Colliers 2024 Canadian Hotel Investment Report

Sustained investor interest and strong operating conditions kept the hotel real estate market active in 2023 with transaction volume of approximately $1.72 billion, pacing slightly ahead of 2022 levels ($1.63 billion). Despite interest rate headwinds, confidence in the hotel asset class was evidenced by a diverse investor pool including new entrants eyeing hotels in a quest for cash flow amidst inflationary pressures.

Sustained investor interest and strong operating conditions kept the hotel real estate market active in 2023 with transaction volume of approximately $1.72 billion, pacing slightly ahead of 2022 levels ($1.63 billion). Despite interest rate headwinds, confidence in the hotel asset class was evidenced by a diverse investor pool including new entrants eyeing hotels in a quest for cash flow amidst inflationary pressures.

While overall investment levels remain below the past decade average of $2.1 billion, positive momentum in lodging demand across the leisure, corporate, and group segments, as well as healthy debt market conditions are supporting a bright outlook with significant investment volume closed and in the pipeline so far in 2024.

Debt availability for hotels improved in 2023, aiding momentum in the transaction market with involvement from a variety of credit unions, government sponsored funds, banks, and private lenders. Given the overall cost of capital continued rising during the year and loan-to-value (LTV) ratios have reduced, creative financing structures including seller financing within the capital stack played an important role. Asset and sponsor quality, as well as debt service coverage ratios (DSCR) remain paramount in the current environment. As articulated in the Colliers 2024 Global Investor Outlook, conditions this year will stay complex, but the best positioned investors will be those who are ready to act on opportunity.

The depth of capital has continued to diversify and the appetite for lodging investment remains high – the challenge lies in the limited supply of hotel opportunities on the market. As owners rationalize their portfolios by reviewing capital plans, refinancing terms and timing the cycle, we believe new offerings across the various segments will result in another strong year for the sector.

Download the latest INNvestment Canada Hotel Report for preliminary transaction highlights as well as an update on lodging performance and tourism trends here.