INNvestment. CANADIAN TOURISM SNAPSHOT Contributed by Destination Canada. Canada s Tourism Industry Strong Despite Economic Uncertainty

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1 INNvestment Accelerating success. COLLIERS INTERNATIONAL HOTELS Q1 16 CANADIAN TOURISM SNAPSHOT Contributed by Destination Canada Canada s Tourism Industry Strong Despite Economic Uncertainty Tourism generates 1 in 11 jobs in Canada and supports employment in every community across the country. The tourism sector is the number one employer of Canadians under 35 as well as our biggest service export and we continue to grow our global market share, year-over-year. Turbulence in the world economy in 2015 did not preclude Canada s tourism industry from attaining heightened results across major indicators: Canada welcomed close to 18 million overnight visitors in 2015, a remarkable increase of 7.5% from the previous year and, for the first time in over a decade, notably higher than the global 4.4% international arrivals growth rate. These visitors spent a combined $16.8 billion across Canada, contributing to the livelihood of more than 190,000 small and medium-sized tourism businesses and supporting over 650,000 jobs. Upwards of three million of Canada s visitors arrived from the 10 leisure markets in which Destination Canada ( DC ) and their partners invested in Five of these markets Australia, Brazil, China, France and India registered a record number of arrivals to Canada. A weakened Canadian dollar, air capacity increases, international marketing and the implementation of the CAN+ Visa program all created conditions that we can leverage to boost Canada s share of world arrivals. Amid the economic recovery south of the border and the stronger purchasing power of the greenback, overnight arrivals from the US - Canada s main inbound market - rose significantly to surpass 12 million. With one billion international travellers on the move spending over $1.3 trillion USD in 2015, predictions for sustained growth are strong over the next decade. This continuing momentum within the global tourism industry represents significant opportunity for Canadian economic prosperity and diversification. continued on page 2... Source: Destination Canada Q1 TRANSACTION HIGHLIGHTS Q.1 Canadian hotel transaction volume reached $331 million More on page 4 colliershotels.com

2 THE DOLLAR DECLINE Like most Canadian export sectors, Canada s tourism industry is buoyed by a lower dollar against the US dollar. The immediate benefits are two-fold: more American visitors and more Canadians opting to stay in Canada rather than visiting the US, reducing our travel deficit as well as driving up domestic revenues in the accommodation and attractions sectors. These are good, short-term economic benefits. However, the effect of a lower dollar on visitation from overseas is more complex. It hinges on many factors that can tip travellers decisions to visit Canada. For example, travellers interested in dual-nation US/Canada vacations, such as many Australians, may decide to postpone trips until the cost of visiting the US drops. To get these consumers to pick Canada alone requires more than a low dollar; it also requires marketing, promotion and great access. When a currency is strong against both the US and Canadian dollars, as is the case with the British pound, the only way to compete for travellers from these countries is to win them over through marketing, as they are enjoying a buyers market for tourism to North America. On the whole, a lower dollar provides short-term stimulus to the Canadian tourism sector, and can provide significant momentum to achieve visitation and revenue goals. But it doesn t deliver on all fronts or in all cases. We must be mindful that a low dollar alone is not a growth strategy, but a short-term accelerant. Long-term growth for Canada s tourism sector depends on many winning conditions: smooth access across our borders, exceptional and authentic experiences, strong and aligned partnerships, and effective marketing. Very favourable conditions are in place. Destination Canada is taking full advantage of these conditions to help the industry reach new heights. HOW DOES DC HELP MARKET CANADA AS A DESTINATION? Destination Canada is the country s national marketing organization, mandated to internationally promote the unique and iconic experiences available across Canada s