Ottawa Business Journal: Ottawa hospitality industry seeks crackdown on ‘pseudo hotels’

By David Sali

As the head of the region’s main hotel industry association, Steve Ball sees plenty of room for growth in a local hospitality industry that enjoyed its best year ever in 2017 and followed that up with another solid season in 2018.

After a string of hotel closures a few years ago, the industry has bounced back in a big way.

New properties from major brands have sprung up across the region such as the Alt Hotel on Slater Street, the Andaz Ottawa Byward Market and a pair of Hilton lodgings at the site of the former Delta hotel on Queen Street. A number of other high-profile projects – including Group Germain’s $40-million plan to construct a 180-room Alt-branded hotel at the airport – are in the works.

“Ottawa is a very stable market,” says Ball, the president of the Ottawa Gatineau Hotel Association. “We’ve got the government sector, we’ve got a good, solid tech sector and business sector. I think it shows confidence that investors are doing a build, because a build isn’t cheap.”

Ball would appear to have plenty of good reasons to cheer.

Even with the addition of more than 1,000 extra rooms to the city’s stock in 2018, the overall occupancy rate at local hotels last year was still a respectable 73 per cent, according to commercial real estate firm CBRE, down two percentage points from the record-breaking Canada 150 year of 2017.

Meanwhile, the average room daily room rate last year dipped by $3 to $169, not a huge surprise considering the surge in demand for accommodations in the nation’s capital during the country’s sesquicentennial celebrations.

But local hoteliers aren’t riding a completely unbridled wave of optimism. At the same time as the hotel stock has been growing, the number of visitors renting accommodations on room-sharing platform Airbnb has also jumped from 185,000 in 2017 to 225,000 last year. Other competitors such as Booking.com are getting into the game, offering travellers even more alternatives to traditional hotels.

'Pseudo hotels'

Ball and other industry executives say it’s high time the city slapped rules on short-term rentals to prevent owners of multiple properties from running what they refer to as unregulated “pseudo hotels.”

City officials are currently studying the issue, with the aim of presenting a report on proposed regulations to council before the end of the year.

“Let’s find out what’s really happening in the short-term rental economy, because there’s misinformation out there that the public’s not aware of,” Ball says. “The big one is the commercialization of that industry.”

The City of Toronto has already tried to impose rules that would force homeowners to register for a $50 permit to host short-term rentals and bar them from listing more than one property on Airbnb and other platforms. Those rules are currently under appeal to the Local Planning Appeal Tribunal.

Affordable housing advocates claim the regulations would return 6,500 homes to that city’s rental housing market, helping push down rents by boosting the supply of inventory.

Ball and others say Ottawa should implement similar regulations, arguing that reining in Airbnb and its competitors would ease a housing crunch that saw the city’s rental vacancy rate drop to 1.6 per cent in 2018. The average rent for a two-bedroom apartment rose nearly six per cent last year to $1,301, according to the Canada Mortgage and Housing Corp., the benchmark rate’s largest increase since 2001.

Rental market squeeze

“We are losing access to affordable and accessible housing,” says Somerset Coun. Catherine McKenney. “There is no doubt when people are buying up apartments and condos and renting them out as short-term rentals, that has an effect on the affordability of housing accommodations in the city.”

Ball’s association is a member of Fairbnb, a coalition of about 15 organizations calling for stricter regulation of room-sharing platforms. Fairbnb researcher Thorben Wieditz says the organization is set to release a study of the industry’s impact on Ottawa’s housing market shortly, adding the group will likely recommend rules similar to Toronto’s, with a few “tweaks.”

Ball says such regulations will make housing more affordable for long-term renters who are currently being squeezed out of a market that’s become even tighter thanks to Airbnb and other platforms.

“The housing market is a supply-and-demand business,” he says. “Ultimately, more inventory might make it more of a renters’ market. Presumably, that helps to drive prices down.”

Ottawa hotel executives echo those feelings.

“There’s no question that Airbnb and other digital platforms are affecting our industry,” says Nyle Kelly, the general manager of Kanata’s Brookstreet Hotel, one of the largest properties in the region with 276 rooms.

“The impact is on the city and the community as well. It’s putting a strain on affordable housing in our community.”

But Airbnb spokesperson Alex Dagg isn’t buying that argument.

“When has the hotel industry ever been concerned about the rental market and housing?” she says. “This is about being able to restrict their competition. It’s about protecting the room rate, protecting their revenues.”

Dagg says that far from being unregulated hoteliers, the vast majority of hosts on the platform are people who rent out single rooms to make a bit of extra income. In Ottawa, she says, Airbnb’s 2,800 hosts earn an average of $6,000 a year from 70 nights’ rentals.

“Our data just doesn’t ever substantiate or give credence to the kind of things (critics are) saying,” she adds.

McKenney says if that’s the case, Airbnb and its competitors shouldn’t have a problem with the rules.

“If in fact what they say is true, then I don’t see why they would oppose regulations that would stop people buying a number of homes and then renting them out,” she says.

Catherine McKenney