Toronto, The global credit crunch and the recession that followed have hit the Canadian hotel real estate sector, which experienced a 77 per cent decline in investment activity, falling to $1.1 billion over the past year, according to Colliers International Hotel’s 2009 Canadian Hotel Investment Report released today. The report also found the average price per room fell by 25 per cent to $116,500 in 2008 from $154,200 the previous year.

“Although the current climate looks bleak, the lodging industry is in a much better position compared to previous downturns as it hasn’t been inundated with oversupply and distressed hotels,” says Bill Stone, Executive Managing Director, with Colliers International Hotels. “The past has taught us that the hotel industry can come back stronger after each downturn. In fact, this economic slowdown presents an opportunity both for investors and owners to reassess their investment and operations strategies respectively, to successfully weather this down cycle and better position themselves when the market turns around.”

On a regional basis, Western Canada led the pack last year with 36 traditional transactions, followed by Ontario with 34 transactions and the balance in Quebec and Atlantic Canada. Alberta had the highest price per room (excluding strategic transactions) at $137,700 which represents a 23 per cent increase compared to the previous year. Ontario posted the lowest overall pricing at $65,100 per room, a 26 per cent decline from 2007. The stronger position of Western Canadian markets, especially in the first half of 2008 was also evident by the divergence in the average price-per-room which was 70 per cent higher than in the rest of Canada ($112,400 vs. $66,000).

Regional Volume By Price Per Room1

  • 1The mix breakdown by province or region reflects a percentage of total traditional trades
  • 2Includes New Brunswick, PEI, Nova Scotia and Newfoundland and Labrador

Source: Colliers International Hotels

Ninety-two transactions were completed in 2008, mainly led by private investors who acquired 66 hotels (72 %), followed by hotel investment companies with 16 transactions (17%), and REITs and pension funds with six and four transactions respectively. All but one hotel acquisition in 2008 were led by Canadian entities.

“While we are seeing a slowdown in the hospitality industry in Canada as a result of the global recession, it will not be as significant as in the U.S., given the market’s strong fundamentals. Canada will remain more insulated from the global credit crisis, as it has historically been a low leverage investment environment,” adds Alam Pirani, Executive Managing Director with Colliers International Hotels.

Additional findings:

  • Eighty new hotels with approximately 8,900 rooms opened in 2008, representing a 2.4 per cent increase in supply
  • Seventy-four new hotels are expected to open in 2009, although due to limited availability of credit, the hotel development pipeline is expected to slow in the mid-term

The challenging economic conditions also took a toll on the average hotel value, which declined in 2008 after three consecutive years of double-digit growth. According to Colliers Hotel Value Index, which measures hotel values based on various market indicators, the average hotel value dropped by 1.4 per cent nationwide, with an additional decline of 6.3 per cent expected in 2009. Strongest value declines occurred in Montreal Airport (-8.2%) followed by Montreal Downtown and Victoria (-5.4% each).

About the report

The 2009 Canadian Hotel Investment Report provides an analysis of the investment fundamentals that drove the Canadian lodging industry in 2008 and provides 2009 forecasts including data and intelligence on a variety of market measures such as transaction volume, per room pricing, buyer profiles, capitalization rates and room supply. The report also includes the Colliers Hotel Value Index which monitors the annual rate of change in hotel values on a year-over-year basis. Rate of change is based on operating performance of a market, industry trends and the return expectations of investors.

To obtain a copy of the full report, please visit .

About Colliers International | Colliers Macaulay Nicolls Inc. (CMN) operating as Colliers International is a leading global real estate services company that provides a full range of services to real estate users, owners and investors worldwide. Colliers operates in 293 offices in 61 countries. Services include brokerage, property management, hotel investment sales and consulting, corporate services, valuation, consulting and appraisal services, mortgage banking and research. Colliers International is a worldwide affiliation of independently owned and operated companies. To access Colliers news globally, visit: .

Gal Wilder/Katie Gates
416-924-5700
Colliers International