Monopoly board game illustration with hotel on one of the squares
Illustration by Blair Kelly

By Fraser MacDonald, Senior Director | Canada, Colliers International Hotels

Sustained investor interest and strong operating conditions kept the hotel real-estate market active in 2023, with transaction volume of approximately $1.72 billion, pacing slightly ahead of 2022 levels ($1.63 billion). Despite interest-rate headwinds, confidence in the hotel asset class was evidenced by a diverse investor pool, including new entrants eyeing hotels in a quest for cash flow amidst inflationary pressures. 

While overall investment levels remain below the past decade average of $2.1 billion, positive momentum in lodging demand across the leisure, corporate, and group segments as well as healthy debt-market conditions are supporting a bright outlook with significant investment volume closed and in the pipeline so far in 2024.

Debt availability for hotels improved in 2023, aiding momentum in the transaction market with involvement from a variety of credit unions, government sponsored funds, banks, and private lenders. Given the overall cost of capital continued rising during the year and loan-to-value (LTV) ratios have reduced, creative financing structures, including seller financing within the capital stack, played an important role. Asset and sponsor quality, as well as debt service coverage ratios (DSCR), remain paramount in the current environment. As articulated in the Colliers 2024 Global Investor Outlook, conditions this year will stay complex, but the best positioned investors will be those who are ready to act on opportunity.

The depth of capital has continued to diversify and the appetite for lodging investment remains high — the challenge lies in the limited supply of hotel opportunities on the market.

“As owners rationalize their portfolios by reviewing capital plans, re-financing terms and timing the cycle, we believe new offerings across the various segments will result in another strong year for the sector,” says Alam Pirani, vice chairman, Colliers.

2024 Industry Outlook

ACTIVE TRANSACTION MARKET: Strong liquidity with more buyers than sellers

We expect an uptick in transaction volume of $1.75 billion to $2.25 billion, fuelled by large single asset and portfolio deals, as well as a healthy mix of mid-market assets in secondary and tertiary markets expected to close this year.  

POSITIVE LENDING CONDITIONS: Debt funding available in hospitality sector with strong sponsors 

Liquidity from a broad cross section of regional, national and international lenders has been one of the primary drivers of investment activity. Financing in today’s market is varied but available, and generally involves established relationships with lenders.

RATIONALIZATION OF PORTFOLIO: More and more ownership groups are re-evaluating short and long-term strategic plans

Portfolio reviews, capital cycles, loan maturities, and partnership changes will bring assets to market. Each offering has a unique story and is generally met with buyers who see the upside opportunity if priced right. 

STRUCTURAL OWNERSHIP SHIFTS: Canadian hotel ownership structures continue to evolve

While we will continue to see traditional and largely private domestic groups as the dominant buyers, new non-traditional investment vehicles will also stimulate activity as the industry evolves, with more institutional and real-estate companies entering the hotel space.

CAP RATES TO RE-GAIN RELEVANCE: Return to cap rate-based valuations, as price per room barometer becomes less of a main focus

As net income levels for hotel properties have stabilized and surpassed 2019 levels, more weight will shift to the capitalization of income-valuation methodology

Although assessing comparable trades and price-per-room values is common, high construction costs have pushed price-per-room ceilings and cap-rate valuations will form an important element in assessing values as forecasting income becomes
more transparent.

CLOSELY MONITORING ECONOMIC INDICATORS: Investor sentiment is highly influenced by strength of the overall economy

Demand and consumer confidence undoubtedly has an impact on performance and investor outlook, but our resource-rich and diverse economy, infrastructure and demand generators will support a prosperous market through the long-term.

INCREASED OFFICE-CONVERSION OPPORTUNITIES: Several failed office construction projects lead well to hotel conversion

With the dislocation of the office market, we see increased activity in conversion opportunities in major cities such as Toronto, Montreal, Vancouver and Calgary, as long as the building layout and floorplates allow for flexibility, ensuring compliance with local regulations and zoning, as well as reasonable all-in pricing post renovation.

2023 Year in Review

Major metro and resort markets drove the lion’s share of investment volume (68 per cent) with strong pricing across all service segments setting record national average price per room metrics of $175,000, up 45 per cent year-over-year. 

2023 saw seven major single-asset transactions over $50 million spanning the full-service, luxury, and resort segments in Canada’s primary urban and recreational markets, with all but one deal for continued use.

Acquisitions for re-development and alternate use declined to typical levels (14 per cent of volume) while distressed sales remained at historical lows (one per cent of volume), demonstrating a return to typical investment trends. 

Small-investment opportunities were still plentiful with transactions up to $10 million accounting for almost 75 per cent of the year’s trades (by number of trades) and a quarter of annual volume. 

Financing conditions improved year-over-year with participation from a variety of credit unions, government sponsored funds, banks, and private lenders; however, seller financing continued to play an important role. 

Private domestic buyers continued to lead the market given the limited headline deals and scarce portfolio investment opportunities available to attract major foreign and institutional players.

Buyer/Seller Mix 

Private domestic capital continued to lead the market with fluid investment activity by private investors followed closely by hotel investment companies with substantial acquisitions by major owners, including Sunray Group, InnVest Hotels, and Manga Hotels, among others. 

Given the relatively limited major investment opportunities on the market, activity by institutional groups and public companies was limited save for a handful of acquisitions by Oxford Properties, Knightstone Capital, Skyline Group, and VICI Properties with the balance of the institutional and other category comprised of purchases by First Nations investment groups, governments, and social-housing organizations. 

Private investors and hotel investment companies remained the dominant sellers on the market with sell-side activity by PCs comprised of select dispositions by First Capital Realty, Century Casinos and Pandox AB. 

Segment Analysis

Full-service assets played a dominant role in 2023, elevated from a handful of high-water mark deals while the limited-service segment continued to pique investor interest with a nearly 80 per cent share of the year’s transactions. Focused-service acquisition opportunities remained sparse; however, the segment remains highly sought after and has been at the forefront of new development proposals. 

Regional Analysis

Transaction volume was evenly split across the country with Eastern Canada (Ontario and east) outpacing the Western provinces’ volume share by eight per cent. There were some interesting shake-ups in provincial distribution; Ontario, which typically drives half of national hotel volume slowed to a third while Quebec, British Columbia and Alberta saw double-digit growth year-over-year.

Canada’s largest metro markets (+1M population) accounted for close to 50 per cent of volume including downtown and suburban submarkets, pacing slightly above recent years given the increase in luxury and larger full-service trading. 

Primary recreational markets in Alberta, British Columbia and Ontario drove the bulk resort activity which hovered at 21 per cent of volume with a boost from major acquisitions by Oxford Properties and InnVest Hotels.

Trading in secondary and tertiary markets remained fluid, accounting for 60 per cent of the year’s transactions and a third of overall volume with lively activity in northern Ontario and British Columbia, the Okanagan Valley, Kamloops, and Winnipeg. 


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