Canadian hotel investment market saw growth in Q2 2024: Colliers

With robust sales activity, the total hotel transaction volume reached an impressive $1.3 billion for the mid-year, marking a 20 per cent increase year-over-year. This growth is largely driven by a diverse range of transactions across both major urban centres and secondary markets.

Key highlights from Q2 2024:

Transaction Volume and Pricing: Colliers tracked approximately $555 million in hotel transactions during Q2, bolstered by substantial full-service and focused-service transactions. The national average price per key remained strong at $163,000, although slightly below the record levels of 2023. This dip is attributed to the absence of transactions involving $100 million+ trophy assets.

Total transaction volume for mid-sized and larger deals, ranging from $10 to $50 million, exceeded $800 million across Canada, representing an 80 per cent increase compared to the same period in 2023. This surge highlights a broader variety of transactions occurring within both major urban areas and secondary markets.

Regional Activity: Ontario dominated the hotel investment landscape, accounting for $700 million (54 per cent of national volume) in transactions. Notable deals included portfolio sales within the Greater Toronto Area and Northern Ontario, as well as significant single-asset transactions like the Sheraton Hotel Ottawa and Hilton Garden Inn Sudbury.

Alberta and British Columbia followed as the second and third most active provinces, with Alberta capturing 15 per cent and British Columbia 13 per cent of the national volume. Key transactions occurred in Calgary, Vancouver, Victoria, and Banff.

Buyer and Seller Dynamics: Hotel Investment Companies were the most active buyers, commanding a substantial 70 per cent share of the year-to-date transaction volume. Prominent players such as Artifact Group, InnVest Hotels, Manga Hotels, NOA Hospitality, and Sunray Group were key acquirers.

The seller landscape was more balanced, with Hotel Investment Companies, Private Investors, and Public Companies each contributing 30-40 per cent of the sales volume.

Outlook for 2024

Based on the current deal pipeline, Colliers forecasts that year-end volume will meet or surpass $2 billion. This prediction underscores the strength of the hotel asset class in the face of ongoing market conditions. As the report notes, "The substantial increase is reflective of the broader variety of transactions within major urban and secondary markets," indicating a healthy and diverse investment environment.

Notable transactions

Several high-profile transactions were recorded in Q2, including:

• The DoubleTree by Hilton Montreal sold for $95.1 million.
• The Embassy Inn Victoria sold for $25 million, reflecting a price per key of $357,100.
• The Best Western Plus Parry Sound fetched $22.8 million, the highest price per key ($245,200) among mid-range properties.

This surge in transactions, especially in secondary and tertiary markets, highlights the growing investor confidence in Canada's hotel sector. As the year progresses, all eyes will be on whether the market can sustain this momentum and achieve the forecasted $2 billion in total transaction volume.

The Canadian hotel investment market is demonstrating strong recovery and growth in 2024, driven by diverse transactions across the country. As investors continue to target both high-profile assets and emerging opportunities, the sector is poised for a robust year, reflecting the enduring appeal of hotel investments in the Canadian market.