In its recently released quarterly report, CBRE Hotels predicts hotel investment activity will remain strong for the balance of 2013, following activity levels during the first half of the year, including a continued trend towards larger deals. REITs and public companies will continue their disposition strategies and Central Canada will continue to outpace both Atlantic and Western Canada in transaction activity given current product on the market.
According to Smith Travel Research, results to June 2013 indicate national hotel occupancy was 60.0 per cent versus 59.6 per cent for the same period in 2012. Room demand increased 1.5 per cent while supply grew by just 0.7 per cent. ADR for the first half of the year rose by 1.9 per cent, pushing RevPAR growth to 2.8 per cent. Lead markets for occupancy growth year over year (January to June) included Vancouver North (8.1 per cent), Edmonton (6.6 per cent) and Regina (5.1 per cent), while the strongest ADR growth was reported by Alberta North (7.4 per cent), Toronto Downtown (6.7 per cent) and Regina (6.5 per cent). For RevPAR, the top growth occurred in Regina (11.9 per cent), Alberta North (9.7 per cent) and Toronto Downtown (9.6 per cent).
Canadian hotel transaction volume reached approximately $794 million YTD Q2 2013, compared to $650 million in the first half of 2012, a 22 per cent increase. In comparison, according to Real Capital Analytics’ May 2013 Hotel Month in Review, US hotel transaction volume for the first half of 2013 is expected to be more than 40 per cent higher than the first half of 2012.
Key trends in Canadian hotel transactions to Q2 2013 included:
• Of the 55 trades in YTD Q2 2013, 17 exceeded $100,000 per room, the same number as last year;
• There were 24 trades reported over $10 million in the first half of 2013 compared to only 17 in the first half of 2012;
• Average per room pricing for YTD Q2 2013 was down approximately 20 per cent from YTD Q2 2012, although per room pricing in the prior year was influenced by transactions such as the Four Seasons Toronto and Clearwater Suites Timberlea which traded at $375,000 and $462,100, respectively in Q1;
• More than 50 per cent of total transaction volume in the first half of 2013 occurred in the Greater Toronto Area, including the recent $70.5 million five-property Courtyard and Residence Inn portfolio acquired by Morguard Corporation;
• Public companies/REITs continue to actively sell, with trades including Royal Host’s disposition of the Super 8 Sudbury and Travelodge Medicine Hat and InnVest REIT’s previously discussed sale of the Delta Montreal Centre-Ville;
• Hotel Investment Companies have been the dominant buyer in the first half of 2013 accounting for approximately 38 per cent of total transaction volume, including Easton’s Group’s acquisition of the Holiday Inn Markham, with REITs/ Public Companies, namely Morguard and Temple Hotels Inc., acquiring 23 per cent of transactions in terms of volume.