The global credit crunch and the recession that followed have hit the Canadian hotel real estate sector, which experienced a 77 per cent decline in investment activity, falling to $1.1 billion in 92 transactions over the past year, according to Colliers International Hotels' 2009 Canadian hotel investment report released Wednesday.
The report also found the average price per room fell by 25 per cent to $116,500 in 2008 from$154,200 the previous year. Although the transaction volume was down from a record$4.6 billion in 2007 with 168 transactions, last year was the fifth-strongest year of activity on record.
"Although the current climate looks bleak, the lodging industry is in a much better position compared to previous downturns as it hasn't been inundated with oversupply and distressed hotels," said Bill Stone, executive managing director with Colliers International Hotels. "The past has taught us that the hotel industry can come back stronger after each downturn."
According to Susan Thompson, research manager at Avison Young Commercial Real Estate in Calgary, there was only one hotel sale last year in Calgary -- the Delta Bow Valley for$115.4 million, or $289,950 per unit.
In 2007, there were three city hotel sales--Days Inn for $12.25 million ($91,418 per unit);Lakeview Signature Inn for $24.5 million ($204,167 per unit) and Howard Johnson for $4.385 million ($91,354 per unit).
Alberta had 14 hotel transactions in 2008 for a total of $133 million and that worked out to the highest price per room in the country at $137,700.
The Colliers report also said 80 new hotels with about 8,900 rooms opened last year in Canada, representing a 2.4 per cent increase in sup-ply, and 74 new hotels are expected to open this year.
Nationally, hotel sales in 2006 totalled 141 for almost $3 billion and in 2005 there were 104 sales for $1.7 billion.
"These are challenging times with international governments acknowledging the recessionary pressures and implementing spending strategies to stimulate the economy," said the Colliers report.
"The return to a lower Canadian dollar and reduced fuel prices will likely not be enough to spur lodging demand growth in 2009, particularly as airlines reduce capacity and consumer and business confidence remains weak.
"The hotel real estate sector, however, enters this recession in remarkably better shape than previous downturns."
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