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Hundreds of construction workers in booming northern British Columbia will take up residence this week in unique digs on board a cruise ferry revamped into a floating luxury hotel.
The aging ship will help relieve a housing shortage in one busy Canadian port town already bursting ahead of a promised energy boom that could last more than a decade.
The Silja Festival – a Baltic ferry made over as the Delta Spirit Lodge – will spend at least a year docked outside Kitimat, British Columbia, where it will provide housing for about 600 workers in town for Rio Tinto Alcan’s $3.3 billion smelter-upgrade project, which is expected to wrap up in 2015.
After that, the ship’s owners hope more contracts will float their way as major energy companies like Chevron Corp, Petronas and Royal Dutch Shell push ahead with proposed liquefied natural gas export (LNG) projects along Canada’s Pacific coast.
“This kind of investment would never occur without the kind of mega-opportunities that are growing in the Pacific Northwest,” said Andrew Purdy, vice president of Bridgemans Services Ltd, the privately held company behind the hotel. “We saw the opportunity and we put it all together, but it was effectively driven by industry.”
Despite the “No Vacancy” signs popping up all over town, the endeavor is risky. Bridgemans declined to say how much it is making from its first job, but it has already spent more than C$4 million ($3.6 million) to import and upgrade the ship, with further improvements planned. It has no contract after work wraps up at the Rio smelter.
But if just four major LNG projects go ahead, roughly 15,000 extra beds will be needed in coastal northern British Columbia at peak construction, according to a report from National Bank Financial.
For employers, offering free top-end accommodations complete with a basketball court, a theater, a fine-dining room that serves three hearty meals a day and a captain’s lounge for relaxing may be a draw in a very competitive labor market.
“We always go back to what our client wants. They want to build a platform that attracts and retains the best workers,” said Purdy.
Scrambling for Skilled Labor
The North American energy industry is booming. Yet as companies make new investments, there are doubts the sector will be able to find and keep the employees needed to complete all the potential projects.
Speaking at an event earlier this year, British Columbia’s energy and mines minister, Bill Bennett, said the province will need to import workers from other provinces and abroad.
“If every single high school kid in B.C. graduated, became an apprentice … it wouldn’t even come close to satisfying the demand we see coming,” he said.
Luring skilled labor away from other thriving areas, like the Alberta oil sands and the Bakken region driving North Dakota’s fracking boom, will take more than good pay. Workers are looking for perks.
The floating hotel, with its all-inclusive facilities and gourmet meals, may be just the ticket for companies that want to take temporary living to the next level.
The ship, which used to sleep more than 2,000 people on overnight trips across the Baltic Sea, has been retrofitted with 700 single-occupancy rooms, each fitted out with a memory foam bed and flat-screen TV.
In addition to providing room and board for the temporary construction workers, the ship has meeting facilities and even a private dining area that can be rented out for special events.
The hotel also provides jobs for local residents who don’t have a professional trade, the owners note, helping to ease the pain of a sharp increase in local housing costs.
Tripling Rents, Soaring Home Prices
A quick scan of real estate listings for Kitimat shows just how tight the market has become. Only two houses are listed for under C$200,000, and both are fixer-uppers.
“If the house is priced right, it sells within a few days,” said Ilona Kenny, a realtor with RE/MAX Kitimat Realty who has lived in the area for nearly four decades. “They’re being snapped up by people who live here, by investors who are renting out properties and families that are moving into town.”
The town’s typical family home – an older three-bedroom, one-bathroom bungalow – is selling for about C$250,000, said Kenny, compared with C$100,000 to C$150,000 last year. In one new subdivision, not yet under construction, townhomes start at C$288,500.
Rents too have skyrocketed, which is putting pressure on long-time residents who can no longer afford their homes, said Kitimat mayor Joanne Monaghan.
“All the apartment buildings that were built in the 1970s have been purchased and are being refurbished, and that’s causing problems,” she said. “People were paying C$400 a month rent, and now, in some cases, it’s up to C$1,200 a month.”
The worry is the town will soon find itself in a housing-affordability crisis, much like Williston, North Dakota, where a fracking boom delivered high-paying jobs for thousands of workers but also led to a sharp rise in homelessness.
While the housing crunch keeps Monaghan awake at night, she is happy the local economy is thriving. There are new hotels, restaurants and retail shops in the works, and the town of 11,000 just got its first Tim Hortons, a popular coffee shop chain that is the hallmark of a bustling Canadian town.
Parade of the U-Hauls
Still, the long-time politician knows that with every resource boom there is usually a bust. Indeed, the town was hit hard during the economic crisis when the local forestry industry collapsed.
“A few months after I became mayor, the Eurocan (paper mill) just pulled out. We had more U-haul trailers going out than I could shake a stick at,” said Monaghan. “Now they’re coming back in and I’m just thanking God.”
Floating lodges are nothing new along the west coast, where they have traditionally been used for road, lumber and fishery projects, but there’s never been anything close to the same size as the 11-deck Silja Festival ship.
As workers finish up last-minute vacuuming and polishing on board the floating hotel, the four investors are eager to secure their next contract. They have had meetings with various companies that plan to build LNG export projects.
To mitigate risk, the group did not buy the roughly $30 million cruise ferry outright but rather reached a type of rent-to-own deal. If things go well, the investors can buy it. If not, they can walk away.
“I think everybody is sitting here waiting to see if this is a success,” said Brian Grange, president of Bridgemans. “Am I terrified? No, I’m not. I think this is probably one of the most innovative ideas that has been seen on the B.C. coast in quite some time.”
Editing by Jeffrey Hodgson and Prudence Crowther.
Copyright (2014) Thomson Reuters. Click for restrictions.