The Canadian hotel sector marked a recovery from previous pandemic lows last year, with national average revenue per available room (RevPAR) of $111.06, representing a 3.5 per cent increase over 2019 levels. Colliers’ newly released market summary notes the 61.1 per cent average occupancy rate for 2022 was still roughly four per cent below the 2019 average, but forecasts that increased international travel and a low Canadian dollar will draw more guests in 2023 and 2024.
On the investment front, the $1.6 billion worth of deals over the course of year fell about 20 per cent short of 2021 transaction value. However, fewer properties were sold for conversion to other uses —accounting for about 20 per cent of deal activity compared to 41 per cent in 2021 and 53 per cent in 2020. Just 1 per cent of all transactions were forced sales of distressed properties, which Colliers analysts report occurred as “a handful of small trades”.
The larger share of 2022 investment activity occurred outside of Canada’s largest urban markets with populations exceeding 1 million, equating to 60 per cent of trades. This underlies the year-over-year decline in the average price per room, which was pegged at $132,500, down from $158,100 in 2021. Notably, too, the top two sales of the year — $112.5 million for Oak Hotel Overlooking the Falls in Niagara Falls and $94 million for Toronto’s Bond Place Hotel — were acquired for partial or full redevelopment with an average price per room thus deemed not applicable.
About three quarters of all 2022 sales were for less than $10 million, with just four exceeding $50 million. Colliers’ data also includes 10 multiple property sales, encompassing 33 hotels and 3,400 rooms. The largest of these was Morguard’s divestiture of 12 hotels encompassing 1,686 rooms, which occurred as separate deals to multiple buyers. Colliers analysts typify Morguard’s moves and those of other hotel investment companies such as Pomeroy Group, G6 Hospitality, Imperia Hotels, and a Concord Hospitality sponsored partnership as rationalizing their portfolios and disposing of non-core assets.
They forecast a continuation of that trend in 2023, presenting opportunities for investors in secondary and tertiary markets. Overall, they predict $1.5 to $2 billion in transactions unfolding Canada-wide this year.
“Catch-up capital post-pandemic will continue to propel the market this year as equity remains,” Colliers analysts project. “It is unlikely we’ll be going back to record low interest rates of yesteryear, requiring creativity in deal structuring.”
