Market Update: August 2024 Kelowna's Executive Rental Industry
This article was sent to our subscribers August 24, 2024 via our Investor Insights newsletter which was . Subscribe here to receive these updates as they happen
Disclaimer: Nothing covered here should be taken as investment advice, please consult your professional advisors (financial, legal, tax, real estate or otherwise) before taking any action.
Market shifts, tourism woes and how we’re adapting
I honour your inbox, and my philosophy is only to send emails when I get the same questions repeatedly. In this update, I'll share what I see on the ground and explain why this move has been a game-changer. Below, I will cover:
Our shift to executive stays: steady income, less risk.
Tourism trends: Official reports are rosy, but real life is grim.
Market challenges: outside factors impacting furnished rentals.
Pricing and rates: long-term prices dipped slightly and how we stack up
New Condos: More competition is coming
Legal & Regulations: We're ahead of the game
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Personal Note
I had big plans for the company and my clients, including expanding our portfolio and increasing our market share, until everything turned upside down. Over the last 11 seasons operating, I've seen firsthand how unpredictable this industry can be, but these regulations turned everything sour and continue to make every day a battle.
The decision to shift our focus to longer stays for corporate and executive guests versus pursuing more STR-approved properties wasn't just about adapting—it was about ensuring stability for our existing clients. I am proud to say that I have only said goodbye to three clients this year in this madness. Two chose to sell and one decided a change of use.
Caban and Aqua are the next buildings in my sights which are going up and we've been working with some owners on those plans since they confirmed their units during pre-sale. I receive dozens of owner inquiries every week and while I wish I could help everyone, we are selectively adding only a few new listings to the portfolio with great care to ensure everyone we work with is taken care of and has the best chance to ride out this dip.
On to the updates...
Shift to Executive
Since the legislation took effect, we have moved 90% of our portfolio to offer executive stays of 30 or more nights. We still provide hospitality services to the guests with mid-stay cleans and concierge services as needed.
While securing corporate contracts for 30-plus-day stays is more challenging and time-consuming, the benefits have been significant. These contracts provide a steady revenue stream, helping property owners navigate economic uncertainties and ensuring a consistent income for our homeowners, regardless of fluctuating tourist activities. This success in executive rentals is a testament to our strategic decisions...and hustle.
Our corporate guests typically book accommodations for an average of 90+/- days, often requiring various extensions. We also provide temporary housing to guests who are relocating, in limbo between real estate transactions, renovating or restoring, here for a particular project, or here for work.
We have hosted several cast and crew from the four film productions here this summer (another is returning this fall), and they have all stayed for less than 90 days.
It's rare that we host travelling medical professionals, as they have very limited budgets. With the recent vaccine mandate for healthcare workers lifted in BC, we won't see the same volume of nurses needing to move around as we have these past few years.
Our reputation, reliability, and quality products have attracted many professionals. We have exclusive relationships with several third-party agencies that prioritize Keys to Kelowna when searching for stays for their guests. We've also built strong relationships with every production company that comes to town, and I've personally cultivated genuine relationships with realtors across the city to support their clients as needed.
Our next steps involve solidifying Keys to Kelowna as the premier executive rental agency for temporary housing solutions. We aim to capture every lead when someone is searching, demonstrating our commitment to growth and our readiness to accommodate a wide range of guests.
Tourism Trends
While official visitor reports suggested a rebound in tourism, my on-the-ground experience indicates otherwise. After this August long weekend, I feel like we should be sounding the alarm bells, yet Lisanne Ballantyne, president and CEO of Tourism Kelowna, says, "It certainly feels like it's down a little bit... I think once we get our numbers in… we're going to guess visitation might be on par with last year,". That response felt like political posturing to keep everyone optimistic. BC Tourism Minister said tourism is down globally, not just in Kelowna or BC.
Last weekend, the downtown streets of Kelowna felt like a ghost town, and restaurants are reporting sales down by over 50%! Golf courses and wineries have publicly shared how slow sales and traffic have been.
Despite a less intense wildfire season, we have some terrible PR to recover from, with lingering effects from last year deterring some tourists. Domestic travellers expressed concerns about travelling on highways that could close due to wildfires, leaving them stranded or unable to get home, as well as the lack of affordable accommodations due to the loss of short-term rentals and the overall high cost of living. We've had the best summer here in the Okanagan, and no one is here to enjoy it.
I will report on the visitation statistics later in the fall once published on Instagram. Follow me there for more timely updates.
Issues Affecting Growth
CPABC latest reports show that the Thompson-Okanagan region lost residents to other provinces for the first time in 21 years despite our population growth over the last year! The year ended July 1, 2024, and showed a decrease in population growth by 503 people. We all know Kelowna is highly desirable, and while hearing this is discouraging, I can't imagine this being the trend year over year. We may just see a shift in the demographic of those who can afford to move to BC.
