Hotel Capital Connection 2023 event
Photo credit: Patty Watteyne Photography

TORONTO — Approximately 100 C-level hospitality executives gathered recently at the Omni King Edward Hotel in Toronto for the Hotel Capital Connection (HC²) summit, matching Canadian hotel owners with top legal and financial advisors, with the aim of exploring current issues impacting the hotel-investment community and future opportunities.

The summit kicked off with an overview of Canada’s hotel performance and financing from Alam Pirani, executive managing director, Hotels, Canada & Caribbean, Colliers Hotels.

Pirani started off with a few hotel performance metrics in 2022 compared to 2019. “Despite the global economic volatility, labour shortages and supply-chain issues, [the industry did fairly well] in 2022,” he said. “Revenue Per Available Room (RevPAR) was up 3.5 per cent against 2019, which was driven by Average Daily Rate (ADR) gains. That ADR gain represented almost 10 per cent compared to 2019.”

Pirani went on to highlight transaction activity, noting that 2022 ended with $1.6 billion in transaction volume compared to $1.8 billion in 2019. He also mentioned some transaction trends to look out for in 2023, including a focus on smaller deals, deceleration of alternative-use transactions, portfolio rationalization and marquee investment opportunities. 

The first panel was moderated by Darren Schmidt, managing director, portfolio manager and head of Origination at IMC, and featured Daniel Hsieh, CFO, Easton’s Group; George Kosziwka, CFO, InnVest Hotels; and Blake Lyon, CEO, Skyline Investments. Together, the panellists reflected on lessons learned over the past 24 months and the outlook for 2023, with a focus on the looming recession, interest rates, lender and brand temperament and anticipated Chinese leisure travel. Ultimately, the group agreed that choosing the right lender and fostering a strong relationship with them is key when discussing covenants, debt-service coverage, rate caps and more.

“It all comes back to the relationship with the lender,” said Lyon. “Always talk to your lender, even if you don’t want to have conversation after conversation. COVID was the real calling out of that. Lenders were the critical juncture to getting through the crisis.”

Not surprisingly, in terms of property-level performance, the panellists also agreed properties in secondary and tertiary markets performed the best throughout the pandemic, as opposed to downtown urban markets.

“We have a portfolio of 52 Comfort Inns that we call our limited-service portfolio, and they stayed on covenant with their debt throughout COVID,” said Kosziwka. “They performed exceptionally well. Our Comfort Inn portfolio had its most profitable year in 2022 and not by a little margin either. It was about 15 per cent.”

To wrap up the panel, Hsieh said, “We’re all hoping that rates stabilize, but in addition to that, we all have concerns about the labour market still. We’re all spending a lot more time re-evaluating our entire employee experience to make sure we keep our team as efficient as possible.”

“I sleep pretty well at night,” said Lyon. “You just have to get used to the fact that we’re going to be in an uncertain world for the next little while. It’s an opportune time to work harder and search for deals. You have to spend more time looking than you did in the past.”

The second panel, moderated by Zach Pendley, Real Estate and Hospitality Transactions and Valuations lead at EY Canada, featured Serge Primeau, managing partner, Canada, Urgo Hotels; Alan Perlis, president & CEO, Knightstone Capital Management Inc.; and Carrie Russell, senior managing partner at HVS. Together, the panellists discussed the pace of investment activity.

“It’s been a good year for our business,” said Russell. “We’re probably 50 per cent of feasibility work and 50 per cent of appraisal work. People are excited and want to build new hotels, so the demand and opportunities are there across the country.”

Perlis agrees. “There’s going to be a lot of pressure in the next year to sell assets and to re-value assets. The difficult interest rates are going to have a big effect in re-financing. Every acquisition we’ve made in the last two years, in addition to the ones we’re looking at now, requires a major renovation, which will drive owners to say ‘Do I really want to put all this money back in with higher interest rates?’”

When asked about how hotel investment compares to other asset classes, Perlis said Knightstone Capital Management Inc. got into student housing because there are a lot of similarities between hotels and student housing, as well as the fact “that they’re both operating businesses sitting on top of real estate.”

Generally speaking, the time is right for acquisitions. “We’re trying to be opportunistic,” said Primeau. “We’re in acquisition mode and we want to grow our portfolio in Canada specifically.”

Check out the Thursday edition of Hospitality Headlines for more coverage of the Hotel Capital Connection summit.


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