The occupancy rate, for example, is projected to hit 71.3 percent in 2015, compared to 68.1 percent in 2014. By contrast, Canada’s occupancy for this year is expected to reach 61.4 percent, down slightly from 2014’s 61.7 percent, according to HVS’ Canadian Lodging Outlook. The differences in average daily rate and revenue per available room, year-over-year, are similar when looking at Vancouver versus Canada overall.
Supply, valuation update
Boding well for the future, the city’s crucial supply versus demand growth equation remains in good shape. In 2015, supply is expected to grow a very modest 0.2 percent, year-over-year, while demand growth is projected to increase a healthy 4.9 percent. Lodging Econometrics is tracking eight new projects in the various stages of the construction pipeline, accounting for 1,168 rooms, with one hotel scheduled to open this year, one in 2016 and the remainder in 2017 and beyond.
On the tourism front, the city’s natural beauty, environment-friendly reputation, plus its diverse population continue to attract visitors, especially from Asia, a boon to the city’s hotels. The Conference Board of Canada estimates Vancouver’s overall tourism growing a healthy 3.5 percent this year with the number of international visitors jumping an even more robust 4.9 percent. The Conference Board is equally bullish looking further out with increases in overnight visits in the 2.5-percent range forecast in each of the next three years (2016-2018).
In this kind of heady environment, it shouldn’t come as a surprise that hotel valuations are rising. From 2012-2014, hotel values in downtown Vancouver rose 3.2 percent, 6.4 percent and 8.6 percent, respectively. Analysts consider the airport a distinct market and hotel values rose there as well, though at a more modest 3-percent to 4-percent rate. As in most markets, barriers to entry are highest downtown, while available development sites are the hardest to come by.
The sale in February of the 556-room Fairmont Hotel Vancouver, a downtown landmark built in 1939, has been 2015’s headline-grabbing property transaction to date. West Vancouver-based Larco Hospitality acquired the “Grand Dame” for $180 million Canadian (roughly $136 million U.S.) from Caisse de Depot et Placement, a Quebec pension fund.
Larco has invested heavily in the greater metropolitan Vancouver market, including airport hotels that carry the Marriott, Hilton and Sheraton flags. The Grand Dame will continue to be managed by Fairmont Hotels & Resorts.
For its part, Toronto-based Fairmont also has a significant presence in Vancouver, including the 489-room Fairmont Waterfront, the 377-room Fairmont Pacific Rim and the 392-room Fairmont Vancouver Airport Hotel in addition to the Grand Dame. Fairmont is part of FRHI Hotels & Resorts, which includes the Raffles and Swissotel brands.
The other recent property transaction of note was the acquisition last November of the downtown, 644-room Hyatt Regency Vancouver by InnVest Real Estate Investment Trust for $140 million from an affiliate of Hyatt Hotels Corp. Hyatt has been selling assets in the past few years as part of a strategic decision to be more asset light.
Like Fairmont, Hyatt will continue to manage the hotel, which was built in 1973. One of the city’s major group houses, the Hyatt Regency features 40,000 square feet of meeting and event space, including the 14,000-square-foot Regency Ballroom.
Toronto-based InnVest has a portfolio of 109 hotels throughout Canada, comprising 15,000 rooms among 15 premium brands. In addition, it holds a 50-percent stake in Choice Hotels International in Canada.