Typically, Keys to Kelowna accommodates numerous local families between real estate transactions, but this season, there hasn't been much movement and there is better coordination of possession dates between buyers and sellers. Relocation lead traffic is down by about 60%, but the bright side is that the contracts we have secured have healthy budgets and great guest profiles.
Rates
For the first time, I found our prices higher than hotels! Quite the opposite of the narrative circulating that hotel prices are higher than STR. I assumed the licensed short-term rentals left would be like hitting the jackpot for those owners, but getting them booked has been a challenge. Our executive rentals have been very successful in comparison. More details below.
Long-Term Rentals
Long-term rentals are not a market I operate in, but I do pay attention to what the property management agencies are forecasting locally. The local digital classifieds report that the average asking price for a one-bedroom in July was $1,617, and last month's average asking price for a two-bedroom unit was $2,256. It was the first time since last November that both marks fell in the same month!
Here are average long-term rents in Kelowna for Q3 2024 (July-September) from the licensed Property Management division of Vantage West Realty. I've added Keys to Kelowna median averages for our confirmed executive rental reservations for Q3 below for comparison. I knocked it out of the park for the 2 bedroom condos! Do I feel this confident heading into this fall and winter? I feel like I have my work cut out for me!
Important Disclaimer - Please Read
The projected rental revenues are intended for the purpose of illustrative projections to facilitate analysis and are not guaranteed by Keys to Kelowna. The information provided herein is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice, consultation or service. All investments, including real estate, is speculative in nature and involves substantial risk of loss. We encourage owners and investors to take careful considerations and consult with your professional advisors before taking any action.
New Condo Developments
The market remains competitive with new properties entering the marketplace. As you can imagine, many previous STRs are looking for an option to pivot into the executive rental space.
To add to the surge in furnished rentals moving from short-term to executive 30+ days, hundreds of new condos purchased with the intent to rent as furnished units are close to completion. Many investors are not clear on what options they have now.
"Some areas of Kelowna have already surpassed growth levels that weren't expected to be reached for another 16 years", the city says.
Here is the approximate completion schedule for the larger buildings currently under construction, which will add inventory to the condo market in various ways. This list is not exhaustive and does not include the hundreds of purpose-built rental condos under construction in Kelowna.
October 2024 - 257 units - Bertram at Bernard Block
November 2024 - 127 units - Caban by Cressey
December 2024 - 154 units - AQUA Tower 1 (Towers 2 & 3 coming soon)
Fall/Winter 2025 - 322 units - Movala
Sometime 2025 - 156 + 340 units - Water Street by the Park Tower 1 & 2 (Tower 3 coming soon)
Update on Legal Action
April 10, 2024 - Property Rights BC filed a Petition with the Supreme Court of BC against the Province of British Columbia.
June 17, 2024 - 5 days of Legal proceedings were held.
Week of June 24 - PRBC's written reply to the defence submission was filed.
Present Date: "The case will be in the hands of the judge and complete from our perspective by the end of the week of June 24. However, there is no ability to estimate how long we will wait for a decision."
Property Rights BC organized calls with Kevin Falcon, the party leader for BC United, and John Rustad, the party leader for the Conservatives. Both party leaders addressed how they both planned to repeal the STRA Act if elected.
30 Days Versus 90 Days
We can only market the property on large platforms like Airbnb and VRBO for 90 or more days to satisfy the provincial regulations. In 2025, platforms that market under 1000 listings must follow the same guidelines.
I recently had a call with the Director of the Housing Policy Branch of the Ministry of Housing to discuss how the reporting for companies that offer 1000 listings or less will roll out. From what I learned on this call, the way I have set up our reservation system, we would not be subject to those rules. We will meet again after the provincial elections, likely in early December. Fingers crossed for some government changes this winter.
For your information, a report on the impact of the short-term rental changes will likely go before city council this fall. City of Kelowna staffers will propose amending the period of time definition in the Zoning Bylaw to be consistent with provincial legislation. This is the next item on the agenda for lobbying our local councillors to educate them on the need for these 30 to 90-day rentals in the city.
Final Thoughts
The market might be challenging right now, but we've found a way to keep things steady. By focusing on more extended stays, we've provided consistent income for our homeowners, even when short-term rentals are struggling. We've built solid relationships and found reliable, high-quality guests looking for more than a weekend getaway. This strategy is working, and I am committed to ensuring our business continues to thrive, no matter what the market throws at us.
Did you like what you read here today? I would appreciate it if you could share your thoughts in a brief Google Review to support my business. Please leave your review here. 🙏
Sincerely,
Deana Steele, Founder & Lead Host
Important Disclaimer - Please Read
The projected rental revenues are intended for the purpose of illustrative projections to facilitate analysis and are not guaranteed by Keys to Kelowna. The information provided herein is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice, consultation or service. All investments, including real estate, is speculative in nature and involves substantial risk of loss. We encourage owners and investors to take careful considerations and consult with your professional advisors before taking any action.
