Varcoe: City hotel group call for mass appeals as property assessments climb 23%

‘There has to be an appeal. There’s no way that we as an industry can sustain what the city is doing’

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Who says you can’t fight city hall — just don’t expect to get everything you want quickly.

Calgary hotel owners pushed back last fall after the annual reassessment process had them staring at the prospect of a 42 per cent increase in their property values for 2024, triggering an anticipated tax hike of 40 per cent.

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The industry, worried about the potential of skyrocketing tax bills, asked city administration and council to consider ways to moderate the increases, possibly over multiple years.

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After collecting feedback and information from local hotel operators, the city said Wednesday the industry will instead see a 23 per cent rise in their property assessments.

It represents some progress for an industry still travelling down a long, bumpy road to recovery after a bruising multi-year downturn caused by the pandemic.

Will a smaller increase quell concern in the industry?

Not yet.

“We will be asking every hotel that is a member today to be actively appealing their assessment,” Sol Zia, executive director of the Calgary Hotel Association, said in an interview Wednesday.

“We are not satisfied with the rate of decrease, yet.”

According to data released Wednesday, as the city began sending out assessment notices, the overall increase for hotels and motels this year will be 23 per cent.

Calls for appeals from the hotel association’s 79 members are gaining support.

“Even the revised assessment is still far above the average of any other type of business in the city. It is worth appealing because of the significant cost increase to us,” said John O’Connell, general manager of the Hyatt Regency Calgary.

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“It would send a strong message to the city leadership that the hotels are unified together and we’re all fighting the same cause.”

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The annual civic reassessment process is often contentious, although it is revenue neutral, meaning the tax burden is reallocated each year — depending upon changes in property values — but it doesn’t generate more taxes for the city.

(In November, the city separately approved a 7.8 per cent hike for Calgary homeowners in 2024, with some tax burden shifted onto residences from commercial properties during the budget process.)

However, redistributing values within the non-residential property class can lead to its own series of winners and losers.

The typical assessment for commercial properties this year has risen by three per cent, with industrial accounts increasing by nine per cent, retail edging up by two per cent and office buildings remaining flat.

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City data show 82 per cent of non-residential properties will see an increase or decrease of 10 per cent or less due to reassessment.

Only three per cent — about 473 commercial accounts — will face big hikes of 20 per cent or greater.

But hotels will be on the front line of the issue in 2024, following a tumultuous period for the sector.

Calgary hotels
The Fairmont Palliser Hotel is shown in downtown Calgary on Wednesday, January 3, 2024. City of Calgary property assessments will be sent out and commercial properties, such as hotels, have increased in value. Jim Wells/Postmedia

During the pandemic, occupancy levels in hotels plunged as tourists were largely unable to travel and rooms remained empty.

As revenues and property values eroded, the combined assessed values for local hotels tumbled by 35 per cent between 2019 and 2022.

This year, the hefty assessment jump is based on the industry recuperating over the past 12 months, led by a strong summer season and rising occupancy rates.

City assessor Eddie Lee said Wednesday the industry had a “banner recovery” in 2023, as the sector saw an increase in business.

The reduction from the preliminary increases announced last November occurred after the city gathered more information about income levels from operators, he told reporters.

“Still, we are at values that are less than the pre-pandemic era,” Lee added. “Hotels have still been negatively affected, but there is definitely optimism.”

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City of Calgary assessor Eddie Lee
City of Calgary assessor Eddie Lee. Gavin Young/Postmedia

A study by CBRE Hotels found that Calgary hotels posted a 67 per cent occupancy rate through the first 10 months of last year. It was up seven percentage points from 2022 levels, but slightly below the national average and trailing cities such as Vancouver, Montreal and Toronto.

And optimism for 2024 won’t smooth over the angst of the industry facing a bigger tax bite, coming on top of rising interest rates, higher utility bills and increased labour costs.

In a letter sent to council and administration last November, the association noted about half of the hotels in the city are owned by local families, and the only way to mitigate the impact on the 2024 bottom line would be “to consider reductions in workforce.”

Greg Kwong, regional managing director for commercial real estate firm CBRE in Calgary, pointed out the hotel industry is still facing a long recovery from three difficult years.

“I would suggest the value of hotels have, at best, flatlined over the past 12 months,” he said.

“The minute one (hotel) fights their tax bill and wins or gets some reduction, it sets a precedent for the rest.”

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The deadline for filing an appeal is in March, and some hotel operators are gearing up to do so.

Karim Ismail, area director of operations for First Canadian Management Corp. They operate three hotels in Calgary.
Karim Ismail, area director of operations for First Canadian Management Corp. They operate three hotels in Calgary. Chris Varcoe/Postmedia

Karim Ismail, area director of operations for First Canadian Management Corp., said the property assessments on the company’s three local hotels have climbed by an average of 28 per cent from last year.

“It’s a shock, to start with. We can understand five per cent. We can understand eight per cent. We can’t understand 28 per cent,” he said.

“There has to be an appeal. There’s no way that we as an industry can sustain what the city is doing.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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