The hotel transaction market continued its strong momentum in 2012 with $1.2 billion in sales registered for the year. This surpassed 2011’s $1.1 billion in deal volume and replaced 2011 as the fifth-strongest year since Colliers began recording transaction data in 1985. Sales of lodging properties across Canada marked a third year of growth, nearly tripling in total dollar terms since the full effects of the last downturn. Summary highlights include


  • There were 116 transactions reported for the year, up 17 per cent from the 99 trades in 2011. Total deal volume also increased year-over-year, up six per cent from 2011 and 64 per cent from 2010.
  • Sales of lodging properties across Canada marked a third year of growth, nearly tripling in total dollar terms since the full effects of the last downturn.
  • Pricing per room for the year averaged $83,600, about 23 per cent below last year’s average. This was weighed down by smaller average deal sizes, which registered $10.2 million, compared to $11.2 million in 2011.

Furthermore, the market is expected to surpass this performance in 2013 as evidenced by deal flow in the first quarter of the year outperforming results from the same period in 2012.


Hotel trading activity was nearly split evenly between the East (51 per cent) and West (49 per cent) in 2012. The disparity, however, was on the average price per room, with the West 28-per-cent higher than the national average, bolstered by results in Alberta, reflecting the strength in many of the province’s oil and gas markets. While Saskatoon ended the year with the highest price-per-room metric across the country, trading volume was thin and represented just three per cent of the overall results. The East (measured as provinces east of Manitoba) ended 25 per cent below the national average.

On a provincial level, Ontario led the pack in terms of volume and number of trades ($460 million, 50 trades) followed by Alberta ($391 million, 30) and Quebec ($135 million, 13). On a local level, Toronto marked the highest deal volume ($289 million) per city, followed by Edmonton ($121 million), Montreal ($112 million) and Calgary ($80 million). Other cities that made their mark on the hotel investment map in 2012 included Vancouver ($61 million), Fort McMurray, Alta., and Grande Prairie, Alta. ($56 million each), Victoria ($48 million) and Saskatoon ($37 million).


Real Estate Companies (RECs) were the most significant buyer group in 2012 at 43 per cent of total volume, growing from an eight-per-cent share in the year prior. However, acquisitions by RECs were largely motivated by conversion opportunities tied to the hot residential high-rise market in major urban markets, particularly Toronto. The bulk of these transactions occurred in the first half of the year and has slowed substantially ever since, as activity in the residential sector has moderated.

  • Hotel Investment Companies (HICs) were net-sellers, representing 43 per cent of sell-side activity, reversing the course from 2011 when they were the dominant buyer group with 45 per cent of volume. HICs were the second-lowest buyer group in 2012, ending with a 10-per-cent share — opportunities that would have otherwise been typically acquired by HICs were purchased by RECs.
  • REITs/C-Corps emerged as an active buyer group at 16 per cent of volume for 2012 (three per cent in 2011), their busiest year since 2007. This effort was led by Temple Hotels Inc., which purchased seven assets — the single-largest purchaser of hotel real estate for the year with $160 million in volume. REITs/C-Corps were active sellers as well, representing 17 per cent of the transactions sold (nine per cent in 2011), although these dispositions were from InnVest REIT, Holloway Lodging Inc. and Royal Host Inc.
  • Private investors were the second-largest buyer group, at 29 per cent, the same share as the year prior. This group represented the lowest average price per room — $69,000 per room — of all buyer groups as their average deal size was generally low and segmented in the limited-service category. Still, private investors purchased 71 of 116 trades last year, by far the most active group by the number of properties sold.
  • Selling by cross-border companies represented 24 per cent of volume (40 per cent in 2011). These sales were generally the most significant deals of the year and averaged $46 million. On the buy side, the 160-room Banff International Hotel was the only sale to a cross-border ownership group, continuing the trend from last year when there were only two transactions to non-Canadian groups.
  • Lender-driven sales corresponded to four per cent of the overall transaction market. Distressed hotel property sales peaked in 2010 at 12 per cent of volume and have since moderated as lender-driven asset sales have largely worked their way through to resolution.
  • Sales in the focused-service category grew as key buyer groups aggressively chased this asset class in secondary markets. Approximately 60 per cent of these sales occurred in Western Canada.


Looking at where we are in the cycle, to shed some light on the industry’s outlook, we compared the previous growth period to the current cycle, which we define as 2005 to 2007 and 2011 to 2013 (F).

When looking at overall real-estate metrics and the more diverse buyer/seller composition that has transpired in recent years, it’s evident we are in a period of sustainable growth that should carry the market through the next few years. The relative strength of the Canadian economy and the renaissance in other commercial real-estate sectors, such as the office and retail markets, have created new dynamics among hotel investors.

Focusing on the traditional portion of the market, and removing strategic acquisitions, we’re able to better compare the ebb and flow of the natural market given the omission of one-time deals that were inked for strategic reasons. Taking a look at traditional volume between the two periods, the three years between 2005 and 2007 averaged approximately $920 million per year, with a peak in 2006 of $1.09 billion. In the recent period, 2012 ended as the new peak year on record, up six per cent from the previous market high. The pace and scale of transaction flows in 2012 clearly demonstrated a healthy market, which we believe will carry through in 2013 and beyond, supported by a plethora of “stars-aligned” conditions — from rock-bottom borrowing rates, robust employment markets and the country’s beneficial exposure to key commodities, which are well demanded worldwide. This presents a great window of opportunity for investors looking to enter and exit the market.

We base our forecast of sustained growth on three fundamental factors currently in play:

  • With real estate being a high priority for many investors, we expect more non-traditional players to enter the hotel investment market over the next few years given the compression in yields occurring in other investment spaces.
  • The significant commercial real-estate transformation seen across Canada has changed the overall landscape for the better. From the massive restructuring in the retail industry to hot office markets that are outperforming with record-low vacancies and a good stock of new developments in the pipeline.
  • The market of buyers and sellers is more rational and balanced than the previous peak cycle. Whereas the last up-cycle (2006/2007) saw more of a “frenzied” approach with too much capital aggressively competing for deals; the current cycle is seeing rational buyers underwriting transactions using solid investment decision-making tools.

The 2013 Canadian Hotel Investment Report is online at It includes 2012 quarter-by-quarter activity and market segment breakdown as well as timely information on cap rates, the financing market, new supply and the economic and operating environment. The report also contains the Colliers Hotel Value Index, which monitors the annual rate of change in hotel values on a year-over-year basis and a full listing of transactions that occurred across the nation in 2012.


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