According to Avison Young’s Canada Hotel Market Report, which provides a look back at 2021 as well as a 2022 outlook, “The Canadian hospitality market has completed another year under the shadow of the COVID-19 pandemic. Throughout the year, the hospitality industry was tested, but some optimistic trends were observed as year-end approached.”

Looking Back
Hotel transaction sales volume in Canada’s six major markets totalled approximately $712 million in 2021 — up 124 per cent compared with 2020, and the highest annual result since $726 million in assets changed hands in 2018.

“There are a variety of reasons for this bump in transaction velocity, such as some investors using capital that had been allocated for 2020 but was not spent, lenders [were] pro-active on non- performing assets which needed to be liquidated, and continued change-of-use opportunities,” reads the report.

A large volume of smaller assets was sold across the country, with 92 trades in 2021 compared to 75 in 2018, reflecting averages of $7.7 million and $9.6 million per trade, respectively. Toronto (GTHA) and Calgary were the most active markets, accounting for 66 per cent of 2021 sales volume. The largest hospitality transaction of 2021 by sale price in these six major markets was the sale of the QUBE Hotel in downtown Toronto’s entertainment district for $74 million. Purchased by Northland Properties, the 120-room hotel sold for approximately $617,000 per room. Another notable sale, which occurred near the end of 2021, was the Courtyard & Residence Inn by Marriott Montreal Airport, which was purchased by Knightstone Capital Management for $69.6 million.

“Although outside of the major market areas covered in this report, one of the most notable resort transactions of 2021 was the acquisition of a portfolio of Ontario resort properties (including Deerhurst Resort, Horseshoe Resort, and the remaining development lands at Blue Mountain Resort) by Freed Hotels & Resorts from Skyline Developments for $330 million. These significant hospitality transactions demonstrate keen investor interest in the marketplace,” reads the report.

Lenders’ perspective
According to Avison Young, the lending community remains cautious when considering the hospitality sector. “Active hotel lenders contemplating financing opportunities require strong sponsors with a meaningful track record and assets with significant market presence. Lenders are looking to see more clarity in the marketplace. The cost of capital is still low, yet bond yields are trending upwards,” say the report.

To manage inflation, interest rates are likely going to rise but the significant unknowns are by how much, and how quickly. Fortunately, states the report, hotels are somewhat resilient to inflation as daily rates can be adjusted swiftly.

“[So far,] 2022 is shaping up to be another challenging year for hotel owners across all fronts, including acquiring additional debt for their existing and prospective properties,” says Cameron Woof, AVP Hotels & Syndication, CWB Franchise Finance in the report. “While the majority of Canadian lenders with exposure to the space are demonstrating commitment to supporting their existing client exposures, the recent recovery setbacks due to the Omicron variant will likely extend the ‘wait and see’ approach currently being employed by most lenders as it relates expanding appetite. This has made sourcing equity via leveraging of existing assets extremely difficult over the past two years — a difficulty that is expected to continue through 2022.”

“That said, Woof continues, “with challenges come unfolding opportunities that have caught hotel investors’ attention, namely the expected increase in the volume of asset sales triggered by owners aimed at re-balancing their portfolios and injecting liquidity into their balance sheets. Partnering with a lender who is active, understands the hotel space, and has demonstrated an ability and commitment to deliver unique debt structures throughout the pandemic will be imperative to success in 2022. This will be true for both sourcing stable and patience capital for existing maturities and re-investment in assets, as well as taking advantage of opportunistic acquisitions. While debt will continue to remain scarce through 2022, there are select lenders who are still active in the space and comfortable structuring robust facilities for nimble borrowers.”

Looking Ahead
The Canadian hospitality industry has been challenged by the ebb and flow of government lockdowns and lack of clarity on a path to recovery over the last two years. According to Avison Young, this has been taxing those invested in the hospitality industry “but there are signs of improvement on the horizon. Performance metrics in 2021 were stronger than in 2020. The resort industry continued to be in high demand as consumers sought regional escapes and this is expected to continue in the near term,” states the report.

Prior to the impact of Omicron, restaurants were getting busier, and workers were starting to return to their offices. Domestic and international air travel started to pick up, although travel to Canada was limited due to restrictions.

According to the report, the busiest day for cross-border travel in December 2019 recorded 33,806 travellers, while December 2020’s high point was 1,984 — representing a 94-per-cent drop. However, the high point in December 2021 was 20,599 daily travellers — demonstrating a significant bounce-back in tourism activity, but still 39 per cent below 2019 levels.

“As vaccination programs continue, hospitalizations decline and health effects of the pandemic wane, consumer confidence is expected to return, leading to increasing travel both for business and leisure,” states the report.
In the report, Laura Baxter, director of Hospitality Analytics, Canada for CoStar Group, offers some perspective on the outlook for the hospitality sector in 2022.

“The national forecast prepared by STR expects full-year occupancy in 2022 to be 60 per cent and ADR to reach $156, resulting in revenue per available room (RevPAR) of $93, up 61 per cent on 2021,” said Baxter. “When compared to 2019 results, occupancy is forecast to be down only five percentage points while ADR and RevPAR are expected to be five per cent and 13 per cent lower than pre- pandemic results, respectively.”

To download the full report, visit


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