Early this year, UrbanToronto embarked on its most ambitious Growth to Watch For series to date, covering 840 developments happening across the city. With this comprehensive database, certain trends began to appear as we sifted through the list, and with many recent breaking headlines on our front page, Toronto's hotel industry stood out as one of the more tantalizing topics to explore.

From a handful of massive hotel complexes slated for redevelopment as dense condo clusters, a host of new exclusive boutique-sized brands announcing their arrival in Toronto, and several high-profile renovations of historic landmark properties, Toronto's hotel industry is experiencing somewhat of a renaissance. A closer look at the data gives a clearer picture of just what this shift in the industry might be. UrbanToronto sat down and crunched the numbers to quantify the evolution of the city's hotels, and spoke with Terry Mundell, CEO of the Greater Toronto Hotel Association (GTHA), to help explain how and why this is happening.

Rendering of 475 Yonge, image courtesy of KingSett Capital.

By The Numbers: A Snapshot of Hotel Development in Toronto

By UrbanToronto's count, there are currently 32 active hotel developments within the boundaries of the City of Toronto. This number includes all proposals still in the planning process, those that have been approved, and those that are currently under construction. The total encompasses a range in scope from hotels shutting down to be redeveloped into some other use, entirely new hotels being established, and extensive renovations of existing properties. Of those 32, nine of them have either been fully approved or are under construction, while the remaining 23 are in various stages of the approvals process, some further along than others. (These numbers, and all statistics presented hereafter, are current as of the date this article was published.)

Not including five projects whose room counts are unknown, the net total of all existing rooms disappearing and all new rooms being added shows an increase of roughly 708 suites across the city. It should be noted, however, that two projects in particular account for 78% of all hotel rooms that are disappearing: the redevelopment of the Eaton Chelsea Hotel site, dubbed Chelsea Green, and the proposal for 475 Yonge, the current site of the Marriott Hotel near Yonge and College. Despite the inclusion of new hotel components in both these proposals, they add up to a total disappearance of 1,718 rooms between the two of them, and are shedding roughly 80% of their existing room count. Neither of these developments have been approved by the City yet.

Rendering of Chelsea Green, image courtesy of Great Eagle Holdings.

As part of the analysis, UrbanToronto also tracked 10 high-profile hotel projects that were completed over the past decade for comparison. These projects, like the current active ones, included new builds, renovations to existing hotels, and conversions of former hotels into different uses. The 10 completed projects produced a net increase of 1,574 hotel rooms across the city, and when combined with the current development activity in the industry, paint a picture of a successful, expanding hotel landscape in Toronto.

View of the Four Seasons Hotel, image by Forum contributor Benito.

As we sift through the various developments, several clear trends become quite apparent. We will now take a look at these to get a better picture of what is happening across the city.

The Rise of the Boutique Hotel

The boutique hotel is a relatively recent phenomenon in Toronto, one that is quickly gaining steam as the slew of new hotel proposals works its way through the development pipeline. Of all of the current hotel projects in the city, roughly half of them have room counts of 150 suites or less. This is in contrast to the past hotel developments we looked at, most of which had room counts of 200 or more.

Rendering of the Drake Hotel Expansion, image courtesy of Diamond Schmitt Architects.

Terry Mundell attributes this trend to a combination of a shift in consumer demand, and the increase in land value making it more difficult for investors to get a return on their money. Over the past couple decades, Toronto has not been a very attractive spot for hoteliers. Mundell pointed out that the city had fewer hotel rooms in 2015 than it did in 2000, and that during this time, the majority of hotel development occurred in the 905 region. This can largely be attributed to the high cost of doing business in Toronto: of the top 20 business destinations in North America, Toronto ranks as having the second-lowest net operating income.

But as the global popularity of Toronto picked up in the mid-2000s, investors began finding ways to enable a healthy Return on Investment (ROI) for hotel properties within the city, aided largely by new regulations in property taxes for condo-hotel properties that the GTHA had a hand in implementing. The passing of this regulation was followed by an onslaught of big-name international luxury hotels establishing themselves in Toronto—The Four Seasons, Shangri-La, The Ritz-Carlton, and the Adelaide Hotel (formerly Trump Hotel, soon to be the St. Regis) to name a few—that kickstarted a movement back into the heart of the city. "That was an exciting time for us, because we had been waiting for so many years to get some new builds in," states Mundell. "The condo-hotel tax regulation, that really helped accelerate the development of some of those condo-hotel properties, which in turn helped accelerate the development of those five-star properties. Now we’ve reached the next wave of that."

View of the Shangri-La, image by Marcus Mitanis.

The next wave is coming in the form of luxury boutique hotels, characterized in large part by their small size and unique branding. The focus of these properties is on experience: each one offers something different from the others, whether it be aesthetic or in the form of amenities, and each is marketed as a distinct designer package that is more than just a place to sleep for the night. Early examples are the Drake and Gladstone Hotels, while more recent ones include the Broadview Hotel, Bisha Hotel, and upcoming Nobu Hotel.

