May 2018 Digital Issue

INDUSTRY OVERVIEW
ISTOCK.COM/TZIDO
Last year was
a successful
one for hotel
investment
and the
momentum
remains
strong in 2018. While
2017 finished with many
markets hitting all-time
highs, in terms of operating-performance
levels and
valuations, the outlook
indicates further performance
and value growth
in 2018. However, after
three years of accelerated
growth, the pace is
expected to decelerate. As
interest rates continue to
rise, the increase in rates is
also indicative of positive
economic conditions
— which translate into
earnings growth for assets
such as hotels. Hotels are a
defensive-asset class, based
on their ability to adjust
rates — an attractive
feature as costs rise. Hotels
will continue to provide
higher returns compared
to other asset classes.
ANOTHER STRONG YEAR
In 2017, total transaction
volume approached $3.5
billion (including traditional
single transactions,
portfolios and redevelopment
sales), making 2017
the third-highest-volume
year over the last decade.
Results were bolstered by
GOING
STRONG
Robust 2017 investment activity is
expected to continue through 2018
BY CURTIS GALLAGHER & BRIAN FLOOD
the inclusion of IMC’s sale
of the SilverBirch hotel
portfolio in Q1 2017 — the
closing of the transaction
had been delayed from Q4
2016. Adjusting for this,
overall investment volume
was lower than 2016
($4.1 billion), with 137
trades at a total volume
of approximately $2.4
billion. This high activity
level occurred despite
continued weakness in
energy-driven markets
in Western Canada and
Newfoundland, where
trade activity has been
limited. In contrast, investor
interest in the major
markets — particularly
Metropolitan Vancouver,
Toronto, and Montreal
— was unprecedented.
Gateway markets are at the
top of everyone’s list, but
there have been a limited
number of assets brought
to market. Investors in
these markets have been
rewarded with double-digit
RevPAR growth over the
hoteliermagazine.com
MAY 2018 HOTELIER 21