MARKET STUDY WITH OPERATING PROJECTIONS PROPOSED MIXED-USE RESORT DEVELOPMENT, BEACH AREA 2 WASAGA BEACH, ONTARIO

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1 MARKET STUDY WITH OPERATING PROJECTIONS PROPOSED MIXED-USE RESORT DEVELOPMENT, BEACH AREA 2 WASAGA BEACH, ONTARIO Prepared for: Mr. George Vadeboncoeur Chief Administrative Office, Town of Wasaga Beach 30 Lewis Street Wasaga Beach, Ontario L9Z 1A1 April 2014

2 April 15, 2014 Mr. George Vadeboncoeur Chief Administrative Office, Town of Wasaga Beach 30 Lewis Street Wasaga Beach, Ontario L9Z 1A1 Via RE: MARKET STUDY WITH OPERATING PROJECTIONS, PROPOSED MIXED-USE RESORT DEVELOPMENT BEACH 2, WASAGA BEACH, ONTARIO Dear Mr. Vadeboncoeur: In accordance with the terms of our engagement, PKF Consulting has completed the research and analysis relating to the for the proposed mixed-use resort development to be located on the Beach Area 2 site in Wasaga Beach, Ontario. The analysis herein assumes an opening date for the hotel within the development of January 1, The entire study, including all findings and conclusions, pertain to the Wasaga Beach competitive market area and is based on our knowledge and information with respect to current and projected economic data, expected growth in the supply of and demand for hotel accommodation, proposed construction of facilities, which could be deemed to be competitive, and the status of the competitive market as of March 4, Projected operating results herein are based on an evaluation of the present economy of the area, but do not take into account or make provision for the effect of any sharp rise or decline in local, provincial, or national economic conditions. To the extent that wages and other operating expenses may increase over the economic life of the hotel, it is expected that room rates would be adjusted to compensate for the increases. As in all studies of this type, the projected operating results are based on competent and efficient management and presume no significant change in the competitive position of the accommodation industry in the immediate area except as set forth in this report. The estimates are subject to uncertainty and variation Tel Fax pkftoronto@pkfcanada.com 8th floor 30 St. Patrick Street Toronto Ontario M5T 3A3 Tel Fax pkfvancouver@pkfcanada.com Suite West Pender Street Vancouver British Columbia V6C 2V6 is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

3 and we do not represent them as results that will be achieved. They have, however, been conscientiously prepared on the basis of available information and our experience in the industry. As is customary in assignments of this nature, neither our name nor the material submitted may be included in any prospectus, press release, offering, or representation in connection with the sale of securities or participation interests to the public, without our prior written consent. It is a requirement of professional practice that we review the final draft of any prospectus or offering memorandum containing references to this study. In connection with the permitted uses and as an advice to third parties, this report may not be disassembled or rearranged in any manner that would allow for presentation of only a portion of the report. This report has been prepared solely for the use of the Town of Wasaga Beach. We understand that this report will be used to support internal discussions surrounding the potential development of the Beach Area 2 lands. It is also understood that this report will be used in discussions with potential developers for the project. It may not be used for any other purpose. Key findings and conclusions from our analysis are as follows: There is market support for development of an 80-unit branded, select service hotel with an estimated capital cost of $11.3 million before land costs. There will be a funding or investment gap of approximately $3.0 million on the hotel project; a shortfall based on its investment value versus its potential capital cost. Given that there would be additional land available, after the proposed hotel is developed, it is our opinion that the development of mid-tier, medium-density, residential units on the balance of the site would complement the proposed hotel project and could generate acceptable development profits to attract a developer to the project. The objectives of a residential development component as part of the project would be: For the Town to realize fair market value on the sale of the 9.7-acre Beach Area 2 parcel(s); To absorb the hotel development shortfall estimated to be approximately $3.0 million; and; To generate significant development profits in order to attract a developer to the project. Proposed Resort Development Beach 2, Wasaga Beach, Ontario Prepared for: Town of Wasaga Beach April 2014

4 If the Town of Wasaga Beach chooses to take this direction, it would be our recommendation that a third party, residential consultant be engaged to provide an in-depth analysis of the market potential and feasibility of the residential component. Based on past experience with similar mixed-used development projects, it is our recommendation that it would be critical that any agreement with a potential developer includes stipulations that the hotel be developed within Phase 1 of the overall project to ensure this component comes to fruition. In the past, when municipalities have not stipulated this, other more profitable areas of development, such as the residential component discussed above, have been prioritized by the developer with the hotel development eventually be shelved. The following pages outline the findings and projections derived from our analysis. Yours truly, PKF CONSULTING INC. Proposed Resort Development Beach 2, Wasaga Beach, Ontario Prepared for: Town of Wasaga Beach April 2014

5 TABLE OF CONTENTS 1.0 INTRODUCTION SITE EVALUATION AND DEVELOPMENT PROGRAM Introduction Site Description Access and Visibility Surrounding Uses / Proximity to Demand Generators Development Program Conclusion ECONOMIC OVERVIEW Introduction National & Provincial Economic Indicators National & Provincial Travel Forecasts Town of Wasaga Beach Town of Collingwood Conclusion COMPETITIVE ACCOMMODATION MARKET ANALYSIS Introduction Local Competitive Accommodation Market Regional Competitive Accommodation Market Ontario Resort Competitive Market Proposed New Supply Regional Competitive Market Competitive Market Demand Projections SUBJECT PROPERTY OCCUPANCY & AVERAGE DAILY RATE PROJECTIONS Introduction Corporate/Commercial Segment Meeting/Conference Segment Leisure/Tourist Segment Government/Other Segment Subject Hotel Average Daily Rate Projections Summary of Property Projections SUBJECT PROPERTY FINANCIAL OPERATING PROJECTIONS Introduction Departmental Revenue and Expenses Undistributed Operating Expenses Fixed Operating Charges Summary of Operating Projections THE CANADIAN HOTEL INVESTMENT MARKET Introduction Investment Cycles in the Canadian Accommodation Sector Proposed Resort Development Beach Area 2, Wasaga Beach, Ontario April 2014 Prepared for: Town of Wasaga Beach

