---

TORONTO—The Canadian hotel industry’s expanding pool of opportunities and growing diversity of buyers and sellers has resulted in another year of strong transaction volumes, according to panelists at the Canadian Hotel Investment Conference.

During the opening session titled “Big country, big changes, big deals,” panelists discussed what fueled nearly 1.5 billion Canadian dollars ($1.2 billion) in hotel transactions during 2014. The dynamic market of equity players, new lenders and the need for alternate investment product were the leading reasons behind the growth in volume.

“There’s going to be people who discover Canada as a great place to invest, “said Steve Giblin, president and CEO of SilverBirch Hotels & Resorts.

Numbers suggest that trend is already beginning. In 2014, non-Canadian entities acquired nine hotels and resorts totaling 15% of overall deal volume with purchaser origin from Europe (8%), Asia (5%) and the United States (2%), according to Colliers International’s “2015 Canadian hotel investment report.” Additionally, there was significant interest from foreign-based groups behind the scenes, often contending as strong second and third place bidders on prime hotel and resort offerings, the report outlined.

In 2014, buyers had a strong appetite for full-service and select-service hotels. “We see that continuing,” Stone added.

Full-service hotels accounted for 52% of total volume by way of 32 trades totaling CA$750 million ($623.8 million). This compares to 22 trades and 55% of deal volume last year (CA$699 million, or $581.3 million). The top three full-service sales by dollar volume included the Hyatt Regency Vancouver (CA$140 million, or $116.4 million), the Park Hyatt Toronto (CA$105 million, or $87.3 million) and the Holiday Inn Montreal Midtown (CA$65 million, or $54.1 million).

Select-service hotels represented 27% of total transaction volume (CA$391 million, or $325.2 million) in 2014, increasing in share from 19% in 2013. Select-service price per key grew 11% year-over-year to CA$122,400 ($101,800), the highest price per room within the various segments, according to Colliers.

---

Despite the free-flowing deals, panelists agreed Canada as a whole needs to do a better job with its product.

SilverBirch’s Giblin said Canadian hoteliers must improve how they cater to the millennial generation, and they also need to invest in older hotels. That goes for resorts as well, he said.

“Can you get as good of an experience in Colorado as you do at Whistler?” The short answer is yes, Giblin explained.

“The U.S. has done a very good job telling their story. In Canada, we’ve been very Canadian. A little bit muted and a little bit subdued,” said Drew Coles, president and CEO of InnVest REIT.

Canadian hoteliers also are concerned about low oil prices affecting hotel performance, particularly in Alberta. But panelists remain optimistic about the long-term outlook.

“We look at the oil long term. When you look at the history of Calgary, Edmonton, you have some diversification of economy there. Long term, we’re holders of these great assets. We believe in them,” Coles said. “Performance this year is not what it used to be. But I don’t think there’s any reason to hit the alarm button. There’s still business in these markets.”

SilverBirch has eight hotels in Alberta, one under construction. Giblin said he believes the market will return.

“We think we’re at the bottom of the trough right now. There’s still market there,” he said, adding the oil situation will lead to lower construction costs and more opportunities to build due to less activity.

Average price per key in Alberta dropped slightly to CA$93,700 ($77,907), the lowest reading in the past five years, according to Colliers. The market accounted for 23% of total hotel deal volume in Canada during 2014.

---

Markets with the most significant supply increases in 2014 included Winnipeg (8.9%), Regina/Saskatoon (5.9%), Halifax (5.2%) and Calgary (3.9%). Toronto Airport, Montreal Airport and Niagara Falls each had no new hotel openings in 2014, according to Colliers.

Canada hotel supply is projected to increase by 1.1% in 2015, led by Calgary (4.7%), which is seeing a flurry of development in the airport submarket; downtown Toronto (4.4%) due to the openings of big-box hotels and Edmonton (3.8%) as a result of new developments in the Edmonton West and Sherwood Park submarkets, according to Colliers.

In downtown markets such as Toronto, hoteliers have to consider mixed-use development when developing a new hotel, Giblin said. “(Central business districts) have very difficult economics unless it’s a 1,000-room hotel,” he said, listing reasons such as expensive land and availability of parcels.