Financial News ~ November 2010
STR: Canadian hotel industry mid-October metrics are positive
HENDERSONVILLE, TN—The Canadian hotel industry reported mostly positive results in the three key performance metrics for the week of 10-16 October 2010, according to data from STR.
In year-over-year measurements, the Canadian hotel industry’s occupancy was up 4.4 per cent to 62.1 per cent. Average daily rate ended the week virtually flat with a 0.1-per cent decrease to $124.45. Revenue per available room increased 4.4 per cent to $77.34.
Among the provinces, Prince Edward Island experienced the largest occupancy increase, rising 12.8 per cent to 58.1 per cent, followed by British Columbia with a 10.2-per cent increase to 58.5 per cent. Manitoba reported the only occupancy decrease, falling 3.9 per cent to 63.7 per cent.
British Columbia posted the only ADR increase of more than 5 per cent, rising 8.3 per cent to $131.42, followed by Manitoba with a 4.3-per cent increase to $111.61. Three provinces reported ADR decreases: Alberta (-4.3 per cent to $126.76); Ontario (-1.5 per cent to $120.12); and Quebec (-1.4 per cent to $136.24).
Two provinces experienced double-digit RevPAR increases: British Columbia (+19.3 per cent to $76.87) and Prince Edward Island (+11.9 per cent to $51.12). Alberta posted the only RevPAR decrease, falling 2.2 per cent to $72.20.
CBRE says recovery is slow but recent hotel trades show promise
CBRE’s Bill Stone
TORONTO—Fuelled by increasing investor confidence, the unfreezing of capital markets, narrowing of bid-ask spreads and pent up equity, the first half of 2010 has shown measurable improvement in the global hotel real estate market, according to CBRE Hotels.
In Canada year-to-date (YTD) September 2010, hotel transactions have amounted to almost $485 million compared to just over $312 million for the same period last year. On a price per room basis, 2010 YTD transactions have also improved over 2009 levels, from an average of $69,000 to $103,000. So far there have been nine transactions worth over $10 million in 2010, compared to 10 for the same period last year; however, six were worth over $25 million in 2010, while there were no deals over this threshold for the same period in 2009.
“We are witnessing opportunistic and strategic purchases for larger assets,” said Bill Stone, executive vice president, CBRE Hotels. “While activity is certainly on the rise, the limited number of transactions in the Canadian market continues to make it challenging to peg ‘true market value’. Bid-ask spreads, while narrowing, remain and this is particularly true for assets that are performing well below stabilized levels, or without positive cash flow.”
While many Canadian markets are slowly recovering in terms of hotel operating results, income erosion is still prevalent and impacting value. Still, recent significant hotel trades show promise.
They include the Niagara-based DiCienzo family’s acquisition of the Marriott Niagara Falls (432 rooms) and Sheraton Fallsview Hotel (407 rooms). The Marriott Niagara Falls, at a price of $76.4 million, traded for $177,000 a key, and ownership intends to renovate and reposition the asset as the premier city hotel, with irreplaceable views of Niagara Falls.
The Sheraton Fallsview Hotel traded at a price of $70.0 million ($172,000 a key) and is expected to receive significant renovation capital to position it as a premier meeting and conference facility. Another significant transaction was the 307-room Crowne Plaza Chateau Lacombe in Edmonton (see CLN, October 2010), which sold in August to a private investor for $47.8 million ($155,700 per room).
To put the depth of recovery needed into full context, Canadian hotel transaction volume fell about 90 per cent from 2007 to 2009, from a market peak of $4.6 billion to just over $400 million, which was the second slowest year of activity in the past decade.
Canadian September pipeline down from last year, according to STR report
HENDERSONVILLE, TN—The Canadian hotel development pipeline comprises 214 projects totalling 22,363 rooms, according to the September 2010 STR/TWR/Dodge Construction Pipeline Report released last month.
This represents an 8.6-per cent decrease in the number of rooms in the pipeline compared to September 2009.
“The Canadian hotel development pipeline’s rooms under construction has decreased by 11.6 per cent versus September 2009,” said Lana Yoshii, VP of content management at STR.
“With only a 1.1-per cent increase in supply during this period, new development has had sluggish growth.
“There are no rooms in the active pipeline phases (In Construction, Final Planning and Planning) for the Upper Upscale chain scale. The Upscale chain scale is reporting the most number of rooms currently In Construction (1,973 rooms).”
Among the Chain Scale segments, three segments reported increases in rooms in the total active pipeline: the Economy segment (+26.6 per cent to 957 rooms); the Midscale with Food and Beverage segment (+13.0 per cent to 1,953 rooms); and the Unaffiliated segment (+5.7 per cent to 9,025 rooms).
The Upper Upscale segment fell 100 per cent in rooms in the total active pipeline with 0 rooms, followed by the Luxury segment with a 41.1-per cent decrease to 594 rooms.