Strong Demand from Foreign Investors to Lift the Canadian Hotel Investment Market in 2011: Colliers Hotels Report

Investment activity in Canada’s lodging industry is expected to boom over the next 12 months by up to 30 per cent from 2010 levels, according to the Colliers International Hotels report and forecast released today. The anticipated surge in investment activity will arrive at the heel of last year’s exceptional market rebound and fuelled by demand from foreign investors, especially U.S. hotel companies who find it challenging to compete for transactions at home and will be looking for opportunities north-of-the- border.
 
“The tremendous investment market recovery of the past year is attributed to a number of factors including the strong Canadian economy, which outperformed the other industrialized countries, and large-scale international events such as the Winter Olympics, the G8/G20 summits and the return of Grand Prix race, which helped propel hotels’ operational performance,” says Alam Pirani, Executive Managing Director with Colliers International Hotels. “These factors were well noticed by investors, who also find Canada to be more welcoming to foreign investments compared to other countries.”
 
Western Canada’s Marked Improvement
 
According to Colliers International Hotels’ 2011 Canadian Hotel Investment Report, a total of 86 hotels exchanged ownership in 2010, representing a 73 per cent increase in transaction volume to $717 million from $414 million recorded the year before. Average deal size ($8.3 million) and average per room pricing ($83,000) also rose by 48 per cent and 27 per cent respectively compared to the lows of 2009. In terms of geographic diversity of transactions and values, Western Canada saw a marked improvement in the number (30) and volume ($294.6 million) of transactions mainly in British Columbia and Alberta. The average price per room in Western Canada was 27 per cent greater than the national average at $105,000, led by British Columbia ($131,000) and Alberta ($94,000). Average deal size in the West also surpassed the national average by 18 per cent ($9.2 million).
 
 
 
Improved macro-economic conditions, strong operational performance and increased appetite from investors have helped grow the average hotel value by three per cent over the past year, based on the Colliers Hotel Value Index, which measures hotel values based on various market indicators. The rise in hotel valuations was led by Downtown Toronto (6.3 per cent), Regina/Saskatoon (5.4 per cent) and Downtown Montreal (5.2 per cent). Colliers International Hotel’s forecast for 2011 calls for a further 5.3 per cent increase in the average hotel value nationally.
 
“One of the most interesting trends we’ve seen over the past year was the acquisition of lodging properties for conversion purposes,” adds Tom Andrews, Senior Vice President with Colliers International Hotels in Vancouver. “A third of deal volume in 2010 is attributed to 15 properties which exchanged hands for redevelopment or conversion to alternate use such as condominiums or student residences. We expect to see this trend to continue to evolve, especially in markets where assets have reached the end of their economic life as hotels.”
 
Additional Findings and Highlights
 
·  Two-thirds (68 per cent) of total transactions in 2010 were purchased by  Hotel Investment Companies and Private Investors (34 per cent each).
·  Revenue per Available Room (RevPAR) grew 5.5 per cent nationally, with occupancy rates up 3.4 per cent and average rates up 2.1 per cent¹.
 
About the Report

The 2011 Canadian Hotel Investment Report provides an analysis of the investment fundamentals that drove the Canadian lodging industry in 2010 and outlines the forecast for 2011 including data and intelligence on a variety of market measures such as transaction volume, per room pricing, buyer profiles, capitalization rates and room supply. The report also includes the Colliers Hotel Value Index which monitors the annual rate of change in hotel values on a year-over-year basis. Rate of change is based on operating performance of a market, industry trends and the return expectations of investors. 
Note to editors: a copy of the full report, including the Colliers Hotel Value Index covering 17 major markets across Canada can be found at: http://www.colliershotels.com/research/reports.
 
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.
 
¹ Source: PKF Consulting

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