HOTEL INVESTMENT REPORT

Still under the ripple effect caused by the recession that hit global markets two years ago, Canada’s hotel investment industry experienced yet another challenging year as transaction volume and values continued to spiral downwards, according to a Canadian Hotel Investment Report released today. Total transaction value declined by 61 per cent from $1.1 billion in 2008 to just over $400 million over the past year, representing only 74 non-strategic hotel transactions led mainly by private investors, who represented 60 per cent of the transaction volume.

The relatively low transaction activity and values also translated into a lower average price per room which declined by 44 per cent nationally from $116,500 in 2008 to only $65,500 over the past year. The harsh economic conditions also weighed on the lodging industry’s operational environment pushing occupancy and average daily rates downward by eight per cent and 12.3 per cent respectively.

While the majority of hotel transactions occurred in Eastern Canada (61), mainly in Ontario with 48 transactions which account for half ($212.9 million) of the total deal volume over the past year, the average price per room yielded by these deals ($61,900) was below the national average ($65,500) and significantly lower than the average price per room in Western Canada ($113,400). The lion’s share of activity in Western Canada occurred in Alberta (10 transactions) followed by British Columbia (2) and Yukon (1).

The continuous deterioration of the economic environment also took a toll on the average hotel value, which further declined by 7.3 per cent in 2009, according to Colliers’ Hotel Value Index, which measures hotel values based on various market indicators. The sharpest value declines occurred in Toronto Airport West (-14.7%) followed by Victoria and Toronto Downtown (-12.3% and -10.2%, respectively). On the upside, the outlook for 2010 expects some increases in hotel value, mainly in Regina (4.5%), Whistler (3.7%) and Ottawa (3.6%), with a national average climbing by 1.3 per cent.

• Sixty new hotels opened across Canada in 2009, edging the national room supply by a marginal 1.5 per cent.

• The largest transaction completed in 2009 was the Hilton Garden Inn & Ajax Convention Centre, which sold for $24 million.