Weak Loonie Means Strong Hotels
A falling loonie and lower gas prices mean good times for Vancouver hotels, with U.S. travel north rising as Canadian cross-border jaunts decline. The city’s benefiting "greatly" from the currency exchange, CBRE’s Bill Stone tells us, and investors are eagerly seeking hotel assets.
Canada saw $1.3B in hotel investment activity last year, according to CBRE. A fair chunk of that came via transactions on the West Coast. It was mostly smaller deals nationwide in the first half of 2014. But the second brought a flurry of big ones, culminating with Ivanhoé Cambridge's sale last month of Fairmont Hotel Vancouver (above). Hyatt Regency Vancouver was acquired by InnVest REIT for $140M in November; and Ivanhoé, which is seeking to exit the hotel business, sold the Fairmont Empress Hotel in Victoria to Bosa Development in July (in Toronto, the Park Hyatt and Fairmont Royal York Hotel were sold.)
Bill says investors are taking advantage of “exceptionally strong” debt and equity markets, and they’re impressed with Vancouver's hotel operating fundamentals. The city is projected to have a 72% hotel occupancy rate this year, and the average daily room rate is forecast to hit $149. Meanwhile revenue per available room (RevPAR, but you knew that) will rise to $107, making Van No. 2 nationwide after Calgary, according to PKF Consulting. “We’re seeing top line strength,” Bill says. “And we think this will be enhanced in the next few years.”
The promise of continued RevPAR growth is largely what's attracting investors. And though hotel supplies are limited, the outlook for the city's lodging sector is sunny. A lower loonie is leading to increased US trips north, plus growth in domestic travel, thanks to enhancements to Vancouver International Airport, which in January opened an expanded domestic terminal (above), a $213M project that’s added gate capacity and resulted in more inbound flights to YVR, notes Bill. "And full planes have a direct impact on the hotel business."