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Canadian Hotel Investment Report 2017

Canadian Hotel Investment Report 2017

Canadian Hotel Investment Report 2017

Canadian hotel industry capped off 2016 with $4.1 billion in transaction volume, with 2017 expected to see over $3 billion in overall transaction activity

The Canadian hotel real estate industry posted record performance in 2016, making it the best year for transaction volume in the current cycle, according to Colliers International Hotels’ 2017 Canadian Hotel Investment Report that released today.

2016 saw the hotel real estate market complete $4.1 billion in transaction volume, the second-highest amount on record, and almost 70% higher on a year-over-year basis. The year also set a new high for traditional price per room metrics ($99,000) and cross-border investments. In fact, foreign capital accounted for 67% ($2.75 billion) of total transaction volume, and 100% of strategic transaction activity; strategic transactions, in turn, represented 62% ($2.54 billion) of the year’s total transaction volume.

“The low Canadian dollar, the outflow of Chinese capital, hospitality assets’ generally higher yield, and hotels’ strong operating performance are increasing liquidity in the market,” said Alam Pirani, Executive Managing Director, Hotels. “A weaker loonie offers investors greater purchasing power. Canada’s stable economic and political environment is an ideal destination for capital flight from China. Hotels deliver returns that averaged 210 basis points higher than those of other real estate investments in 2016. And the industry continually exhibits strong operating performance, with demand outpacing new supply over the past decade. All these aspects are driving the industry to fire on all cylinders, and deliver the level of results we saw in 2016,” he stated.

2016 likewise witnessed rapid growth in key markets, with the report citing the fastest-growing areas in Canada, in terms of revenue per available room: Windsor, ON; Toronto Downtown, ON; Vancouver/South Surrey, BC; Vancouver Airport, BC; and Banff, AB according to Smith Travel Research.

The industry’s upward trend is expected to continue through 2017, which is poised to see over $3 billion in sales volume – Q1 already saw the completion of a $1 billion portfolio transaction. 

“2017 is shaping up to be another banner one for the hotel industry,” said Robin McLuskie, Vice President, Hotels. “We expect foreign capital to keep flowing into our borders. We anticipate annualized supply growth to reach between 1.5% and 2% in the next two to three years. Hard-hit energy markets are rebounding, setting up these regions for increased activity. Plus the combination of Canada’s weak dollar and significant promotion around the country’s 150th anniversary should make 2017 a peak year for travel into Canada. These factors put the hotel real estate market on track towards yet another banner year.”

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