Overall trading activity in the hotel market in Canada has been healthy through the second quarter of 2013, according to Colliers International’s Mid-Year Transaction Report. There were 56 hotel transactions reported across the country amounting to approximately $810 million in volume, representing the largest mid-year transaction volume in the last five years (2007: $871 million).
Year-over-year, transaction volume and the number of rooms sold have trended positively, up some 21 per cent and 47 per cent from 2012 respectively. Pricing on a per room basis has also exhibited healthy improvements, reaching $100,600 at mid-year, up some 6 per cent from 2012.
When looking at quarterly activity, transaction volume was split fairly evenly between Q.1 and Q.2 at $431 million (53 per cent) and $380 million (47 per cent) respectively. Robust transaction volume from several large deals in Q.1 saw pricing on a per-room-basis grow to $118,200 compared with $84,800 in Q.2. The higher volume and pricing in Q.1, however, was strongly influenced by the Hilton Toronto and Cambridge Suites Portfolio transactions, which when combined comprised approximately $225 million or 52 per cent of all volume for the quarter. Year to date (YTD) 2013 saw 24 deals over the $10 million threshold resulting in $676 million in transaction volume, versus 10 deals representing $344 million in 2012.
Heightened activity over the $10 million mark has been largely driven by the availability of quality portfolios and substantial investment from real estate companies, hotel investment companies, Real Estate Investment Trusts/ C-Corporations, as well as private investors. The most active groups for 2013 have been Temple Hotels Inc., (the only active REIT/C-Corp buyer YTD with six hotels), followed by Morguard Corporation who purchased five Marriott focused-service assets in the Greater Toronto Area, and Vrancor Group following their purchase of two assets in downtown Windsor.
Top 10 YTD Trades
The top 10 YTD transactions exceeded $480 million and represented approximately 60 per cent of total transaction volume for the period. The three largest trades of the first half of 2013 include the 600-room Hilton Toronto for $140 million ($233,300 per room), the 575-room Courtyard by Marriott Toronto Downtown for $76.25 million ($133,000 per room), and the 711-room Delta Centre-Ville Montreal for $51.3 million ($72,100 per room).