A proliferation of timeshare operations and vacation clubs may start to pop up in the Whistler Valley as hotel operators face increasing financial constraints.
The cost of doing business in the hotel world is constantly going up and when the provincial government passed legislation last month to reclassify strata hotel units from residential to commercial properties it may have been the proverbial straw that broke the camel's back.
The focus of the policy shift is to correct an anomaly that has existed between what is classed, and subsequently taxed, as business or residential property.
Strata-titled hotel units are often bought as investments and then put back into a rental pool. These operations, run like hotels, were assessed and taxed as residential property — which historically has been taxed at a much lower rate than commercial property, such as a hotel.
The new policy applies to strata-title hotels situated on one parcel of land with more than 20 units, offering short rental stays for at least half the year and managed by an organization that controls 85 per cent of the units.
Of the 28 strata-title hotels in the province, 14 are in Whistler. Faced with rising costs in many facets of their businesses, local hoteliers are sitting back and evaluating operations in Whistler. Early indications suggest the number of one- or two-night stay rooms available in the valley could drop, as hoteliers shift their focus to longer rentals and developers opt out of creating short-stay hotel rooms.
Last month council allowed the developers of two hotel parcels in Village North to build resort ownership or timeshare properties, rather than conventional hotels. Timeshare properties, which may have as many as 57 owners, will still be assessed as residential property.
"This property tax change is going to open up a whole new can of worms," says Bill Harrison, general manager of the Whistler Village Inns. "We may very well see some of the existing properties drawn toward a timeshare basis."
And as developers come to Whistler looking to develop hotel-like units, they are going to try and arrange a set-up that is financially beneficial.
"The bottom line is in this industry throughout the province financing is difficult to get on a hotel-based property, be it Vancouver, Victoria or Fernie," Harrison says. "It makes it that much more difficult to even think of developing a hotel when there are all of these extra costs right up front."
Harrison adds that the Canadian Auto Workers certification in some Whistler hotels has also driven up operating costs.
In Whistler, the thrust for the change in the tax assessment came from the Chateau Whistler Resort. According to general manager David Roberts, the Chateau has been paying the higher business taxes since the "day we opened the doors of the hotel."
"Over the years we found ourselves in a very negligible position and we have tried to have a discussion with the B.C. Assessment Authority to discuss the taxation inequities and to create a dialogue on the subject," Roberts says.
That dialogue was one of the major factors in the creation of the new policy. According to figures supplied by the B.C. Assessment Authority, the Chateau Whistler Resort, a non-stratified operation, was taxed at the 1994 business rate of $20.74 per $1,000 of taxable value. Across Fitzsimmons Creek at the stratified Delta Whistler Resort the 1994 taxes at a residential rate were $9.06 per $1,000 of taxable value.
Roberts says even after the tax inequities are levelled out in the new policy, it shouldn't have a great effect on the hotel market in Whistler.
"The Disneys, the Marriotts and the Holiday Inns have all got into the timesharing business," Roberts says. "At this point in the evolution of the resort there are enough short-stay accommodations available. This tax change isn't going to put us at a room shortage, timeshare is part of the landscape now."
However, individual owners of strata-titled units aren't likely to be too happy. It's theoretically possible for two identical units to be taxed at different rates, if one property goes into a rental pool and the other is used only by the owner.
Hank Stackhouse, general manager of the Delta Whistler Resort, says they are prepared to fight the tax change. Constructed in the early 1980s when the federal government was offering tax breaks to developers who built multiple unit, residential buildings, The Delta has been stratified since the day it opened.
"We've come up with a team of local property owners to try and combat this tax change," Stackhouse says. "This policy has the potential to double our tax base."
Stackhouse says the tax increase will hit the Delta particularly hard as the owners have poured $5 million in renovations into the hotel in the last four years.
"This (new tax policy) is going to have a major impact on our bottom line and it's definitely not something we are going to take lying down."