6 7.3 National Transaction Activity Yields on Transactions Historic Canadian Hotel Investment Trends Implications for Hotel Investment in INVESTMENT IMPLICATIONS PROPOSED MIXED-USE RESORT DEVELOPMENT Introduction Indication of Supportable Value Proposed Hotel Development Implications & Recommendations Proposed Resort Development Beach Area 2, Wasaga Beach, Ontario April 2014 Prepared for: Town of Wasaga Beach

7 1.0 INTRODUCTION In February 2014, was retained by the Town of Wasaga Beach to make recommendations for and to prepare a for a potential resort/hotel development to be located at Beach Area 2 in Wasaga Beach, Ontario. It is our understanding that the Town of Wasaga Beach is interested in assessing the market and economic potential for the development of Beach Area 2 with the objective of ensuring that a hotel is part of the final development program. The development program presented in the following report contemplates an 80-room, upper mid-scale to upscale hotel, as well as a medium density residential development for the site. This study focuses on the hotel component of the development. This report presents the research and analysis with respect to the development of the proposed hotel. The analysis herein has assumed an opening date for the subject hotel of January 1, The report also identifies and presents broad recommendations for the development of complementary uses, specifically medium density residential. The objectives of this assignment have been to: Evaluate the market potential for a proposed hotel development; Recommend a facility program for the proposed hotel; Project the future occupancy, average daily room rate, and operating performance of the proposed hotel over the period of January 1, 2016 to December 31, 2020, allowing for economic conditions as well as supply and demand growth prospects; Prepare an Indication of Supportable Value for the proposed hotel utilizing the Discounted Cash Flow Approach with the application of market driven capitalization rates; Recommend, as necessary, potential complementary developments for the subject site; and; Provide an overview, as required, of the of investment implications for the overall mixed-use development of the subject site. In order to complete our analysis, we have undertaken the following steps: A review of the proposed hotel site to evaluate its suitability for the hotel development; A review of economic conditions affecting the demand for accommodation in the Wasaga Beach, Collingwood and the Ontario Resort market area; A review of tourism demand trends in the market area; Prepared for: Town of Wasaga Beach Page 1

8 A review of the existing accommodation market in Wasaga Beach, Collingwood and the Ontario Resort market, including an assessment of the existing facilities and the market demand segmentation; An estimate of future growth in supply of, and demand for, hotel accommodation in the competitive market area; Preparation of market penetration rates by market segment and average rate that may be achieved by the proposed hotel over the projection period of January 1, 2016 to December 31, 2020, based on the facilities, and market orientation; A projection of the share of demand which can reasonably be captured by the subject proposed hotel, over the projection period January 1, 2016 to December 31, 2020; Average Daily Rate projections for the subject proposed hotel, over the projection period from January 1, 2016 to December 31, 2020; Preparation of a five year pro forma operating statement for the subject proposed hotel for the period from January 1, 2016 to December 31, 2020; Preparation of an Indication of Supportable Value off cash flow utilizing market driven capitalization and discount rates; Review of potential complementary residential development options, in addition to the proposed hotel, for the development site; Recommendation of complementary development facilities; Review of the investment implications for the overall mixed-use development of the subject site; and; and; Documentation of study research, findings and conclusions. The following pages present a summary of our research and analysis as it relates to the proposed mixed-use development. Prepared for: Town of Wasaga Beach Page 2

9 2.0 SITE EVALUATION AND DEVELOPMENT PROGRAM 2.1 Introduction The following discussion provides an overview of the subject site, located at Beach Area 2 in Wasaga Beach, Ontario, including a description of the site, surrounding land uses and proximity to demand generators, the recommended facility program for the proposed subject hotel, and an overview of a potential residential component of the mixed-use development. 2.2 Site Description The development site is located at Beach Area 2, which is located on the north side of Mosley Street between 6 th Street and 3 rd Street in Wasaga Beach, Ontario. The subject site is an irregular shaped parcel of land that is approximately 9.7- acres in size and is currently owned by the Town of Wasaga Beach. Beach Area 2 is not currently improved, save and except a small public washroom and change facility in the north-west corner of the property. The parcel has varying topography with small knolls and hills dispersed throughout the property. The site, currently used as a public park area, is lightly forested with open grass areas. Approximately one acre of the property, located between 4 th Street and 5 th Street, is currently an asphalt public parking lot. The site benefits from beachfront access on Beach 2 of Wasaga Beach, the world s longest (14km) freshwater beach. Exhibit 2-1 presents and aerial view of the development site. The zoning of the site is Tourist Commercial (CT-8), which permits the operation of hotel as well as high-density residential development. It should be noted that, at the time of this report, the Town of Wasaga Beach is reviewing the zoning by-laws for the Beach Area 2 site, pending the results of an environmental study. It is anticipated that new zoning will be approved for the site and that both a hotel and residential development will continue to be permitted uses. Prepared for: Town of Wasaga Beach Page 3

