Will hotel prices rise when B.C.’s new short-term rental rules begin?

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Victoria resident Lecksudha Purboo is planning her June wedding and dozens of family members from Mauritius and India have long been looking forward to travelling to Victoria for the occasion and a reunion.

She and her fiancé had planned on booking short-term rentals for their guests.

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But they’re now reassessing their plans since new B.C. legislation, changing what can be rented, comes into effect May 1.

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They will still be able to rent properties that are a principal residence or a secondary suite or a laneway house that is part of a principal residence. But there will likely be fewer of these options available as peak season starts.

The couple has looked into hotels, but are balking at prices for regular rooms that are heading toward luxury prices of $600 a night.

“We are not talking about the Fairmont here,” she quipped.

The new legislation aims to reduce short-term rental housing in about 65 communities across B.C. where vacancy rates for long-term rental housing for locals is very tight.

With a few months to go until summer starts, there are some early signs that the change could push up hotel prices in late May, June, July and August, even though there are a number of variables that could influence this trend.

Mainly, it’s not known yet how many existing short-term rental properties will be taken out of the market by the new legislation. It also remains to be seen how many travellers will simply cancel plans and how many will switch to booking hotel rooms.

It’s this latter group that would give hotels the increased demand they need to charge potentially much higher prices for the number of rooms that are still available for the summer.

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Purboo is about to graduate from a tourism management program and she’s worked for hotels and a property management company, so she’s been able to keep her family more up to date about how the new rules could scupper summer plans.

“Others are completely oblivious to the situation until we bring it to them,” said Ryan Sawatzky, who manages short-term rental properties in Victoria. “There is about 20 per cent of guests who booked way ahead of time and have cancelled because they don’t want to deal with the uncertainty.”

A clearer image will emerge within the next few months as to the impact of the new legislation, said Chloe Garlaschi, a spokeswoman at AirDNA, which provides data about short-term rental markets around the world.

For a sense of what’s starting to happen, AirDNA compared the current number of summer bookings with the same point last year for Victoria, Kelowna and Vancouver. The Denver-based company found there are 17 per cent fewer nights “on the books” for May in Victoria than at this time last year.

Meanwhile, current bookings for August drop to 23 per cent fewer this year compared with this time last year.

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In Kelowna, the May bookings are about the same as last year, but the July bookings are showing 28 per cent fewer nights.

In Vancouver, the situation is different. May is still showing a 19 per cent increase in nights booked versus last year, while August shows a three per cent increase compared with last year.

Usual summer occupancy rates are another point to consider when trying to see how much hotel prices could rise.

Last summer, Vancouver’s average July hotel room price increased to $345 per night, which was the highest monthly rate ever recorded by a Canadian city, according to CoStar, which specializes in commercial real estate information.

The hotel occupancy rate for Vancouver hotels in the summer is at around 90 per cent compared with 60 or 70 per cent in the fall and spring, said Laura Baxter, CoStar’s group director for hospitality analytics. “It’s a very supply constrained market already.”

There are many different windows for booking when it comes to room prices. Group bookings made two to three years in advance will be cheaper than what an individual guest booking now for the summer and vying for a limited number of rooms could book.

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Other factors that will be in play this summer include rising costs that could keep travellers from spending as freely, said Royce Chwin, president and CEO of Destination Vancouver.

New rules by Ottawa reinstating visa requirements for travellers from Mexico to reduce the number of asylum claims and the number of people crossing from Canada into the U.S. could also affect hotel occupancy numbers and also prices this summer, he said.

jlee-young@postmedia.com

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