Canadian Hotel Investment Report

Hotel Investment Transactions in Canada Experience Strong Annual Performance

Buoyed Markets, Low Cost of Debt and Investor Optimism Spurred a Stellar Year for Hotel Investment Transactions in Canada

Colliers International - Deal volume grew by 72 percent year-over-year eclipsing $2 billion with strong performance expected into 2014

- Average deal size, price per room and revenue per available room also experienced upward trajectory

- Western Canada topped price per room metrics while Eastern Canada led deal volume with the GTA being the most active market in the country

Canada’s hotel investment market experienced one of its strongest annual performances in a decade according to the 2014 Canadian Hotel Investment Report released today by Colliers International Hotels. Buoyed markets, easy access to capital, investor optimism and demand for hotel properties propelled deal activity by 72 percent year-over-year. One hundred fifteen transactions were recorded in 2013, surpassing $2 billion in volume, significantly higher than the $1.2 billion and $1.1 billion in deal volume recorded for 2012 and 2011 respectively. The Colliers International Hotels’ report also forecasts a robust 2014 with a solid level of deal activity ranging between $1.25 billion and $1.75 billion. 

“As Colliers Hotels previously forecasted, 2013 proved to be one of the strongest years for Canadian hotel investment in a decade,” says Alam Pirani, executive managing director with Colliers International Hotels. “In fact, in terms of absolute deal volume, 2013 ranks in the top three as the highest year on record following only the pre-recession 2006 and 2007 era. Positive domestic economic conditions, coupled with attractive yields for hotels vs other real estate classes as well as the availability of high-quality product are some of the elements that draw local and foreign investors to Canada’s hotel market.”

According to the Colliers Hotels report, foreign investment in Canada last year grew to the highest levels since 2007 and accounted for approximately $857 million in volume stemming from nine hotel transactions. “When the right product becomes available, Canada is on the radar for international investors.  Foreign capital sources are attracted by the opportunity to diversify as well as the long-term stability our country offers,” says Tom Andrews, senior vice president with Colliers International Hotels. 

The report also reveals significant improvement in deal metrics and operational performance. Average price per room increased by 60 percent year-over-year to $133,000 and average deal size grew by 73 percent to $17.6 million.  

Regional Transaction Analysis

Table - Hotel Investment Transactions in Canada


Unlike 2012, transaction activity in 2013 was noticeably split between Western and Eastern Canada. While Western Canada topped the chart in terms of average price per room ($154,700) led by British Columbia and Alberta, Eastern Canada took the lead for deal activity (68 transactions) and volume ($1.2 billion) with Ontario leading the pack with 51 transactions totalling just more than one billion dollars. 

The high level of activity in Ontario, Alberta and British Columbia is reflective of the rarely offered institutional grade portfolio and large single-asset hotel product that was brought to market and met with a diverse mix of domestic and international buyer groups,” adds Robin McLuskie, vice president with Colliers International Hotels.

The Greater Toronto Area (GTA), crowned as the most active sub-market in Canada in 2013 with transaction volume more than doubling  year-over-year to $647 million (125 percent increase), accounts for almost a third of the national volume. Other sub-markets with noticeable activity over the past year include Ottawa ($279 million), Calgary ($264 million) and the Greater Vancouver Area ($226 million).

 

About the Report

The 2014 Canadian Hotel Investment Report provides an analysis of the investment fundamentals that drove the Canadian lodging industry in 2013, as well as a short-term forecast for deal activity in 2014. The report includes data and intelligence on a variety of market measures such as transaction volume, per room pricing, buyer profiles, capitalization rates and room supply. Also included is the Colliers Hotel Value Index, which monitors the annual rate of change in hotel values on a year-over-year basis. 

Note to editors: A copy of the full report, including the Colliers Hotel Value Index covering 17 major markets across Canada, is available at:  http://www.colliershotels.com/2014/CHIR/Colliers-2014CHIR.pdf



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