How Canada's falling dollar is prompting hotel investment

(Toronto and Vancouver garner major sales to bolster Canada hotels' 2017 RevPAR and transaction increases. )

According to a report by Colliers International, and cited by Vancouver's Western Advisor, primary locations and secondary markets in Western Canada are rapidly becoming ripe hotel investment plays for both local and foreign buyers due, in part, to Canada's falling dollar.

Carrie Russell, managing director of the North Vancouver's office of global hotel valuation firm HVS International, told the Western Advisor that, “It is a combination of many factors that include strong performance in many markets across Canada for the past few years: the stability and desire of holding real estate in Canada, the recycling of capital as owners make money on one deal and put money back into another one, and the favorable debt market with a number of lenders interested in financing hotels at low interest rates.”

The combination of these factors boosted the total cost in hotel transactions nationally to $4.1 billion, more than double the $2.2 billion-plus transaction volume recorded in 2015

HVS said that six hotels, all in either Vancouver or Toronto, traded for more than $50 million and accounted for 39.8 percent of the 2015 transaction value. Concord Pacific's 510-room Westin Bayshore was the largest transaction at $290 million, or $569,000 per room. 

According to Russell, RevPAR also saw a 2.5-percent national increase in the beginning of 2017. Major sales in Toronto and Vancouver bolstered the rise in profits. 

“[Hotel operations have] high fixed costs, so when conditions are strong and average nightly rates can be increased, the profitability can grow faster than more traditional forms of real estate,” Russell said.

Foreign buyers made up 67 percent of the hotel transaction value in Canada in 2016 and now, they are included in the priciest hotel transactions in Canada. 

A Hong Kong-based investor Able Shine Trading bought downtown Vancouver's 156-room Rosewood Hotel Georgia for $145 million—approximately $930,000 per room. This was the highest per-room hotel transaction in Canada.

The $360-million Trump International Hotel and Tower opened in Vancouver, making it the first luxury hotel and second tallest building in the city.
Tim Down of NAI Commercial Okanagan told the Western Investor that local developers, pension funds and hotel franchisers took interest in resort markets in smaller cities, such as Banff and Canmore, Alberta and Whistler and Victoria, B.C. in the recent years. 

“Hotel prices will continue to strengthen given the current economic conditions in the Okanagan coupled with the lack of quality, well-located properties available for sale,” Down said.

Kelowna developer Argus Properties bought Manteo Resorts on Kaeshore Drive last year while Marriott International bought B.C. Investment Management's Grand Okanagan Resort and Conference Centre for $168 million.

Colliers is currently selling the 68-unit Spanish Villa Resort in Penticton for $5.9 million and the 46-unit Penticton Slumber Lodge for $4.5 million.