10 2.3 Access and Visibility The subject site has excellent visibility from Mosley Street and 3 rd Street as well as from the intersection of 3 rd Street and Beach Drive. The Town of Wasaga Beach is accessible from most major 400 series Highways including Highways 400, 401 and 404 and the subject site is easily accessible from the primary roadways in Wasaga Beach. Highway 26 is the primary route for traffic travelling both to and from the Collingwood/Blue Mountain Resort area. Visitors traveling north on Highway 26 would turn right onto Mosley Street, and continue to the site, turning left into the site from Mosley Street. Guests traveling north on Highway 400 would take Exit 96B Dunlop Street West and travel west on Dunlop Street to Ferndale Drive. Guests would turn right and travel north on Ferndale Drive, merging with Wilson Drive guest would continue traveling north before turning left onto Highway 26 West. Traveling west on Highway 26, guests would exit onto Country Road 22 and immediately turn left on Country Road 29. Traveling north on Country Road 29, guests would turn left onto Country Road 92 / River Road before turning right onto Main Street in Wasaga Beach. Traveling north on Main Street, guests would turn left onto Mosley Street and drive to the subject site, accessing the property by turning right from Mosley Street, or right onto 3 rd Street then left into the subject site. The site is approximately a 2-hour drive from the City of Toronto to the south and a one-hour drive from the City of Barrie to the east. 2.4 Surrounding Uses / Proximity to Demand Generators The site benefits most from being a beachfront property on Wasaga Beach, a major leisure demand generator. Wasaga Beach is Ontario s longest freshwater beach, and is the main driver of leisure/tourist demand. On weekends and all week throughout the summer months, the Town benefits from a large influx of tourists, especially for its special events and summer recreational activities. Beach Area 1 is adjacent the subject site with a number of seasonal restaurants, bars, and retail stores that support the summer tourist activity in the area. The Blue Mountain/Collingwood area, located approximately 25 kilometers west of Wasaga Beach, has evolved into one of Ontario s few, truly multi-season tourist and vacation areas. Throughout the summer and winter months, the area benefits from a large influx of tourists, especially for its special events, summer and winter recreational activities such as golf, mountain biking, downhill and cross-country skiing. Prepared for: Town of Wasaga Beach Page 4

11 As a predominantly seasonal leisure destination, Wasaga Beach has very little industry and corporate/commercial activity. The Zancor Group has serviced and prepared industrial/ commercial land for development in the Zancor Business Park, located along Hwy 26. The group is marketing the Business Park to light commercial and manufacturing companies. Based on discussions with Economic Development there are currently no companies/employers planned or proposed for the Business Park. 2.5 Development Program Based on current market dynamics as well as our research and analysis, the development program envisioned for the Beach Area 2 site would be a mix-use development, comprised of an 80-room hotel and a medium-density residential component, such as town-home units. The following discussion presents the development program for the hotel, with some preliminary considerations for a potential residential component of the development Hotel Development Program The following report contemplates an 80-room, upper mid-scale or upscale, branded, select service hotel development program for the Beach Area 2 site in Wasaga Beach. Examples of upper mid-scale or upscale brands that could be considered for such a development include, but are not limited to, Best Western Plus, Holiday Inn Express or Hotel Indigo by Intercontinental Hotel Group, Fairfield Inn by Marriot, Hampton Inn or Hilton Garden Inn by Hilton. Branding is recommended in that it will not only enhance the marketability of the project, but will also enhance the potential for project financing. Table 2-1 presents a preliminary facility program for the proposed subject hotel based on the typical prototype programs for hotels of this size and nature. Prepared for: Town of Wasaga Beach Page 5

12 TABLE 2-1 BEACH AREA 2 - PROPOSED HOTEL DEVELOPMENT WASAGA BEACH, ONTARIO HOTEL FACILITY PROGRAM - PKF ESTIMATES Guestrooms Rooms Sq.Ft./Rm Sq.Ft. Standard King ,325 Standard Queen / Queen ,375 King Suite ,700 Queen / Queen Suite ,325 TOTAL GUESTROOMS ,725 Food & Beverage Rooms Sq.Ft./Rm Sq.Ft. 70 Seat Restaurant , Seat Outdoor Patio (Seasonal) Total Food & Beverage ,000 Meeting/Event Faciities Rooms Sq.Ft./Rm Sq.Ft. Main Meeting Room (150 Seats - Flexible Design) ,250 Breakout Rooms (2 rooms + Boardroom) ,250 Total Meeting/Event Facilities ,500 Recreational/Other Activities Rooms Sq.Ft./Rm Sq.Ft. Fitness Room ,000 Indoor Pool ,600 Lobby/Public Areas/Back of House Lobby/Public Areas/Back of House/Mechanical/Kitchen ,975 TOTAL BUILDING SIZE ,800 Source: has provided these estimates as a discussion point for the proposed hotel development used in our projections. We are not Planners or Architects and as such these estimates should be used as a guideline for discussion only. The proposed hotel development would include a comprehensive offering of amenities for both business and leisure travelers. Hotels of this nature typically feature a variety of guestrooms, including standard one or two bedded rooms, and a mixture of suite configurations. Guestrooms within this tier of hotels typically include amenities such as a desk or work space, high-speed internet and/or wireless internet access, and in-room coffee making facilities. The proposed hotel would have a total of 80 rooms comprised of 58 standard rooms with either a single king bed or queen/queen bed configuration, 15 one-bedroom suites with one king bed, and 7 one-bedroom suites with a queen/queen bed configuration, covering 26,725 sq.ft. Other services incorporated into the development program for the proposed hotel development include an onsite 24-hour grab-and-go kiosk for sundry items, as well as guest laundry services, and a 24-hour business center. In addition to an indoor pool, the hotel s recreation facilities would also include a 1,000 sq. ft. fitness room, large enough to accommodate both hotel guests and a small number of members from the surrounding community. Prepared for: Town of Wasaga Beach Page 6

