If you needed a reminder of the precarious nature of COVID-19 and the hotel sector, it came early at the Canadian Hotel Investment Conference.
Carrie Russell, senior managing partner of HVS, took over as moderator for the panel called "Raindrops Have Stopped Falling on My Head" and kicked off a discussion on the state of the sector after the original moderator was restricted from attending because of exposure to COVID-19.
Revenue per available room, or RevPAR, is up almost 100% in the first quarter from a year ago and a safe bet for the industry's full recovery is now 2024.
"We have seen a strong recovery," said Russell. "The market is looking well."
She says the real test for statistics is how they compare to where the industry was in 2019 before the pandemic.
RevPAR in Canada hit 52% at the end of 2021, with British Columbia faring better at 56% because of domestic performance, said Russell.
The real variation is between major downtown markets, which have only recovered to between 30% and 35% of their RevPAR peaks, while regional markets like the Okanagan Valley and parts of Ontario are between 80% and 85%.
Despite the lack of a full recovery, the sector still saw almost $2 billion in transactions in 2021, said Alam Pirani, executive managing director of hotels for Canada and the Caribbean at Colliers Hotels.
"The theme is hotel investment is back," said Pirani, adding investment has pivoted away from risk mitigation and liquidity and more to growth.
Alternative use drove about 80% of transactions, with about $325 million from government organizations looking to hotels for uses like social housing. Distressed transactions drove less than 2% of deals.
Pirani said 6,500 rooms, or 1.5% of the Canadian market, were taken out of inventory over the past two years. "It bodes well for the supply and demand equilibrium," he said.
Curtis Gallagher, principal and Canadian hospitality lead at Avison Young, said Ontario and the Greater Toronto Area are in high demand by investors.
"Try and find the asset and the pricing someone is willing to accept. That's the biggest challenge," said Gallagher. "The pivot point when transactions start to take hold is when there is a belief that the recovery is sticky and is going to take form. What you are selling is futures. If there is no belief in the future or protections, there is no activity. Everybody sits on their hands."
In the past few weeks, Pirani said he is hearing from owners that booking patterns have increased for the second and third quarters.
"Now we are not seeing the big groups transactions come back, but smaller meetings and leisure activity [are rising] and individuals are going back to downtowns," said Pirani.
Anthony Cohen, executive vice president and partner at Crescent Hotels & Resorts Canada and president and chief executive of Global Edge Investments, said that every time a restriction is lifted, there is an uptick in hotel activity in bookings.
Recently, "we have seen a huge lift in our urban properties in markets like Toronto," said Cohen, who said he believes the next couple of months will be telling as government aid winds up. "It's terrible, but it also means your economic performance is improving. I think from a transaction standpoint, the next two quarters are going to be telling."