The shift to experiential boutique hotels can largely be attributed to a change in consumer demand. "The business in many ways adapts to consumers’ needs," explains Mundell, "and one of the trends is clearly to some of the smaller, more boutique type hotels. It’s not specific to Toronto, you’ll see that in other urban locations where people are looking for a bit of a different experience." The market and branding of these properties also contributes to an attractive ROI for investors, who have found that the boutique hotel is an economically viable typology in Toronto's red-hot real estate market.

Lobby Lounge of the Bisha Hotel, image by Craig White.

Capitalizing on this trend, Robert Cooper, President and CEO of Alterra, and Ken Zuckerman, President of Zinc Developments, teamed up for a boutique hotel development at 51 Camden in the King-Spadina neighbourhood. The pair spotted the trend toward smaller hotels, and noticed that this particular neighbourhood was lacking one. The 13-storey, 124-unit building is currently under construction, and will feature an eye-catching design by Shim-Sutcliffe Architects, a firm that was chosen deliberately for their distinct design aesthetic and high-quality architecture. "We wanted to build something unique, something interesting", explains Zuckerman. "We did not want a regular-looking building, we wanted something different and recognizable".

Rendering of 51 Camden, image courtesy of Zinc and Alterra.

The new hotel at 51 Camden will feature a restaurant and bar, and will seek to create a landmark in the community. The development also capitalizes on the high rate of condo and office development in the area, including the Waterworks Building just across the street, and is located adjacent to St. Andrews Playground. Cooper and Zuckerman noticed the trend toward experiential, designer boutiques in the hotel industry nearly five years ago, and after a successful design process, are about to add what could become Toronto's next landmark hotel.

The Hotel as a Neighbourhood Institution

In addition to the smaller boutique hotel, investors have found that implementing mixed-use developments has been a successful solution to navigating Toronto's tricky economic situation. As discussed earlier, 9 out of the 10 hotel developments completed before 2017 were condo-hotel towers, and 25 out of the 32 current developments (roughly 78%) have paired the hotel component with some other commercial or residential use. The seven developments that are not mixed use are either small boutique hotels (the Drake Hotel expansion, the Broadview Hotel, and 51 Camden), complete conversions into another use, or are not located in proximity to downtown.

The trend of the mixed-use development is directly a result of wanting to maximize the ROI of a property. Mundell explains that the mixed-use development makes more sense financially, and also provides a safer investment, in that if one component of the project under-performs, it may still turn a profit on its other components. The lack of available land in the downtown core is also fuelling this, prompting the stacking of uses and increase of density in new developments. "I think the challenge is that when they made dirt, they didn't make enough of it," Mundell jokes. Hotels are also expanding the repertoire of what uses they are paired with, with a variety of entertainment venues, restaurants, or other programs added in addition to the typical commercial or residential components.

Rendering of Nobu Hotel and Residences, image courtesy of Madison Group and Westdale.

The introduction of more mixed-use developments into the city also has beneficial impacts for the city itself. Integrating hotels within larger developments allows for greater density and greater connectivity with the surrounding neighbourhood. A condo-hotel project, for example, would not only serve visitors to the city, but also provides housing and amenities for local residents.

The desired move to increase ROI in the wake of rising land value is also an explanation behind the move to convert or downsize hotels and incorporate new condo developments. This is certainly the case at the Chelsea Eaton Hotel and 475 Yonge, and also explains the recent conversion of the Best Western Primrose Hotel into the Parkside Student Residences, and the planned addition of a condo tower attached to the Grand Hotel. Landowners must constantly re-evaluate their investment potential and in some cases, reverting to smaller or mixed-use hotel properties is better.

Rendering of the Grand Hotel Redevelopment, image courtesy of Amexon.

Perhaps one of the more unintended consequences of the recent evolution of the industry is the transformative effect that some of the smaller boutique hotels may have on their local neighbourhoods. The obvious examples are the Drake and Gladstone, both of which have evolved into Toronto institutions that have helped define West Queen West as one of the trendiest neighbourhoods in North America. Both hotels have also sprung offshoots of their brands - the Gladstone as a major art hub, and the Drake into its iconic nightclub and General Store. The new Broadview Hotel is largely being hailed as leading a renaissance of the Riverside neighbourhood, reminiscent of its two western counterparts.

View of the Broadview Hotel, image by Forum contributor skycandy.

The surge in the hotel industry also bodes well for some of the city's iconic heritage properties. Not only are new hotels being built in the city, but money is being re-invested into existing ones to upgrade and refurbish them. One King West was previously renovated and restored along with the construction of an accompanying condo tower, while the King Edward Hotel recently reopened after extensive renovations, which included a $6-million restoration of the long-lost Crystal Ballroom that returned the legendary venue to its former glory. The Royal York Hotel recently underwent renovations, while the Park Hyatt Hotel at Bloor and Avenue is planned to be restored and partially converted to rental units.

View of the restored Crystal Ballroom of the King Edward Hotel, image courtesy of Omni.

Overall, it seems that the recent hotel boom is not only contributing to a successful economy, but also bringing community benefits along with it as well, while in the process re-establishing the hotel as a landmark that defines the character of its surrounding neighbourhood.