13 Capitalizing on the world class beach location, the hotel facility program includes a 2,000 sq. ft., 70 seat all day restaurant with a 30 seat beach-side patio that would also be open seasonally. With full kitchen facilities on-site, the hotel would be able to offer a limited amount of in-room dining to its guests as well. The proposed facility program would also include approximately 3,500 sq. ft. of flexible meeting space. The meeting space would be comprised of a main ballroom/banquet room with seating capacity for 150 guests, two breakout rooms with seating capacity for 30 to 50 guests and an executive boardroom. Food and beverage for the meeting and conference space would be serviced in-house with full kitchen facilities on-site. Inclusive of the hotel lobby, public areas, mechanical rooms and back of house support areas, the proposed the hotel facilities would require a total GFA of approximately 46,800 sq.ft., an average of 585 sq.ft./room. While a formal capital budget has not been prepared for the subject development, our experience in the industry and knowledge of comparable new build hotel construction projects would indicate that the capital cost for the proposed upper mid-scale, or upscale, select service, branded, hotel would be in the range of $135,000 to $145,000 per room (excluding land cost) or between of $10.8 and $11.6 million. For the purpose of our analysis we have utilized the approximate cost of $141,000 per room or $11.3 million total. Based on our experience in the industry and knowledge of comparable new build hotel construction projects, the proposed hotel development would require approximately 2.5 acres of the total 9.7-acre subject site. It is recommended that the hotel be developed in the north-eastern quadrant of the property, as identified in Exhibit 2-2, bordering the commercial area of Beach Area 1 and acting as a transition into the proposed residential development on the site. Prepared for: Town of Wasaga Beach Page 7

14 2.5.2 Proposed Residential Development Program The following report contemplates the development of mid-tier, medium-density residential units, such as town-homes, on the balance, approximately 7.2 acres, of the subject site. Assuming a density of 20 to 30 residential units per acre as identified by municipal planning representatives, there is potential for units to be developed on the west-side of the proposed hotel development. has provided these estimates as a discussion point for the proposed mixed-use development used in our projections. We are not Planners or Architects and as such these estimates should be used as a guideline for discussion only, and assumes that all 9.7 acres are fully developable. 2.6 Conclusion In terms of its location, visibility and access, the Beach Area 2 site in Wasaga Beach is considered to be very suitable for a mixed used development, incorporating both residential and hotel accommodation components. The site is considered to be well located within the market for both a hotel development and a residential development and is in reasonable proximity to Collingwood, Barrie and the Greater Toronto Area. The site benefits from its frontage on Wasaga Beach, as well as its proximity to supporting amenities such as restaurants and retail stores, that are open seasonally, within the Beach Area 1 zone. Furthermore, the proximity to surrounding recreational amenities and tourism attractions, such as the Blue Mountain Ski Resort, snowmobile trails, golf courses and the Rec-Plex, also bode well for the prospect of a hotel development on the subject site. However, the absence of local corporate or industrial demand generators may present a challenge in realizing weeknight and shoulder season demand levels. Prepared for: Town of Wasaga Beach Page 8

15 EXHIBIT 2-1 SITE PLAN BEACH AREA 2 Prepared for: Town of Wasaga Beach Page 9

16 EXHIBIT 2-2 RECOMMENDED DEVELOPMENT LAYOUT Prepared for: Town of Wasaga Beach Page 10

17 3.0 ECONOMIC OVERVIEW 3.1 Introduction The market potential of hotel properties are influenced by National, Provincial and local economic conditions. Accordingly, the analysis has included a review of recent economic performance in, the Province of Ontario and for the Town of Wasaga Beach and the Town of Collingwood specifically, in order to assess potential implications for the accommodation market and the subject hotel. 3.2 National & Provincial Economic Indicators After posting Real GDP growth of approximately 2.0% in 2013, is expected to continue to experience modest positive economic growth in 2014 and The challenging global economic performance, and the uncertainty of US economic performance, are some of the factors that continue to moderate growth in and, consequently, in Ontario in the near term. TABLE 3-1 REAL GDP (% CHANGE) CANADA & ONTARIO (f) 2014(f) 2015(f) Real GDP Real GDP Ontario Source: Scotiabank Group, Global Forecast Update, March 26, 2014 The Scotiabank Global Forecast Update released March 26, 2014, projects that the annual gross domestic product (GDP) growth outlook for the Canadian economy for 2014 to be 2.2%. This level of growth is the result of strengthening exports and business investment tempered by more moderate consumer and housing activity. Similarly, Scotiabank has forecasted a 1.5% GDP growth for Ontario in 2013 and a 2.0% increase in Ontario s economic growth has slowed since 2010, when its GDP grew by 3.4%. Both the Province and Country are anticipated to realize growth above 2.0% in TABLE 3-2 EMPLOYMENT GROWTH (% CHANGE) CANADA & ONTARIO (f) 2014 (f) 2015(f) Employment Growth Employment Growth Ontario Source: Scotiabank Group, Global Forecast Update, March 26, 2014 Prepared for: Town of Wasaga Beach Page 11