provinces and territories. It operates in collaboration with other government marketing organizations (PMOs and DMOs) as well as private industry. Canada is in the process of re-establishing its footing as a globally competitive international destination for business and leisure travellers. As a result, DC has undergone a transformation that includes innovation in digital content marketing, increased collaboration and a focused strategy to take advantage of emerging marketing trends and best practices. The goal is to move past simply measuring the volume of visitors to a more highly developed view of the global market share. Significant achievements by the tourism sector on measuring the success of its strategy to help Canada s tourism businesses grow and prosper. By shifting away from traditional advertising to more content and digital marketing as well as developing partnerships and platforms enabling businesses to better sell Canada, we delivered on our commitment to evolve our business in order to drive greater economic benefit for tourism entrepreneurs from coast to coast to coast. Travellers today are consuming information in new ways, not only with various devices but in different formats as well. Having put innovation at the forefront, we can adjust our marketing efforts so that we are more highly connected and customer focused. As a content marketer, we re leveraging all marketing channels to produce, curate and publish content that is most relevant and impactful to our various target travellers. We re also collaborating more closely with other media organizations, influencers and multi-channel content networks to optimize our efforts and generate stronger leads for partners. CONSUMER DIRECT Research shows that arrivals growth from our leisure markets is outperforming the global average. The leisure markets that we invested in with our partners in 2015 together performed much better overall (6.4%) than the average international growth rate of arrivals (4.4%). CAN+ PROGRAM CAN+ is a Temporary Resident Visa (TRV) stream that facilitates the application process for applicants who were previously issued a TRV or who hold a valid US visa. The facilitation stream enables the applicant to apply for the visa with minimal documentation, making the application process less onerous for the applicant. CAN+ is available to TRV applicants from China, India, Brazil and Mexico, among other countries. Since its introduction in China in 2013, more than 250,000 travellers have benefited from CAN+. P 2

3 TRADE AND MEDIA PLATFORMS Enabling local tourism operators, particularly small and medium-sized, to connect with new markets contributes to their livelihood and prosperity, and acts as a springboard for trade and investment activities in Canada s other sectors. In addition to advertising directly to consumers, DC also connects with the travel trade - such as tour operators and travel agents - in all its leisure markets. In 2015, we assessed the performance of these partnerships with results showing nearly 40,000 bookings which translates into over $73 million in visitor spending. Tradeshows and media platforms allow businesses in the tourism community to sell their product and experiences by connecting with travel agents, tour operators and media from international markets. Through a number of events in 2015, we were able to facilitate access to global markets for thousands of Canada s tourism businesses. INCREASING BUSINESS TRAVEL Destination Canada also works to attract meetings, conventions and incentive travel (MC&IT) programs to Canada. The meetings industry has a growing significance for Canada s economy, and is a key driver for hotel and conference centre bookings. In addition to filling hotel rooms and convention centres, meetings can be the catalyst for introducing Canada s export business interests to key global influencers, business stakeholders, entrepreneurs and investors. The Business Events Canada (BEC) team focuses on the key industry sectors that represent Canada s greatest potential for export revenue growth, those for which we are internationally recognized as a centre of excellence. The recent stronger purchasing power of foreign currencies relative to the Canadian dollar has resulted in higher than expected per delegate spending, producing revenue disproportionately greater than the attendee count. In 2015, our BEC program resulted in more