A Waterfront Hotel May Be Good for Kelowna. Is It the Best Use of Municipal Resources and Capital?

By Tim Down, CCIM, RI

This article expands on the media release issued October 1, 2026, calling for greater public disclosure of the financial structure, feasibility assumptions and downside risks associated with the City's investment in the downtown waterfront hotel site.

A premium waterfront hotel could be a valuable addition to downtown Kelowna. It could support tourism, conferences, downtown businesses and broader economic activity.

But that is not the only question taxpayers should be asking.

The more fundamental question is whether scarce municipal capital, borrowing capacity and administrative resources should be committed to a commercially risky real estate development when the City is simultaneously responsible for roads, water and sewer systems, public safety, transportation, parks and the replacement of aging infrastructure.

That is a question of opportunity cost.

Every dollar of municipal capital has competing uses. Every borrowing decision consumes financial capacity. Every major project demands staff attention and creates future obligations.

The City's 2026-2035 capital plan identifies approximately $2.82 billion of required investment, with almost four-fifths directed toward maintaining and renewing existing municipal assets. Kelowna is already dealing with growing transportation requirements, utility infrastructure, public safety demands and significant recreational and civic capital projects.

Against those obligations, the City acquired waterfront properties for $27.8 million in 2025 to facilitate development of a major hotel.

The City has stated that revenues from the existing marina, office building and parking operations are expected to offset borrowing costs while redevelopment proceeds. That is relevant, but it does not eliminate the economic cost of the investment.

From an appraisal and investment perspective, capital always has an opportunity cost.

The appropriate comparison is therefore not simply whether the property generates enough income to pay its current carrying costs. It is whether committing municipal capital to this investment produces a sufficient risk-adjusted public return compared with alternative uses of that same financial capacity.

Private investors make that calculation every day.

They consider land cost, construction costs, financing, market demand, operating expenses, expected income, risk and required return. Projects proceed when the anticipated return adequately compensates investors for those risks.

This waterfront site has been available to sophisticated developers and investors for many years. Previous private-sector development proposals did not ultimately proceed.

That history does not establish that a hotel cannot succeed.

It does suggest that the reasons private capital previously declined, delayed or was unable to proceed deserve careful examination before taxpayers assume any portion of that risk.

Hotels introduce an additional layer of uncertainty because development risk does not end when construction is completed.

New hotels normally require a ramp-up period before reaching stabilized occupancy, average daily rates and operating margins. Depending on the market and property, stabilization may take several years.

That is especially relevant in Kelowna, where accommodation demand is highly seasonal. Tourism Kelowna's 2025 figures showed hotel occupancy of approximately 41% in January and 43% in December, compared with 87% in July and 89% in August.

Competition is also changing as short-term rentals and additional accommodation projects compete for portions of the same visitor market.

A prudent feasibility study should therefore model several years of operating results and stress-test occupancy, room rates, financing costs, operating expenses and seasonal cash flow.

That leads to an important question:

If the hotel takes three, four or five years to reach stabilized operations, who funds the operating shortfall?

A major hotel brand may contribute management expertise, reservation systems and marketing reach. But branding should not be confused with assuming the underlying real estate investment risk. Development cost, financing exposure, working capital and operating performance normally remain risks borne by the ownership structure.

Municipal involvement does not make those risks disappear. It can simply transfer some of them from private investors to the public sector.

That is why the City's business case matters.

Before additional municipal capital is committed, residents should be able to understand the total public investment, current revenues and carrying costs, private-sector equity contribution, independent hotel feasibility assumptions, risk allocation, projected stabilized income, anticipated return and the City's eventual exit strategy.

There is also a broader governance principle involved.

Municipal governments have responsibilities that private markets cannot replace. Roads must be maintained. Sewer and water infrastructure must be renewed. Police and fire services must be provided. Transportation networks must function.

Hotels, by contrast, are routinely financed, developed and operated by private enterprise.

There can be circumstances where municipal land assembly or strategic intervention unlocks development that produces substantial public benefits.

Chilliwack's downtown redevelopment demonstrates one approach: the municipality assembled strategic properties and then transferred development execution to private enterprise.

Nanaimo's long effort to secure a conference-centre hotel demonstrates another lesson. After earlier developers failed to meet development timelines, the City ultimately sold the hotel site to a private developer with contractual protections, and the project was eventually completed.

These examples do not tell Kelowna what decision it should make.

They do illustrate an important principle: government can facilitate development without necessarily assuming the commercial risks of being the developer or long-term investor.

As a current candidate for Kelowna City Council, I believe this project also raises important questions about transparency and accountability.

Residents should not have to infer the financial rationale for a major municipal investment. They should be able to see the business case, understand the assumptions, know where the risks reside and evaluate how the commitment fits within the City's broader capital priorities.

That approach is consistent with the priorities I have emphasized throughout this campaign: clearer financial reporting, accountable spending, transparent decision-making and disciplined evaluation of major capital commitments.

My professional background in commercial real estate, appraisal, development feasibility, property taxation and investment analysis has taught me that major transactions should be tested against evidence, alternatives and downside risk before capital is committed.

If elected, that is the type of analysis and oversight I would bring to the Council table.

The role of Council is not simply to ask whether a project sounds attractive. It is to ask whether the assumptions are reasonable, whether the risks are understood, whether alternatives have been considered, whether the public is receiving sufficient information, and whether the investment represents an appropriate use of limited municipal resources.

A waterfront hotel may ultimately prove to be an excellent development for Kelowna.

The question is whether it also represents the best use of municipal capital.

If public resources are being committed to make a commercial project proceed where private capital previously did not, taxpayers deserve to understand why that investment takes priority over other demands on the City's finite financial capacity.

That is not opposition to economic development.

It is the same question every prudent investor asks:

Given limited capital, risk and competing needs, is this the best place to invest Kelowna taxpayers' money?