18 The modest gains in private sector employment, especially in the education and health care sectors, are expected to offset the public sector cuts in the province of Ontario, which has the largest number of public employees in. Scotia Bank is expecting Ontario s employment rate to grow by 0.9% in 2014 and then 1.1% in National employment is expected to grow by 1.0% in 2014 and 1.2% in National & Provincial Travel Forecasts In the Fall of 2013, The Conference Board of released their Travel Market Outlooks for , which project moderate growth for and Ontario across all travel segments. After posting modest growth of 1.3% in 2013, National total overnight visitation is projected to grow by stronger levels of 2.1% in 2014, and 2.7% in 2015, while total overnight visitation to Ontario is projected to increase by 2.0% in 2014 and 2.9% TABLE 3-3 TOTAL OVERNIGHT VISITATION (% CHANGE) CANADA & ONTARIO 2013(f) 2014(f) 2015(f) 2016(f) 2017(f) Ontario Source: Conference Board of Travel Market Outlooks, Fall 2013; Statistics National domestic overnight travel is estimated to grow between 2.2% and 2.7% per annum from 2014 to Domestic overnight visitation is projected to account for million visits, or over 86% of total visitation to by Similarly, in Ontario, domestic travel will account for approximately 85% of overnight travel by 2017, generating more than 46.4 million overnight visits. The domestic market is forecasted to see growth of 2.1% in In 2015, domestic pleasure travel to Ontario is projected to grow 3.5% as the City of Toronto and surrounding municipalities host the PanAm Games. TABLE 3-4 OVERNIGHT VISITATION DOMESTIC ORIGIN (% CHANGE) CANADA & ONTARIO 2013(f) 2014(f) 2015(f) 2016(f) 2017(f) Business Pleasure Ontario Business Pleasure Source: Conference Board of Travel Market Outlooks, Fall 2013; Statistics Prepared for: Town of Wasaga Beach Page 12

19 The U.S. travel to is expected to grow by 1.6% in 2014 with modest improvement in the U.S. economy. Continued moderate growth is expected for the U.S. market between 2014 and 2017 at rates between 1.6% and 2.1%. The U.S. visitation to Ontario is expected to contract slightly in 2013 and then grow at rates that generally mirror the National levels from 2014 to TABLE 3-5 OVERNIGHT VISITATION U.S. ORIGIN (% CHANGE) CANADA & ONTARIO 2013(f) 2014(f) 2015(f) 2016(f) 2017(f) Ontario Source: Conference Board of Travel Market Outlooks, Fall 2013; Statistics The overseas market in is projected to see continued growth of 2.5% in Going forward this segment is expected to post healthy growth of between 3.1% and 3.7% per annum through to Similarly, this market in Ontario is projected to see growth of 2.5% in 2014 and growth of between 3.5% and 3.9% from 2015 to TABLE 3-6 OVERNIGHT VISITATION - OVERSEAS ORIGIN (% CHANGE) CANADA & ONTARIO 2013(f) 2014(f) 2015(f) 2016(f) 2017(f) Ontario Source: Conference Board of Travel Market Outlooks, Fall 2013; Statistics The overseas segment is often touted as a major opportunity market for the tourism and accommodation sectors, particularly countries like China with huge volumes of potential visitors. However, even with solid annual growth, the overseas market is projected to generate less than 5% of the total overnight travel to by 2017, or about 2.2 million overnight visits to Ontario. 3.4 Town of Wasaga Beach The Town of Wasaga Beach, while only incorporated in 1974, has a rich history as one of Ontario s premier summer tourist destinations dating back to the early 1800 s. The area s original settlement was a logging and fishing village settled along the shores of the Nottawasaga River, a main waterway that runs through the Town today. In the early 1900 s the region progressively transformed into a popular tourist destination for the military families at nearby Base Borden, and Toronto residents visiting the area to enjoy the 14 kilometers of white-sand, freshwater beach. Prepared for: Town of Wasaga Beach Page 13

20 Today the Town is part of Simcoe County and has a population of approximately 17,537 people. The area is expected to continue to see strong population growth with the overall population projected to be 27,500 people by 2031 according to the Provincial Growth Plan. The Town of Wasaga Beach is serviced by the main north-south highways of HWY 400 and 27, which direct travelers to the Town of Wasaga Beach via County Road 92 and Highway 26. During the peak summer months, the Town of Wasaga Beach has indicated that traffic congestion problems can occur. The congestion issues are due in part to the increased visitation from cottagers and tourists and the lack of road lanes, as currently the primary access routes within the town proper are two lane highways. The nearest local airport to the Town of Wasaga Beach is the Town of Collingwood Municipal Airport. It is equipped with a 5,000-foot jet runway capable of handling small jets. Additionally, the Town of Wasaga Beach is approximately 125 km drive from by Lester B. Pearson International Airport, which has daily flights to most major national and international destinations Economic Development The Town of Wasaga Beach has an estimated labour force of 7,745 persons with an unemployment rate of 7.7%. The Service sector represents the largest industry by labour force in Wasaga Beach accounting for 29.2% of jobs. The Trades/Transport/Equipment Operators sector accounts for 17.3% and the Business Finance/Administration sector accounts for 13.3% of jobs in the Town of Wasaga Beach. Table 3-7 provides the summary of labour force occupations for the Town of Wasaga Beach. Prepared for: Town of Wasaga Beach Page 14