Location, Location, Location

Mapping out all of the current hotel projects, clear patterns begin to emerge that tell a story of hotel development across the city. Unsurprisingly, the majority of the projects are focused in and around the downtown core, with clusters of developments in the Entertainment District and the Jarvis Corridor, two locations that already have a concentration of hotels. All of the projects that are located outside of the core are conveniently situated adjacent to highways, along the 401, 404/DVP, and 427 corridors.

Map of all current and recently completed hotel developments, image via Google Maps.

While the location of the developments seems rather self-explanatory, it also speaks to a larger theme that is integral to the hotel industry: transit and transportation. Mundell explains that the GTHA has a vested interest in transit and access to the city, as moving people around and getting them into and out of the city is the number one issue for the hotel industry, one that heavily influences when and where to build. Subway lines, road networks, transportation plans, and air networks are all very important.

Mundell noted that Toronto has made significant improvements to city access and transportation, but much more still needs to be done. The revamp of Billy Bishop Airport for its establishment as a hub for Porter flights, and more recently the opening of the UP Express have both fundamentally changed how travellers get into and out of the city. The revitalization of Union Station will also significantly aid the travel industry, as the refurbished gateway into the city will be more streamlined to welcome passengers with greater capacity and more services. He pointed to the South Core, which did not exist a mere 10 years ago, as a neighbourhood that has directly benefited from this increased access to the city, with the Delta Hotel as a landmark structure in its midst, and more hotels potentially on the way.

View of the Delta Hotel, image by Riley Snelling.

The GTHA is also directly involved in the plan to transform Pearson Airport into a transportation hub to rival Union, and is advocating for the area's greater connectivity to the city and GTA, not just for the benefit of the expansion of the hotel industry, but also to provide easier transit access for the many employees of the hotels currently clustered around the airport. They also had a voice in the shaping of the city's public transit plan presented to and approved by City Council last year.

Mundell stated that the hotel industry constantly has to pay attention to new development and new investment in the city, and must adjust to meet trends in the market. The Woodbine Racetrack Redevelopment is one that Mundell is keeping an eye on, which carries with it implications for the hotel industry, the transportation network, and the city as a whole that could bring many economic benefits to Toronto. "When people come to hotels, they’re in restaurants, they’re in retail, they’re in transportation, they’re supporting the attractions: that’s where all the money goes," says Mundell. "It’s great for us if we can get them here."

Conceptual rendering of the Woodbine Racetrack Redevelopment, image courtesy of Woodbine Entertainment.

The Cautiously Optimistic Future

The hotel industry in Toronto is booming at the moment. 2016 was a banner year, and all signs point to 2017 surpassing its performance. But as Mundell explains, the hotel industry follows a pattern of peaks and valleys, so a watchful eye must always be kept on the numerous factors that impact hotels in order to stay ahead of the curve. The industry is highly adaptive, and as we have seen, reacts directly to consumer demands and market trends.

View of the Gladstone Hotel, image by UrbanToronto Flickr Pool contributor edk7.

One prickly situation, at least as many media outlets portray it as, is the rise in popularity of Airbnb and short-term apartment rentals as a global trend that rivals hotels. Mundell cautions that it is a more complex issue than what it appears to be at first glimpse. The 'mom-and-pop' approach of someone simply renting out their apartment or a spare room to travellers poses no immediate threat to hotels, as this is not necessarily a new phenomenon. Bed and breakfasts have been around long before Airbnb began, and the vast majority of travellers are actually not staying in hotels, but are staying instead with friends and family, a condition Mundell points out has always been the norm, and always will be. Hotels cater to a different market, and there is room to accommodate the average Airbnb host with extra space in their home to share.

Where the hotel industry might be threatened is when commercial for-profit companies buy up condos and apartments for the sole purpose of renting them as short-term rentals for travellers. These companies are operating on platforms like Airbnb and are going unchecked, avoiding the regulations that restrict the traditional hotel industry. This is something the GTHA is fighting against, and Mundell points to multiple studies of the effects of these short-term rentals that all conclude the same thing: that these commercial companies are having an impact on the housing supply and are taking a small bite out of the hotel industry, benefitting from a lack of regulation. Municipal governments are beginning to take notice, and action might soon be on the way.

Rendering of the Park Hyatt Renovation, image courtesy of Oxford Properties.

But for the time being, the hotel industry in Toronto is doing well with a seemingly bright future ahead. While he is pleased with recent progress, Mundell pointed out that there are many opportunities in the city to capitalize on and reinforce the expanding hospitality industry, some of which may not be immediately obvious to outsiders. The casino at Woodbine Centre and the city's transit plan, as previously mentioned, are both golden opportunities, while others Mundell highlighted might be the upcoming development of the East Bayfront, or the hypothetical renovation and expansion of the Metro Toronto Convention Centre.

As Toronto transforms into a more livable, business-friendly global city, its hotel industry will consequently flourish, and locals will reap the benefits that new hotels bring, if done right, to the city. The future of hotels in Toronto is cautiously optimistic, and all signs point to a bright future for visitors and local residents alike.