Colliers: Canadian hotel investment market sustains momentum despite Q3 moderation

According to Colliers Canada’s INNvestment Hotel Report for Q3 2024, the year-to-date (YTD) hotel transaction volume reached $1.65 billion, representing a 20 per cent year-over-year increase.

A robust start tempered by Q3 dip

Following a robust first half, Q3 transaction activity moderated to $280 million, largely driven by the high-profile sale of the Residence Inn Calgary Beltline for $112.5 million. Despite this slowdown, Colliers anticipates year-end investment volume to settle between $1.9 billion and $2.0 billion, signalling the continued appeal of Canadian hotel assets.

Sustained valuation strength

Hotel valuations remain firm, with the normalized average price per key at $160,000 in 2024. While this represents a 6 per cent year-over-year decline, it is significantly higher than the pre-pandemic levels of $130,000 per key in 2019. This increase correlates with a 26 per cent rise in RevPAR since 2019, driven by improved operating fundamentals.

Key transactions and regional insights

Prominent Q3 transactions included:

• Residence Inn Calgary Beltline, Calgary, AB: Sold for $112.5 million ($288,500 per key).
• Four Points by Sheraton Cambridge Kitchener, Cambridge, ON: Sold for $25.5 million, including two acres of excess land.
• Hilton Garden Inn Niagara-on-the-Lake, Niagara-on-the-Lake, ON: Sold for $25.24 million ($213,900 per key).
• Ontario led the nation in investment activity, contributing $800 million—48% of the national total. Alberta and British Columbia followed as the second and third most active provinces. Atlantic Canada saw growing momentum with $100 million in transactions, equalling the total for 2023.

Buyer trends and investor composition

Hotel investment companies dominated the buy-side, accounting for 70 per cent of total activity ($1.1 billion) with acquisitions by groups such as Artifact Group, InnVest Hotels, Manga Hotels, and Sunray Group. Private investors maintained a steady 20 per cent share, with 60 per cent of transactions priced at $10 million or less, highlighting accessible opportunities for smaller players.

The remainder of 2024

Colliers’ analysis points to sustained optimism for Canadian hotel investments. With ample capital availability, both in equity and debt, and strong operating performance, the sector is positioned to remain attractive. The firm projects robust year-end results, supported by a pipeline of transactions in progress.

The Canadian hotel investment market has proven its resilience and adaptability in 2024. While Q3 marked a moderation in activity, the year has solidified Canada’s position as a compelling market for hotel investment, buoyed by strong valuations, diversified buyer participation, and a dynamic regional landscape.

Download the full report HERE.