As hotel investors converge on Toronto for that annual rite of passage called the Canadian Hotel Investment Conference (CHIC), a groundswell of uncertainty is cresting. With eyes firmly cast on what’s happening south of the border, the business community is being hit by wave after wave of bad news. American hoteliers are scrambling to better position themselves to make dramatic cuts as worst-case scenarios force them to get proactive and deal with the balance of this year and beyond.
Ironically north of the 49th parallel the Canadian hotel market continues to show strength. Headlines are peppered with good news, both in terms of new development and strategic deals. Colliers International reports the Canadian hotel market is coming off its third-consecutive year of record transaction activity. In this year’s Investment Report, Colliers states “The level and range of interest shown by hotel investors has been nothing short of remarkable.” During the past three years, transaction volume has surpassed total volume in the prior 10 years by a whopping 42 per cent, driven by a low interest rate environment, strong employment numbers and productivity growth. Market influences have also fuelled dramatic shifts in hotel ownership, with the industry moving through cycles dominated by private equity, REITs and pension funds.
Today’s hotel landscape looks dramatically different than it did 10 years ago, and one can only wonder what further changes loom on the horizon. With Canada’s economy directly tied to the U.S., a downturn is likely inevitable. But whether a recession hits next month or next year, the hotel industry is poised to soldier on with typical aplomb and resiliency. Hoteliers have learned valuable lessons through the watershed events of the past decade, and undoubtedly they will be applied to the current business plan judiciously.
Despite the uncertainty, there is good news for the Canadian hotel industry. With a slate of luxury properties scheduled to come on stream in the near future, the Winter Olympics just two years away, and surging interest in various burgeoning market segments, we sit on the precipice of exciting times. Add to the mix, the current fascination with all things green and the potential for growth is unlimited.
Hoteliers should gain confidence from the facts. As part of Colliers’ Investment Report, 17 Canadian markets have experienced positive growth in hotel values, and momentum is forecast to continue in 2008, with approximately 65 per cent of the markets anticipated to experience double-digit growth. Toronto, Calgary and Vancouver are expected to lead the pack with growth of 17, 18 and 22 per cent respectively. Globally, Canadian product is competitive with hotel prices here lower than in comparable cities around the world, making Canada an attractive and unique destination. Fortunately that bodes well for visitors and investors alike.