Hotel Valuation Journal

1994 Canadian Hotel Sales

In 1994, 28 hotels with over 70 rooms, containing a total of 4,056 guestrooms sold in Canada (see the table on page 3). Total investment dollars were approximately $119 million, or $29,000 per room. The highest sale recorded was the Nancy Green Lodge in Whistler, British Columbia, at $13,000,000 for 137 rooms, or $94,891 per room. However, this facility included an excessive amount of retail space, so the price per room is deceiving. Otherwise, the highest price per room was the Inn on the Harbour at $80,282 per room. The lowest price per room was the Courtney Bay Inn in Saint John, New Brunswick, at $6,800 per room.

Capitalization rates ranged from a low of -7.5% to a high of 17.0%. Some of the low capitalization rates experienced on the East Coast reflect hotel purchasing based on a projection of income, rather than a property's current performance. As in 1993, the majority of sellers are the financial institutions, and the buyers are Canadian operators.

Hotel sales in the provinces of British Columbia and Alberta respresented $28 million, in four hotels with 387 guestrooms. The average price per room for hotels on the West Coast was $72,222. The East Coast hotel sales represented $90.8 million for 3,669 guestrooms, or $24,762 per room.

The worst investment climate is currently being experienced in the province of Quebec. In Quebec, seven hotels sold in 1994, totaling $28 million for 1,255 rooms, or $22,400 per room. Comparing the price per room in Quebec with that in Ontario (16 hotels with a total of 2,289 rooms sold for $62 million, resulting in an average price per room in Quebec is discounted approximately another 21% for the market and political climate.

We also reviewed hotel sales, for smaller properties having under 70 guestrooms. We found it interesting that on a per-room basis, these facilities sold for a higher price per room than the larger hotels. In 1994, we reviewed 18 sales, with a total investment of $22.3 million. The average price per room was $40,921. However, it is important to note that a number of the smaller properties are purchased for their auxiliary facilities, such as restaurants, pubs, beer and wine stores, and so forth. On an income basis, these auxiliary facilities bring in more revenue than the attached guestrooms.

Financing was an important and delicate issue in 1994, and affected the value of some properties. The majority of the sales on the East Coast were with vendor financing. In interviews with brokers, we were informed that a hotel buyer who cannot find adequate financing reduces the offered price significantly.

Because our information was collected from sources we deemed reliable, it is considered to be correct. A special thanks to Alam Pirani and Colin Paton - Colliers International Hotel Realty; Angus Wilkinson and Pierre Bergevin - Royal LePage; Jon Lantz - CB Commercial; Denis Chevalier, AACI; and Stuart Morrison, AACI for their assistance in providing hotel sales.

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