Colliers Canada projects hotel transaction volume should surpass $2 billion in 2024, based on sales completed in the first half of the year and properties now in the sales pipeline. Roughly $1.3 billion worth of deals transpired over the course of winter and spring 2024, representing a 20 per cent gain over the same period last year.
That’s despite a slight, 1 per cent decrease in the number of hotel trades and a more notable 11 per cent drop in the average price per room compared to the first half of 2023. Colliers’ newly released midyear Canadian hotel investment report advises the $163,000/room average thus far is reflective of “the broader variety of transactions within major urban and secondary markets” with fewer trophy assets in the mix than last year. The 85 trades in the first half break down to 9 full service, 25 focused service and 51 limited service hotels.
Ontario properties account for about 54 per cent of national deal volume during the first half of 2024, including both portfolio sales and prominent single asset deals. Alberta and British Columbia have been the next most active markets, together representing another 28 per cent of the total. Hotel investment companies have been the most prominent buyers, equating to 70 per cent of deal volume, while sellers were a more even mix of hotel investment companies, private investors and public companies.
Notable deals in the second quarter include the $95+ million sale of the Doubletree by Hilton in Montreal, equating to $159,800 per room, and the $25 million sale of the 70-room Embassy Inn in Victoria. Buyers of the Victoria hotel also obtained excess development land.
Meanwhile, CBRE Canada’s Q2 investment trend report finds cap rates holding steady at 7.7 per cent for downtown full service hotels, 9.2 per cent for suburban limited services properties and 8.6 per cent for focused service hotels. Luke Scheer, executive vice president with CBRE Hotels, concludes “operating fundamentals remained strong across most of the country” during the second quarter as the market continues to enjoy gains in domestic leisure and transborder travel. However, international travel still lags pre-pandemic levels.
