Regency Calgary and an association board member.

“We’re not seeing the exponential uptick this year that we saw” in 2023, he said.

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“Last year was a good year . . . but if you add growth on top of that for this year’s projections, then we have big shoes to fill.”

The improving picture in 2023 also meant property values for local hotels and motels increased during the city’s annual property assessment process, up 23 per cent.

In turn, the tax bill for the sector has risen by 21 per cent, according to new city data.

Under the revenue-neutral assessment system, properties that see their values go up more than the average end up shouldering more of the tax burden; those below the average see their bills go down.

Calgary hotel and motel taxes

Karim Ismail, area director of operations for First Canadian Management Corp., said the company’s three local hotels were initially facing assessment increases of 30 per cent, 20 per cent and 16 per cent.

Now, the highest one has almost dropped in half, while the lowest assessment is at 9.8 per cent.

“If we didn’t make noise, this would not have happened,” said Ismail. “So, the question that still arises is: How did they come up with the initial values?”

City assessor Eddie Lee said Thursday that after preliminary assessment data was released last fall, the city received more income information from property owners that led to recalibration.

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“What we heard from the hotel industry is there had been a lot of pent-up leisure travel and that was explaining the increase in (2023) occupancy,” he said.

“One of the things that has not picked up as much is the business travel, the conferences that have come in, so that was some of the new information that we took into account.”

Eddie Lee
Calgary city assessor and director of assessment and tax, Eddie Lee, answers questions during budget debate at City Hall on Tuesday, November 21, 2023. Gavin Young/Postmedia

Hotel operators have been watching the issue closely since the fall, although some still want to see further adjustments.

The city is in the customer review period until March 11, which allows property owners to ask questions about their assessments.

Saadiq Kassam, senior director of property tax services at Colliers, noted it’s difficult to compare average assessments across the hotel sector, as they are site-specific and values depend on factors such as location and amenities.

Dave Mewha, a vice-president with Altus Group in Calgary, which acts as a tax adviser to some local hotel operators, said there hasn’t been a blanket reduction in industry property assessments, but there has been some movement by the city.

“They are being more proactive addressing appeals before they are filed,” he said.

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So did the city bend in the face of pressure from the hotel sector and the business community?

Coun. Terry Wong, who previously was a manager at the city and worked in the group that helped bring in the market value assessment system, said any changes would be based on the actual value of hotel properties, not to assist a sector under economic stress.

“If you do it for one sector of the industry, then every other sector is going to ask for it — and then you have a distortion in the assessment base,” said the Ward 7 councillor.

Calgary city councillor Terry Won
Calgary Ward 7 Coun. Terry Wong speaks to media at city hall on Tuesday, January 30, 2024. Brent Calver/Postmedia

Zia noted Lee presented to a standing-room-only meeting of the association last week and explained the assessment process.

He also believes public attention and the support of other industry groups helped the sector get to the right place.

“The major hotels saw significant decreases from what was proposed,” he said. “The process worked.”

Chris Varcoe is a Calgary Herald columnist.

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