Canadian hotel occupancy nudged slightly above 27 per cent in the first quarter of 2021. Colliers Hotels pegs the average daily rate at $113.42 per occupied room, with the national average revenue per occupied room (RevPAR) down nearly 55 per cent from Q1 2020. However, industry analysts project better times will spur more hotel deal activity in the coming months.
“We expect travel demand will increase through the summer months as full and partially vaccinated Canadians make their way back to traveling safely, led by leisure travellers excited to venture outside of their homes,” Colliers’ newly released INNvestment Canada report submits. “There will likely be some semblance of normalcy with demand patterns in time for the peak 2022 summer travel season in Canada.”
On the investment front, 21 deals totalling approximately $197 million in sales value were conducted in the first three months of the year. Of these, seven properties were sold for redevelopment or conversion to other uses, and three were distressed transactions. All sales occurred in Alberta, British Columbia or Ontario.
The quarter’s top two trades involved Vancouver locations. The downtown Ramada sold for $36 million or $450,000 per room, with the Days Inn Metro Vancouver going for $25.5 million or $392,300 per room. Three separate transactions in Banff all yielded upwards of $250,000 per room, while six other Alberta deals garnered more modest prices, including the quarter’s best bargain at $31,400 per room for Travelodge Edmonton West.
Meanwhile, Ontario transactions were scattered in outlying markets. Three were on the north, east and west suburban edges of the Greater Toronto Area — in Aurora, Whitby and Burlington — with another three in smaller centres still: Windsor, Lindsay and Orangeville.
Colliers analysts anticipate more deal activity in the second quarter based on the continued return of traditional capital and investors, and a potential injection from the Canadian government’s Rapid Housing Initiative, which has made funds available to convert commercial properties to residential uses. The recently released 2021 federal budget promises a further $1.5-billion allocation to the initiative, following the disbursement of its initial $1-billion pot for the creation of affordable rental housing.
“Activity in the lodging capital markets had been largely muted since first wave lockdowns that came in effect at the end of Q1 2020. However, based on current pipeline activity there is strong evidence that hotel transactions will pick up materially in the second half of 2021,” Colliers analysts conclude.