If plans for a 12 storey extension of the Delta Hotel go ahead, then the “New Downtown” is going to look a bit different. As well, if plans for 60 new hotel rooms on the east end of Duckworth Street and 140 new hotel rooms further west on Duckworth Street go ahead then the old downtown is going to look a bit different, too. Add 40 “boutique” hotel rooms in the King George V heritage property on Water Street and St. John’s is going to witness an unprecedented surge in hotel development.

The impacts are many if every hotel project that has entered the City’s approval process gets built. Investment will approach $64 million. The stock of hotel rooms will jump by more than a third. Part of the skyline and some streetscapes downtown will change. Finally, according to one industry veteran, “there will be disruption in the market place.” That is a polite way of saying supply will run ahead of demand, price competition will be fierce and some old and new operators will go bust.

Jean Pierre Andrieux says, “We can’t get five cents from commercial banks”. Andrieux has developed the 28 room Harbour View Hotel on Water Street and is about to begin construction of a 60 room addition that will front on Duckworth Street. Remember where Mrs. Bailey’s news stand was located? Well, pretty soon it is going to be the site of a four-storey Marriott Courtyard hotel. Andrieux’s lenders include the Business Development Bank, Banques des Iles in St. Pierre and GE Capital Corporation. Andrieux believes that “Older, unbranded properties will have difficulty.” He is betting that commercial travelers will connect with the Marriott brand name, suites with kitchens, heated floors and granite finish in the bathrooms. The size of his bet is about $9 million.

Each developer has conducted market research and each lender has scrutinized the numbers. Though the information is closely held, the studies generally agree that the hotel occupancy, at about a rate of 70%, grew slightly in St. John’s last year. In contrast, cities in the rest of Canada saw an occupancy drop. The studies also project continued growth due, in part, to expansion of offshore petroleum activity, increase in convention/meeting activity and business associated with the government/finance/university/health care sectors.

“The economic indicators are very positive,” says Cathy Duke of King George Properties Inc. the on again/off again development of the King George V heritage property on Water Street seems to be on again. Duke says construction of a 40 room boutique hotel will begin in May and be finished in nine months. Duke says a $100,000 a room is “a good number”, which means partners Rex Anthony, Guido Del Rizzo and Leo Power are looking at a price tag of $4 million. Their competition in the boutique business is the 28 room Murray Premises Hotel and the 21 room Spa at the Monastery property on Patrick Street.

Fortis Properties Inc. has demonstrated an appetite for acquisitions and growth and the 125 room expansion of the Delta Hotel on New Gower Street is another example of that strategy. The Delta Hotel is connected to the Mile One/Convention Center complex and is positioned to benefit immediately from an increase in convention traffic. The price tag is $15 million.

The Delta development is at a center of what an earlier City planning report called “The New Downtown.” For some, it represents a further realization of a plan that was hatched more than 30 years ago with a proposal by Canadian company, Trizec, to build a complex of high-rise towers combining hotel and office space on the west end of New Gower Street. For politicians who supported the Mile One/Convention Center project, the Fortis Properties investment comes as a long-awaited payoff. “It’s an example of public investment in infrastructure”, says Shannie Duff, Chair of Council’s Planning Committee. “We didn’t just build Mile One for a hockey team,” says Duff, “we built it to attract convention business.” It is still early but the Fortis investment suggests Councilor Duff may be right.

For those who thought the era of Duckworth Street hotels ended when the Welcome Hotel burned down, take heart, a 140 room hotel on Duckworth Street has just come off the drawing board and entered the City’s approval process. Langton Green Development is proposing to build an “all-suite” hotel on the north side of Duckworth Street between Church Hill and the CBC Radio building. The price tag is $18 million.

It is premature to try and pick winners and losers in the hotel marketplace, but one industry veteran handicaps it this way: Fortis Properties is a formidable competitor and it won’t be surprising if their $15 million expansion of the Delta causes some smaller developments to review their investments, delay construction or shelve plans altogether. However no one seems to be cutting and running yet. Asked about the challenge of a big Delta expansion, one developer said, “Bring it on.”

Bring it on indeed. The Provincial government may be facing bankruptcy the rest of the province may be in the midst of an economic crisis but in St. John’s there is no shortage of people willing to bet that the future is bright and they are willing to bet millions on it.

Excerpt from Current, May 2004 Issue No. 34 by Roger Bill