21 TABLE 3-7 OCCUPATION / LABOUR FORCE STATISTICS WASAGA BEACH, ONTARIO People Employed % Occupations Management % Business; finance and administration 1, % Natural and applied sciences % Health occupations % Education; Law and Social; Community; Government % Art; Culture; Recreation and Sport % Sales and Service 2, % Trades; Transport and Equipment Operators 1, % Natural Resources; Agriculture and Related Production % Manufacturing and Utilities % Other % Total Labour Force 7, % According to Economic Development and Planning officials, the Town of Wasaga Beach continues to see strong residential building growth. Due to its proximity to Toronto, there is demand for cottage or weekend properties and retirement residential located near the Beach. There are currently approximately 15 residential projects under construction representing approximately 2,500 units/lots and an additional 25 projects representing approximately 2,700 units/lots actively progressing through the planning and approval process. Table 3-8 provides the historic building permit values for the Town of Wasaga Beach. TABLE 3-8 PERMITS ISSUED & BUILDING PERMIT VALUES TOWN OF WASAGA BEACH Total Permits Issued Estimated Value of Residential Construction ($) $43,136,000 $60,006,000 $58,104,000 $41,671,000 $68,982,000 Estimated Value of Non- Residential Construction ($) $4,954,000 $2,160,000 $5,277,000 $1,078,000 $1,877,000 Total Construction Value $48,090,000 $62,166,000 $63,381,000 $42,749,000 $70,859,000 Source: Town of Wasaga Beach In 2013, total building permit values in the Town of Wasaga Beach reached $71 million compared to $43 million in 2012, and $63 million in Construction in Wasaga Beach has been primarily residential in recent years with residential development accounting for 97.4% of total construction, or $69 million, in Prepared for: Town of Wasaga Beach Page 15

22 3.4.2 Tourism The Town of Wasaga Beach attracts approximately 1.16 million visitors annually according to the Town of Wasaga Beach Economic Development Department. The primary driver of visitation demand is Wasaga Beach itself, the world's longest freshwater beach. In the summer months The Beach is bustling with tourism activity as a popular beach volleyball and sunbathing destination. There are six public beach areas numbered from 1 to 6; the higher the number, the smaller and less crowded the area. Pedestrians along Beach Area 1 and 2 benefit from a boardwalk running along the beach. The boardwalk along Beach Area 1 has been developed with a number of seasonal restaurants, bars and retail stores. Also located in the Town of Wasaga Beach are Wasaga Beach Provincial Park and the Blueberry Plains trail system, which offers 30km of trails through the dunes area. Eco-tourism is a growing market as tourists continue to explore the non-attraction based activities in the area. Peak season activities include golf, biking/hiking, fishing and boating. The Town s waterfront location makes it accessible to marine traffic. There are four public launch facilities in the Town of Wasaga Beach. Two of these facilities, Sturgeon Point Marina and Wasaga Marine provide docking facilities. Wasaga Beach also provides a number of winter activities. In the winter, there are miles of fresh groomed trails for snowmobiling in the region. Cross country skiers enjoy access to local trails, while downhill skiers have central access to Blue Mountain, Horseshoe Valley and Snow Valley ski resorts all located within 35 kilometers of Wasaga Beach. The Town of Wasaga Beach is also home to Nancy Island Museum, this museum displays the original hull of the Schooner HMS Nancy, which was sunk by the British Commander in the Nottawasaga River in Open in the summer, the museum offers daily regular tours, special events and evening programs that take place around a campfire. The Town of Wasaga Beach hosts a number of well attended annual special events catered to both the local resident population, and tourists alike. Most notable major events take place in the summer and fall months, though events like Sledfest, an annual snowmobile festival, have strong support from the community and are expected to grow in the future. Table 3-9 summarizes the major annual events in Wasaga Beach. Prepared for: Town of Wasaga Beach Page 16

23 TABLE 3-9 MAJOR EVENT LISTING WASAGA BEACH, ONTARIO Event Month Estimated Attendance Sledfest Jan 1,500 Snowman Mania - Family Day Weekend Feb 10,000 Easter Eggstravaganza Mar/Apr 3,000 Wasaga Beach Fest Jun 3,500 Day Celebrations Jul 3,000 Not-So-Pro Volleyball Tournament Jul 3,500 Underground Series Jul 4,500 Wasaga Under Seige A War of 1812 Experience Aug 2,000 Corvette Weekend Aug 1,500 Multi-Sports Triathalon and Marathon Sep 1,000 Wasaga Beach Blues Sep 6,000 Funderland Dec 2,500 TOTAL 42,000 Source: Town of Wasaga Beach Tourist accommodations within the Town of Wasaga Beach include motels, cottages, B&B s and many seasonal trailer parks and campgrounds. 3.5 Town of Collingwood The Town of Collingwood is located approximately 20 kilometers west of the Town of Wasaga Beach and is approximately 160 kilometers north of the Greater Toronto Area. According to the 2011 Census, Collingwood has an estimated population of 19,241 residents, representing an 11.3% increase from the 2006 Census. In the winter, the Town provides the largest concentration of downhill ski facilities (5 areas) with the some of the highest verticals in the province. There is a growing base of spring/fall shoulder season recreational activities such as golf, sailing, mountain biking, hiking and fishing. Collingwood s proximity to southern Ontario s large and affluent year round markets (as well as winter markets in southern Michigan, Ohio and as far away as Chicago), have helped the Collingwood area evolve into one of Ontario s few, truly multi-season tourist and vacation areas. The largest single tourist draw to the Collingwood area is Blue Mountain, which sells over 750,000 lift tickets each year. At 720 vertical feet and 2.5 miles long, Blue Mountain is Ontario s largest mountain resort. With 36 runs, 4 terrain parks, 3 half-pipes, a snow-tubing park and 15 ski lifts the facility attracts a significant volume of visitors to the area. The resort is also a regional meeting/conference destination and is increasingly becoming a summer leisure destination for mountain biking, golf and hiking. With further development planned for the Prepared for: Town of Wasaga Beach Page 17

