TORONTO — Canada’s Hotel market continues to build on 2015’s record year of investment volume, which surpassed $2.3 billion.
According to CBRE Limited’s Canadian Hotels Outlook 2016 report, annual transaction volumes of approx. $2.5 billion is now the new normal for the Canadian hotel market and strong operational performance is underpinning investor appetite for the asset class. “Investors from across the globe are looking at Canada’s hotel industry and Bluesky’s recent announcement of its multi-billion dollar definitive agreement with InnVest REIT is a clear barometer of this appetite” says Bill Stone, EVP of CBRE Hotels Capital Markets Group in Canada.
Overall, Canada saw a 0.3 per cent increase in revenue per available room (RevPAR) to $91 in Q1 2016. However there are regional disparities, with Central Canada leading the three regions with a 6.1 per cent increase in RevPAR. Atlantic Canada posted a stable 1.2 per cent gain but B.C.’s strong performance could not offset large declines in Alberta — leading to a 5.4 per cent decline overall for Western Canada.
Calgary recorded a 26.1 per cent decrease in Q1 RevPAR as energy sector cutbacks and new supply continue to weigh heavy on performance. Toronto and Vancouver, however, posted Q1 gains in RevPAR of 9.1 per cent and 16.1 per cent respectively, with Montreal seeing an increase of 3.9 per cent.
“The fundamentals of the Canadian hotel market are extremely strong and, outside of the oil patch, we’re seeing a continuing of the momentum generated in 2015,” says Stone. “Q1 RevPAR growth in Toronto and Vancouver has far exceeded our expectations. When you combine this with a low-interest rate and low-loonie environment, then throw in Canada’s reputation as a safe haven for capital preservation, it all adds up to an extremely compelling investment climate for foreign capital,”
The strong performance of Q1 is predicted to continue throughout the remainder of the year, with the low Canadian dollar benefitting a number of markets. CBRE forecasts 11 per cent growth in hotel profits in Central Canada for 2016, thanks to growth in Toronto. Strong profit growth is also forecast for Atlantic Canada and B.C. at 8 per cent and 13 per cent respectively, but the struggles in Alberta are expected to endure throughout 2016 leading to an estimated 27 per cent decline in profits.