than $132 million in contracted business events and over 116,000 planned delegates. Source: Destination Canada role in generating $437 million in tourism revenue, $57 million in federal tax revenue, and support for over 3,200 tourism-related jobs in Canada. Though the low dollar and relatively low cost of Canadian goods and services may be a pleasant surprise for first-time travellers, our world-class destinations and hospitality will be the factors that win them back for a repeat visit: Those who have visited Canada are one-and-a-half times as likely to return and nearly twice as likely to recommend Canada to others. This bodes well for both business and leisure travellers, and represents an opportunity for hoteliers who wish to create loyal, repeat guests. > End. CONCLUSION While the global economy remains turbulent and Canada s exchange rate continues to fluctuate, we have nonetheless outperformed our competitors in the international tourism market with 2015 clearly a banner year for our tourism economy. Destination Canada played a key P 3

4 Q.1 INVESTMENT SNAPSHOT CASE STUDIES Ottawa Marriott Hotel With 28 hotel trades reported nationally in Q , there continues to be a strong appetite for hotel product. Aggregate transaction volume was an estimated $331 million, just 9% below the volume recorded in Q when strategic acquisitions are removed. Of the 30 trades in the first quarter of 2015, there were two transactions which totaled $366.5 million which are considered strategic in nature. Coming off the heels of a banner year for Canadian lodging real estate, the pipeline of transactions in both in the market and under contract - indicates another healthy year of activity. While trading in Western Canada was muted in the first quarter contributing 18% of national volume, compared to historical levels of approximately 50%, we expect this level to moderate as the year progresses. TRANSACTION HIGHLIGHTS Average price per room was $97,900, a 23% increase from Q when excluding strategic trades. Full-service assets continued to lead transaction activity and represented 50% of national volume. Public companies were the most active buyer group by volume, inclusive of the sale of the 489-room Ottawa Marriott Hotel to InnVest REIT for $115 million, the largest sale of the quarter. Private investors were the most active group by number of deals acquiring 15 properties with an average deal size of $5.3 million. Transaction Volume by Region - Q PROVINCE # OF HOTELS PRICE ($M) % VOLUME PRICE/ RM WEST 7 $ % $94,800 Alberta 2 $12.7 4% $73,200 British Columbia 5 $ % $110,500 EAST 21 $ % $98,300 Ontario 16 $ % $115,300 Quebec 3 $18.4 6% $49,100 New Brunswick 2 $7.6 2% $30,200 TOTAL 28 $ % $106,700 Hotel investment companies were active in the quarter acquiring seven properties for $74.9 million (23% of volume). Morguard Corporation acquired a three property Toronto Airport hotel portfolio from Ocean Properties for $33.5 million. Easton s Group acquired the 201- room Four Points by Sheraton Toronto Airport for $15.48 million. Subject to completion of the transaction, Easton s announced plans to develop a 144-room Element Hotel on excess lands which will be the second Element Hotel in the Greater Toronto Area (GTA). Transaction activity in Western Canada slowed and accounted for 18% of volume compared with 82% in Eastern Canada and well below historical levels where it was a more balanced trading environment. Ontario remained a hot spot for investment representing 74% of national volume, underpinned by the sale of the Ottawa Marriott Hotel and seven deals in the GTA. $115 million Price Per Room $235,200 Cap Rate 6.5% Date Sold February, 2016 The Ottawa Marriott Hotel is a premier fullservice, upper upscale hotel located in the centre of downtown Ottawa. The Hotel has 489 guest rooms, ±35,000 square feet of function space in 22 rooms and will have a direct connection to the new Confederation light rail transit (LRT) line anticipated to open in The Property was acquired by InnVest REIT as part of their strategy to acquire high quality urban assets. Hilton Garden Inn Toronto/Mississauga $23.7 million Price Per Room $153,900 Cap Rate 4.9% $7.1 million Price Per Room $68,900 Cap Rate Nova Lodge Hinton n/a Date Sold March, 2016 The 103-room Nova Lodge Hinton is welllocated off the Trans Canada Highway, three hours west of Edmonton. The Property benefits from its position nearby the Jasper National Park and offers an efficient amenity complement including an indoor pool, fitness room and meeting facilities. Date Sold March, 2016 The Hilton Garden Inn Toronto/Mississauga is ideally positioned in Mississauga s Heartland Business District, proximate to local business and leisure demand generators as well as the Toronto Pearson International Airport. The Hotel was acquired by Bayview Hospitality Group, adding to their portfolio of hotels. P 4

