Hotel Investors Optimistic About the Future of the Canadian Economy

Canadian and foreign investors are bullish about the long-term prospect of our economy according to Colliers International Hotels’ Investment Sentiment Survey released today. Nearly 80 per cent of survey respondents expressed optimism about the performance of the Canadian economy over the next three to five years.
 
The study, conducted jointly with the Ted Rogers School of Hospitality and Tourism Management at Ryerson University, found 40 per cent of respondents choose to ‘Hold, Renovate and Expand’ as their primary investment strategy over the next 12 months with a nearly similar number of respondents (37 per cent) looking to add assets to their portfolio. Only a small number of investors (4 per cent) stated their primary strategy in 2011 is ‘Sell’.
 
“The findings show that respondents believe the market is at the bottom of the cycle and are gearing up for an upturn,” says Alam Pirani, Executive Managing Director with Colliers International Hotels. “Investors are focusing on adding value to their assets through renovations and expansions to potentially yield higher returns as the market rebounds.”
 
Eighty three per cent of participants in the survey said they are seeking lodging investments between 51 to 175 rooms, with more than half of the respondents (57 per cent) choosing ‘Primary Urban’ markets as the preferred location. In terms of geographic location, Central Canada (ON and QC) is the most sought after region (37 per cent) for investments, followed by Western Canada (AB and BC) with 26 per cent of respondents.
 
‘Availability of credit’ was cited by investors as the top factor that influences their investment decision, followed by the ‘slowing of the Canadian economy’ and ‘anticipated demand’. In terms of access to debt to finance acquisitions and expansions, the survey unveiled an interesting dichotomy among investors. Nearly an equal number of survey participants found the cost of debt to be more expensive (38 per cent), compared to those who believed the cost of debt to be less expensive (37 per cent) over the past year.
 
“This stark difference between respondents can be attributed to investor’s relationships with lenders and the ability of borrowers to access more favourable rates,” adds Tom Andrews, Senior Vice President with Colliers International Hotels in Vancouver.
 
Additional Findings and Highlights
 
·  While the majority of respondents do not opt to sell as an overall investment strategy, more than half (53 per cent) indicated plans or are considering to sell one of more assets this year, mainly (72 per cent) to recycle capital.
·  A large group (41 per cent) of investors indicated the average hold period for an asset to be more than 10 years.
·  Limited service (37 per cent) and full service (35 per cent) are the two most favourable type of assets that investors will focus on for future acquisitions. Twenty-nine per cent of respondents will focus on select service product which has grown in popularity in recent years and includes brands such as Courtyard by Marriott, Hilton Garden Inn, and Holiday Inn Express, which consistently outperform their competitors in this market segment.
 
About the Survey
 
The inaugural Canadian Hotel Investment Sentiment Survey, conducted by Colliers International Hotels and the Ted Rogers School of Hospitality and Tourism Management at Ryerson University, provides a snapshot of investors’ stance and outlook about the Canadian hospitality sector. The survey was fielded in the fall of 2010 and includes responses from over 100 active Canadian and foreign investors. It is designed to act as an annual benchmark to measure shifts in hotel investors’ investment strategy, targeted asset class, access to debt and economic expectations over the short- and long-term.   
 
About Colliers International
 
Colliers International is a global leader in real estate services with more than 15,000 professionals operating out of 480 offices in 61 countries.  As a subsidiary of FirstService Corporation (NASDAQ: FSRV; TSX: FSV and FSV.PR.U), Colliers offers the stability of a strong financial partner and significant local ownership providing clients with accountability and enterprising real estate solutions. Colliers provides a full range of services to real estate users, owners and investors worldwide including: global corporate solutions; brokerage sales and leasing; property and asset management; project management; hotel investment sales and consulting; property valuation and appraisal services; residential marketing and sales services, mortgage banking and insightful research. The Lipsey Company and National Real Estate Investor magazine ranked Colliers International as the world’s number two commercial real estate brand.
 
About Colliers International Hotels
 
Colliers International Hotels is an international real estate investment advisory company, specializing in the lodging industry with knowledge and experience extending across all hotel and resort asset classes.  Colliers has developed a unique presence in the industry as dedicated hospitality professionals serving private investors, hotel investment companies, high net worth individuals, offshore investors, public REITs, private equity funds, pension funds and fund managers through the provision of value-added services, including transactions, strategic advisory, debt placement and research.

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