WCLC: No rest in the West

VANCOUVER, TORONTO — Carrie Russell and Scott Duff are noting a lot of superlatives as they prepare for their presentation at the Western Canadian Lodging Conference at the Fairmont Waterfront Vancouver, Nov. 21 and 22.

Carrie Russell, HVS.

Carrie Russell, HVS.

VANCOUVER, TORONTO — Carrie Russell of HVS and Scott Duff of CBRE are noting a lot of superlatives as they prepare for their presentation at the Western Canadian Lodging Conference next month, some good and some not so good.

The conference will take place at the Fairmont Waterfront Vancouver on Nov. 21 and 22.

“The west has some of the best markets in the country, but also the worst market in the country — Regina. On the other hand, Banff and Vancouver were the best performers,” said Russell.

BC and Manitoba showed double-digit increases in RevPAR, and with an 11 per cent increase, Yukon performed well too. 

In Vancouver, RevPAR was up 10 per cent, with downtown Vancouver at 9.2 per cent and the Fraser Valley (Surrey, Abbotsford and Chilliwack) at 12 per cent.  Vancouver was home to the highest price per key ever paid for a Canadian hotel — for the Rosewood Hotel Georgia.  And in the Valley, a Ramada in Cloverdale, BC, went for a astronomical key price for the type of hotel. “There are a lot more buyers than sellers in Vancouver right now,” Duff said.

“Thankfully, there are some green shoots in Alberta,” said Russell. “RevPAR was up 3.7 per cent in Alberta, despite a 2.7 per cent increase in supply. We hoped last year would be the bottom of the cycle, and in Alberta that been shown to be the case. It's not the same kind of growth we've seen in other provinces, but it's not bad.”

In Saskatchewan, RevPAR declined 5.9 per cent year over year through September of this year, while Regina declined by 12 per cent. Saskatoon was not quite as bad as the provincial average, with a decline of 5.2 per cent.

“Of all the markets we look at, only three had negative RevPAR growth — Edmonton, Regina and Saskatoon,” said Russell.

On a national basis, RevPAR was up 4.2 per cent at the end of September last year, while this year it is up 7.4 per cent.

Investor and purchaser profile changes

Scott Duff, CBRE.

Scott Duff, CBRE.

Duff pointed out that in 2016, the total volume of Canadian hotel transactions was $4.1 billion, but if you take away the big deals — InnVest and Coast — the total volume was $1.8 billion.  This year through October, there was $2.9 billion in transactions, but if you strip out the big SilverBirch deal, the total is the same, $1.8 billion.

In terms of Western Canadian trades, if you strip out the Hotel Georgia trade (Vancouver) and other big trades, the average number of rooms per trade dropped from 82 in 2016 to 64 in 2017. Similarly, the price per key dropped from $113,000 to $95,000. “We're looking at smaller, independent hotels, or mid market or economy product,” said Duff.

“There are probably a lot of new people to the industry. Typically, existing owners are looking for bigger and better properties,” he added.

The buyer profile has changed. In 2017, 38 per cent of year-to-date investors are from offshore, with the rest mostly domestic investors. “There is still interest from U.S. and International buyers in areas like Lower Mainland BC,” said Duff. “This is due to a number of factors — the relative strength of the Canadian dollar, the fact that operating fundamentals are particularly strong, and a stable political environment.”

In 2016, there were a lot of investors who were offshore buyers — 50 per cent. Coast Hotels was bought by a Japanese company called APA Group, and InnVest was bought with Hong Kong capital.