Hotel Investment Trends: CBRE

Investment insights from Mark Sparrow, executive vice president of CBRE Hotels.

• Although still below stabilized levels, Canadian hotel investment activity began to rebound in H2 2021 with a recovery in traditional sales. This trend is expected to continue into 2022.
• Investors have begun to re-focus on investment in primary and secondary markets as demand for transient and business travel continues to recover. There also remains a belief that the long-term operating fundamentals in these markets will be favourable.
• The expectation gap between buyers and sellers continued to narrow somewhat during the fourth quarter and appetite for hotel transactions is ramping up heading into 2022.
• Preliminary estimates indicate that national RevPAR growth for 2021 will be up 29.0 per cent over 2020, slightly better than originally projected. The improved RevPAR growth was driven by strong domestic and summer leisure travel seasons which pushed occupancy past 40.0 per cent, while ADR generally fell in line with expectations.

Investment Trends from Paul Morassutti, vice chairman, Valuation & Advisory Services

The Canadian commercial real estate investment market continued its run of impressive performance in Q4 2021. Single asset investment activity was once again exceptionally robust and the quarter also saw the return of M&A activity with several significant portfolio transactions and REIT privatizations closing over the period. National volumes are poised to set a new annual record in 2021, surpassing the $50.0 billion benchmark by a significant margin.

Cap rates declined across nearly all asset classes in Q4 2021. Given compressed cap rates for industrial and multifamily properties, investors have become increasingly willing to consider retail, office, and alternative assets in a search for yield.

• Despite elevated activity levels, the emergence of the Omicron variant brought uncertainty back to the minds of many entering 2022 with concerns that future variants could represent the new normal. It remains to be seen how this will impact investment conviction going forward.

Q4 2021 Cap Rates: Hotel

Downtown Full Service 7.19% ^

Suburban Limited Service 8.56% ^

Focused Service 7.98% ^

Read the full report at cbre.ca.