Hotel transaction momentum increases in the first half of the year; second quarter volume strongest since 2008

Hotel transaction activity across the country through the second quarter surpassed $520 million with approximately 40 hotels trading, reports Colliers International Hotels in their Q2 Hotel Investment Report . Volume year-to-date (YTD) rose 41 per cent from the same period last year, when 45 hotels transacted, representing $370 million in volume.

Activity trended upwards in Q2 2011 with $381 million reported during the quarter (73 per cent of YTD volume), outpacing Q1, which ended with $140 million. The surge in Q2 volume was attributed to six transactions that occurred over the $10 million mark, which together with five additional trades over $10 million in Q1, comprised 83 per cent of YTD volume, or $432 million in value. This was the highest quarterly volume since Q1 2008 when $407 million transacted.

Transactions reported through the first half of 2011 represented 73 per cent of 2010’s year-end volume, which ended at $717 million. It is anticipated 2011 year end volume could be up 75 per cent over last year, with Colliers forecasting between $1.25 and $1.5 billion in sales this year, potentially being the fifth strongest year in history. As detailed in Colliers’ 2011 Canadian Hotel Investment Report, the rising tide in the transaction market is the result of the expansionary period in the business cycle, combined with historically low pricing for debt that has grown in availability since 2008/2009, in addition to improving business and consumer confidence which is translating into improved operating results.

There were 29 trades YTD under the $10 million mark representing 17 per cent of the volume and nine distressed sales sold with the highest trading at $7.0 million (average was $3.7 million). As forecasted, distressed sales have continued to decline in total volume, representing only 7 per cent of total volume YTD.

On a price per room basis, the market improved in Q2, averaging $128,000 per room, up from $72,000 per room in Q1 and $105,000 for full-year 2010. Transaction activity in Western Canada continues to trade higher on a price per room basis with YTD figures at $148,000 per room as compared to $61,000 per room for Eastern Canada.

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