24 resort and increased promotion by Intrawest, Blue Mountain is expected to continue to see an increase in visitation in the coming years. There are also a number of golf courses in Collingwood, including the nationally ranked Monterra Golf Course at Blue Mountain Resorts, Georgian Bay Golf Club and Batteaux Creek Golf Club, located 6 kms south of Collingwood. These courses help to position Collingwood as a golf course destination within Southern Ontario and increase overall visitor volumes in the summer months. In addition to the leisure market, a number of resorts in the Collingwood area also cater to the meetings/convention market. Blue Mountain offers over 37,500 sq.ft of meeting space at the resort. One of the other significant attractions in the Town is the Scenic Caves, which underwent a major redevelopment and now includes a Nordic Ski Centre, treetop trails, Ontario s longest suspension footbridge, eco-adventure tours and 20 kilometres of trails. Major festivals include the Collingwood Jazz and Blues Festival, Collingwood Music Festival, Collingwood Elvis Festival and Dragon Boat Festival. 3.6 Conclusion Overall, Town of Wasaga Beach and the Town of Collingwood have strong tourism presence with attractions including, Wasaga Beach, Blue Mountain Resorts, the Scenic Caves and Nancy Island. The Town of Collingwood draws meeting/conference business to the area year round which helps to support the community. Both Wasaga Beach and Collingwood struggle with a lack of local corporate or industrial business. Residential developments have been the most obvious signs of growth in recent years as visitors increase the demand for summer cottages and retirement residential facilities. The Town of Wasaga Beach expects the community to continue with moderate positive growth in the short to medium term. Prepared for: Town of Wasaga Beach Page 18

25 4.0 COMPETITIVE ACCOMMODATION MARKET ANALYSIS 4.1 Introduction The proposed hotel is to be located on Beach Area 2 in Wasaga Beach would compete within three competitive accommodation markets; the local Wasaga Beach accommodation market; the regional accommodation market, which includes supply in both Wasaga Beach and Collingwood; and on a broader scale within the Ontario Resort accommodation market, which includes a mix of resorts in various locations across the province. 4.2 Local Competitive Accommodation Market The local Wasaga Beach accommodation market is comprised of approximately 22 motels, 42 cottage courts and a number of independent bed and breakfasts. In total there are currently 126 licensed Tourist Establishment properties in Wasaga Beach, comprising a total of 1,109 units. The majority of these establishments are open only seasonally, during peak summer months. Additionally, the greater part of the existing accommodation supply in Wasaga Beach is considered to be tired and does not satisfy the needs of transient guests, especially for corporate demand and meeting/conference groups or sports teams. As such, only 6 year-round establishments have been included within the local competitive market. These properties have been included due to proximity of location, number of annual operating days, the commonality of room night demand generators, and similar services, facilities and amenities. Table 4-1 summarizes the properties that comprise the local competitive accommodation market. TABLE 4-1 LOCAL COMPETITIVE ACCOMMODATION MARKET WASAGA BEACH, ONTARIO Hotel Rooms Hotel Rooms Saga Resort 21 Mermaid Motel & Cottage Court 15 Luau Resort 25 WuWu's Cabins 22 J&J Motel 12 Knightsbridge Inn 14 TOTAL 109 Source: Discussions with local stakeholders indicated that local accommodation establishments generally experience strong demand in the peak summer months of June through September, particularly on weekends, with occupancies in the 65 90% range. Peak season demand is primarily driven by tourists visiting the beach or attending the many festivals and events in the area. In contrast, the general consensus is that off-season demand is extremely limited, particularly on weekdays, due to the lack of tourism and corporate demand generators during the winter months, with occupancies in the 10 25% range. Average daily rates within the Prepared for: Town of Wasaga Beach Page 19

26 local market are generally in the $75 - $195 range during the peak season, and in the $40 - $85 range in the off season. The existing local accommodation product is, for the most part, small owner operated cottage courts, bed and breakfasts, and exterior access motels. As previously noted, the majority of the product is tired and does not satisfy the needs of transient guests, especially for corporate demand, meeting/conference groups and sports teams. A new build, select service, branded property with a beachfront location would be superior to the existing product in the Wasaga Beach market. 4.3 Regional Competitive Accommodation Market The proposed subject hotel development would compete regionally with the Wasaga Beach properties discussed in Section 4.2, as well as with properties also located in Collingwood. This combined regional market is considered to be the primary competitive market for the proposed hotel. The regional Wasaga Beach/Collingwood competitive accommodation market is comprised of 7 traditional hotels and approximately 16 motels and independent accommodations which provide a total of 1,647 guest rooms as of December These properties have been included due to proximity of location, the commonality of room night demand generators, and similar services, facilities and amenities. Table 4-2 summarizes the properties that comprise the regional competitive accommodation market. TABLE 4-2 REGIONAL COMPETITIVE ACCOMMODATION MARKET WASAGA BEACH/COLLINGWOOD Hotel Rooms Hotel Rooms Days Inn & Suites Collingwood 76 Holiday Inn Express Collingwood 74 Mountain Springs Resort 144 Westin Trillium House 222 Blue Mountain Resorts* 612 Cranberry Resort 78 Blue Mountain Inn 103 Collingwood Motel Supply 229 Saga Resort 21 Mermaid Motel & Cottage Court 15 Luau Resort 25 WuWu's Cabins 22 J&J Motel 12 Knightsbridge Inn 14 TOTAL 1,647 * Includes Mosaic at Blue, Seasons at Blue, Weider Lodge and the Grand Georgian Source: The competitive market historic occupancy and average daily rate information for the period is summarized in Table 4-3. The detailed information has been provided in Exhibit 4-1. Prepared for: Town of Wasaga Beach Page 20

