Record-setting pricing for a Kelowna hotel made B.C. the priciest market in the country for hospitality properties in the first half of the year.
The Kanata Kelowna Hotel & Conference Centre sold to Hollypark Hotels Corp. of Vernon on June 10, in what broker Mack Hair of Macdonald Realty in Kelowna described as “the second-highest price ever paid for a hotel in B.C. outside of the Lower Mainland.”
A purchase price for the Kanata was not disclosed, but the highest price ever paid for a hotel outside the Lower Mainland was $131 million.
Royal Host REIT’s sale of the Grand Okanagan Resort to Delta Hotels Ltd. in 2008 worked out to an average price of $404,320 a room.
Originally built in 1993 and expanded in 2010, the Kanata has a total of 190 rooms and 5,000 square feet of conference space. An average room price similar to the Grand Okanagan Resort would put the Kanata sale price in the range of $80 million. The exact price has not been disclosed.
The high price makes the transaction the largest single deal among all B.C. hotel sales in the quarter.
According to Colliers International, four properties worth $167.1 million sold during the second quarter. The average price per key was $385,000.
This marked an intensification of the market from the first quarter, when seven hotels sold for just $32.2 million.
The hotel market continues to be plagued by the lingering effects of the pandemic. While occupancies are rebounding, Colliers noted that cross-border travel remains at 80 per cent of pre-pandemic levels. This will be critical to restoring the performance of hotels as revenue-producing assets.
Rising interest rates are another factor playing into the overall transaction market.
“What was anticipated to be a relatively strong year for hotel investment will likely be softened by a rising interest rate environment,” Colliers reported.
Similar to other sectors, however, the return to more normal performance levels will support revenues and strengthen the confidence of lenders when it comes to financing transactions.
The tourism outlook for the Okanagan is promising, and this gave Sam Dhillon, CEO of Hollypark, the confidence to add the Kanata to his portfolio, which also includes the Fairfield by Marriott hotels in Vernon and Salmon Arm.
“We’re excited about acquiring this hotel in such a prime location in midtown Kelowna,” Dhillon said. “I believe that growth in tourism volume to the Kelowna area will outpace most Canadian markets over the next decade. We’re betting big on the hotel sector after two years of uncertainty in the industry.”
With files from Rob Gibson, Castanet.com
