HCC 2025: A roadmap for hotel ownership, financing, and investment in the months ahead

Finding the right deals: Value-add strategies in hotel investment

Session: "Seek and Ye Shall Grind, Develop and Execute"
Moderator: Robin McLuskie, managing director, hotels, Colliers
Panelists: Kenny Gibson, president, Sunray Group; Anil Taneja, managing director, Palm Holdings; Neelu Toor, chief strategy officer and general counsel, Manga Hotel Group.

This panel focused on how hotel investors are sourcing, structuring, and executing deals in the current market environment.

1. No one is selling stabilized assets—value creation is key

• "We don’t think going in yield exists right now and if you’ve got good yield, nobody’s going to sell today," said Anil Taneja.
• Buyers need to look at underperforming hotels, renovations, and rebranding to drive returns.

2. Full-service hotels over select-service assets

• "We tended to look at more full-service hotels and trying to migrate away from some select service," said Kenny Gibson.

3. Geographic diversification and secondary markets

• "We see Canada countrywide experiencing greater domestic travel… Calgary has done a fantastic job of pivoting from a petrol-fuel-based economy to more diversified markets," said Neelu Toor.
• Alberta and secondary cities offer strong demand for extended-stay properties.

4. The three "Us" of hotel investing

Gibson outlined a framework for value-add deals:

1. Undermanaged – Poor revenue strategy or lack of brand recognition.
2. Under-renovated – CapEx opportunities to improve ADR.
3. Underperforming & Under-branded – Conversion to better-performing flags.

Raising capital: Structuring deals for long-term investor confidence

Session: "Smiling All the Way to the Bank"
Moderator: Zach Pendley, real estate & hospitality transactions & valuations lead, EY Canada

Panelists: Gaurav Gupta, president / managing partner, Artifact Group; Mathieu Mault, CEO, Activar Hôtels; Winston Shariff, national director, Hospitality, Roynat Inc.

This panel focused on capital sourcing, structuring transactions, and maintaining strong investor relationships.

1. Stronger lender appetite for hospitality

• "We have never been busier than we are since over the last six months," said Sanjay Arora.
• More domestic banks and alternative lenders are re-entering the hotel space.

2. Lower interest rates but strict underwriting

• "We were borrowing a little while ago at 7-8 per cent, now we’re borrowing between 4.5-5 per cent," said Anil Taneja.
• Lenders are focused on operators with strong track records.

3. Structuring investor partnerships

• "If you’ve got the track record and you’ve been able to demonstrate that through the cycles, then debt’s not an issue," said Kenny Gibson.
• Preferred structures: Joint ventures, equity waterfalls, and refinancing strategies.

Tax structuring and ownership planning

Session: "Show Me the After-Tax Money!"
Speakers: Jessica Haley, partner, tax, Doane Grant Thornton LLP; Norma Sierra, tax principal, Doane Grant Thornton LLP); Phil Thompson, transaction lawyer, general counsel, Thompson Transaction Law

1. Share sales vs. asset sales—maximizing tax benefits

• Share sales – Preferred for sellers due to capital gains exemptions.
• Asset sales – Preferred for buyers due to higher depreciation benefits.

2. The "bump" strategy to increase tax cost base

• "You have an opportunity to increase the cost base of the land from historical cost to fair market value and this is what is called the bump," said Norma Sierra.

3. Replacement property rules for tax deferral

• "The replacement property rules are going to save you money… these rules permit a taxpayer to defer the tax on recapture or capital gain," said Jessica Haley.

Hotel financing in 2025: Structuring debt for acquisitions and refinancings

Session: "Spanning the Finance Bridge"
Moderator: Bruce Cisterna, Managing Partner, REAP Capital Corp
Panelists: Sanjay Arora, Managing Director & RVP, Central and Eastern Canada, business property finance, BMO Financial;  Mark Kay, president, principal broker, CFO Capital; Ed Khediguian, senior vice president, CWB Franchise Finance

1. More liquidity, lower rates

• "Interest rates are measurably dropping, making 2025 a very active transactional year in the capital markets," said Cisterna.

2. Lenders favour proven operators

• "If you’ve got the track record and you’ve been able to demonstrate that through the cycles, then debt’s not an issue," said Gibson.

3. Debt options for borrowers

• Bank loans: For well-established borrowers with strong financials.
• Private lenders & alternative financing: Higher-cost options but more flexibility.

Key takeaways for hotel investors in 2025

1. GDP growth remains sluggish, but interest rate cuts are improving financing conditions.
2. Hotel cap rates remain attractive compared to other real estate assets.
3. Investors are focused on value-add deals—underperforming hotels with repositioning potential.
4. Lender appetite for hospitality is increasing, but underwriting remains strict.
5. Tax structuring strategies (replacement property rules, share sales) can yield major savings.

The consensus? The next 12 months will be a pivotal time for hotel investors, and those with strong strategies will emerge ahead.