27 TABLE 4-3 HISTORIC MARKET PERFORMANCE WASAGA BEACH/COLLINGWOOD Rooms 1,647 1,647 1,647 1,647 1,647 Available Room Nights 601, , , , ,155 Occupied Room Nights 258, , , , ,368 Occupancy 43.0% 43.7% 42.3% 43.5% 44.3% Average Daily Rate $ $ $ $ $ RevPar $64.68 $67.31 $66.57 $70.07 $72.45 Source: As summarized, over the historic period occupancy in the regional Wasaga Beach/Collingwood accommodation market has been in the mid 40% range. The market occupancy declined in 2011 to 42.3%, following a similar trend to the other regions in Ontario that year, and due in part to a less than ideal start to the winter ski season for the regional market. Since then, the market has experienced year over year demand growth improving occupancy to 44.3% in The market Average Daily Rate has seen relatively consistent growth over the historic period from $ in 2009 to $ in 2013 for a total of 8.6% over the 5 year period or an annual compounded rate of 2.1% Regional Market Mix by Segment Demand for hotel accommodation within the competitive regional Wasaga Beach/Collingwood accommodation market consists of four broad demand segments: the Corporate/Commercial segment; the Leisure/Tourist segment; the Meeting/Conference segment; and Government/Other segment. On the basis of PKF market research, estimated market segmentation for the regional competitive market in 2013 is presented in Table 4-4. TABLE 4-4 MARKET SEGMENTATION WASAGA BEACH/COLLINGWOOD COMPETITIVE MARKET Segment Occupied Room Percentage of Nights Demand Corporate/Commercial 12, % Meeting/Conference 85, % Leisure/Tourist 154, % Government/Other 13, % TOTAL 266, % Source: PKF Consulting Prepared for: Town of Wasaga Beach Page 21

28 The Corporate/Commercial market segment consists of rooms demand, which is generated by, and specifically related to, business and corporate activity. Within this market, both individual and volume (or preferred) corporate accounts are included. The Meeting/Conference market segment consists of rooms demand generated for the purpose of attending meetings and/or conferences internally within area hotels, which offer public assembly facilities. Conference delegates who may be attending a meeting or conference elsewhere in the vicinity may also generate demand. The Leisure/Tourist market segment consists of rooms demand generated by independent tourists, group tours, and a variety of sports teams/events throughout the year. It includes individuals and families visiting as tourists, the VFR market (visiting friends or relatives). This market also consists of demand generated by groups whose primary purpose is of a leisure or transient nature and not related to corporate business. The Government/Other market segment consists of demand generated by crew contracts, government officials, travel agents, hotel employees, and to a lesser extent, smaller specialty markets. Demand in this segment is typically represented by sources, which are highly rate sensitive and are normally provided with significantly discounted room rates. The regional Wasaga Beach/Collingwood market is largely a year-round Leisure destination, with a strong Meeting/ Conference base generated by the Collingwood hotels. There is little in the way of demand generated by Corporate segment which is a result of the absence of industry and major corporate/commercial employers in the area. 4.4 Ontario Resort Competitive Market The proposed hotel would also compete on a broader scale with the overall Ontario Resort Market, in particular within the Leisure and Meeting/Conference segments. The Ontario Resort competitive accommodation market includes Resort and Inn properties located across Ontario and is comprised of 33 traditional resorts and independent inns which provide a total of 3,623 guest rooms as of December These properties have been included due to the nature of their locations as destination resorts, the commonality of room night demand generators, and similar services, facilities and amenities. Table 4-5 summarizes the properties that comprise the Ontario Resort competitive accommodation market. Prepared for: Town of Wasaga Beach Page 22

29 TABLE 4-5 REGIONAL COMPETITIVE ACCOMMODATION MARKET WASAGA BEACH/COLLINGWOOD Hotel Rooms Hotel Rooms Deerhurst Resort 403 Millcroft Inn 52 The Briars 88 Old Mill Inn 60 Westin Trillium 222 Pillar & Post 123 Taboo 61 Benmiller Inn 60 Blue Mountain 784 Idlewyld Inn*** 23 Horseshoe Valley Resort 102 Ste. Anne's Country Inn & Spa 27 Talisman 87 Inn at Christie's Mill 42 White Oaks 220 Queen's Landing 142 Sherwood Resort 49 Moffat Inn 24 Rocky Crest Resort 65 Langdon Hall 52 Pinestone Resort 103 Touchstone Resort 33 Nottawasaga 269 Balance of Inns 103 Hockley Valley 104 Elora Mill Inn* 32 J W Marriott, The Rosseau 220 Delta Grandview** 129 Prince of Wales 110 TOTAL 3,623 *Closed in 2011 ** Closed in 2012 ***Closed in 2013 and is anticipated to re-open in 2014 Source: The Ontario Resort competitive market historic occupancy and average daily rate information for the period is summarized in Table 4-6. The detailed information has been provided in Exhibit 4-2. TABLE 4-6 HISTORIC MARKET PERFORMANCE ONTARIO RESORTS Rooms 3,789 3,785 3,759 3,629 3,623 Available Room Nights 1,382,916 1,381,456 1,371,966 1,324,585 1,322,395 Occupied Room Nights 626, , , , ,276 Occupancy 45.3% 48.3% 48.8% 50.9% 50.3% Average Daily Rate $ $ $ $ $ RevPar $82.06 $90.91 $93.57 $99.44 $99.52 Source: As summarized, over the historic period occupancy in the Ontario Resort accommodation market has been in the mid 40% to 50% range. The market occupancy increased steadily from 45.3% in 2009 to 50.9% in 2012, before declining to 50.3% in It should be noted that over the historic period there has been a reduction in supply with the closure of four rooms at The Briars in 2010, the closure of the Elora Inn in Prepared for: Town of Wasaga Beach Page 23