5 Q CANADIAN HOTEL TRADES TRANSACTIONS OVER $1 MILLION NAME LOCATION RMS. DATE PRICE PRICE/RM Quality Inn & Suites Victoriaville CAP RATE (%) Victoriaville, QC 74 Jan $5,775,000 $78,000 n/a Quality Inn Grand Falls Grand Falls, NB 120 Jan $5,200,000 $43,300 n/a Abott Villa on the Lake 1 Kelowna, BC 52 Feb $4,400,000 n/a n/a Econo Lodge Kelowna Kelowna, BC 44 Feb $3,999,000 $90,900 n/a Courtyard by Marriott Toronto Airport 2 Toronto, ON 168 Feb Hotel Carlingview Toronto Airport 2 Toronto, ON 112 Feb $21,105,000 $75,400 n/a Ottawa Marriott Hotel 3 Ottawa, ON 489 Feb $115,000,000 $235, Quality Inn Edmundston Edmundston, NB 132 Feb $2,400,000 $18,200 n/a Residence Inn by Marriott Toronto Airport 2 Toronto, ON 137 Feb $12,395,000 $90,500 n/a Best Western Inn at Penticton Penticton, BC 64 Mar $5,600,000 $87,500 n/a Best Western Orangeville Inn & Suites Orangeville, ON 84 Mar $12,200,000 $145,200 n/a Bonanza Motel Niagara Falls, ON 50 Mar $1,400,000 $28,000 n/a Claramount Inn 4 Picton, ON 10 Mar $1,975,000 n/a n/a Comfort Inn Toronto East Toronto, ON 81 Mar $7,800,000 $96,300 n/a Delta Sherbrooke Hotel and Conference Centre Sherbrooke, QC 178 Mar $6,000,000 $33,700 n/a Drawbridge Inn Sarnia, ON 97 Mar $2,000,000 $21,000 n/a Four Points by Sheraton Surrey Surrey, BC 77 Mar $12,200,000 $158,400 n/a Four Points by Sheraton Toronto Airport 5 Mississauga, ON 201 Mar $15,480,000 $77,000 n/a Hilton Garden Inn Toronto- Mississauga Holiday Inn Express Toronto- North York Holiday Inn Windsor Downtown Hotel Plaza Valley Field Mississauga, ON 154 Mar $23,700,000 $153, Toronto, ON 163 Mar $15,875,000 $97,400 n/a Windsor, ON 145 Mar $6,500,000 $44,800 n/a Salaberry-de- Valleyfield, QC 122 Mar $6,600,000 $54,000 n/a Manteo Resort Waterfront Hotel 6 Kelowna, BC 78 Mar n/a n/a n/a Nova Lodge Hinton Hinton, AB 103 Mar $7,100,000 $68, Quality Inn & Suites Hinton Hinton, AB 70 Mar $5,566,700 $79,500 n/a Quality Hotel & Suites Woodstock 6 Woodstock, ON 137 Mar n/a n/a n/a Ramada Gananoque Provincial Inn Gananoque, ON 77 Mar $1,560,000 $20,300 n/a Sportsman's Inn Resort & Marina 7 Killarney, ON 27 Mar $2,395,000 n/a n/a Footnotes: (1) Receivership sale. (2) Sold as part of three property portfolio acquired for $33.5 million. (3) Cap rate based on forecasted 2016 net income. (4) Sale included three cottages on adjacent properties. Price per room not applicable. (5) Sale included excess land with development potential. (6) Pricing details confidential. (7) Property includes full-service marina as well as cabin, motel and hotel accommodations. Price per room not applicable. Source: Colliers International Hotels COLLIERS INTERNATIONAL HOTELS CANADA TORONTO One Queen Street East, 22 nd Floor Toronto, ON M5C 2W5 ALAM PIRANI alam.pirani@colliers.com ROBIN MCLUSKIE robin.mcluskie@colliers.com RUSSELL BEAUDRY russell.beaudry@colliers.com TIFFANY CHOW tiffany.chow@colliers.com FRASER MACDONALD fraser.macdonald@colliers.com VANCOUVER 200 Granville Street, 19 th Floor Vancouver BC, V6C 2R6 TOM ANDREWS tom.andrews@colliers.com CALGARY th Avenue Southwest, Suite 900 Calgary AB, T2P 1C9 HAMIR BANSAL hamir.bansal@colliers.com MONTREAL 1800 Avenue McGill College, Suite 400 Montreal QC H3A 3J6 JESSI CARRIER jessi.carrier@colliers.com Hotel Brokerage Debt Placement Strategic Advisory Value-Add Research * Strategic transactions typically involve at least two of the following conditions: 1) a pricing premium is paid; 2) the asset is located in a high barrier to entry market or within a geographic hub of an owner s principal business; or 3) the opportunity allows for an extension of the company s brand or portfolio. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. Colliers International is a worldwide affiliation of independently owned and operated companies. This publication is the copyrighted property of Colliers International and /or its licensor(s) All rights reserved. Colliers Macaulay Nicolls (Ontario) Inc., Brokerage. P 5