Colliers Hotels releases Q2 2022 INNvestment Canada

Q2 Transaction Highlights

• Lodging investment picked up in Q2 with approximately 25 transactions totalling $375 million, more than double that of Q1 volume with a boost from a handful of full-service and portfolio trades. On a year-to-date basis, first-half volume registered $552 million compared with $784 million in 2021 and $470 million in 2020.

• Reflecting the increased composition of full and focused service product that traded, average price per key through Q2 reached $146,000, up approximately 5 per cent from the same period in 2019.

• Diverging from trading activity over the past 24 months, there were no acquisitions for conversion to alternate use in Q2 with sales for ongoing hotel use taking a dominant role.

• Four distressed transactions took place in Q2; however continue to represent a minimal proportion of trading activity. While most government subsidy programs have completed, operating results and other recovery indicators show positive momentum and we do not anticipate a significant increase in distressed activity.

• What was anticipated to be a relatively strong year for hotel investment will likely be softened by a rising interest rate environment; although given overall positive operating fundamentals, there is still a diverse range of lenders committed to the hotel space and capital is available for strong sponsors and quality assets.

Q2 Operational Update

Strong ADR Growth Drives National RevPAR Above June 2019 Levels

• Canadian operating performance continued improving in the second quarter, with clear trending towards normalcy on a top-line RevPAR basis, according to STR.

• Strong leisure demand was the primary driver behind ADR growth which paced above 2019 levels for each period in Q2 with occupancy generally lagging; although gaining momentum as we enter the summer season.

• Cross-border travel remains well below pre-pandemic levels, although, in the latest data available for May 2022, StatCan reports non-resident visitors arriving by air reached nearly 80 per cent of 2019 levels.

• Major urban centres were hit the hardest and have lagged in operational recovery. That being said, the segment has benefited from the easing of border restrictions and return of major city events in Q2 with preliminary results showing positive RevPAR growth for urban markets in June over 2019 levels.