Canadian hotel investment demand will benefit from lower interest rates and a good supply of capital in 2025 after a sharp increase in transactions in 2024, says a new Cushman & Wakefield report.

The strong demand is expected to withstand uncertainty surrounding U.S. President Donald Trump’s threatened tariffs on imports from Canada.

“Hospitality will continue to be a favoured asset class given its demonstrated ability to produce strong returns and hedge against inflation,” states the report.

The national investment market saw a 22% increase in transactions in 2024 as the sector returned to more regular growth patterns.

Hotel property sales volume reached an estimated $2.1 billion, up from $1.7 billion in 2023. Despite this growth, the average deal size dipped slightly to $12.7 million, with the price per room declining to $144,000 from $180,000 due to larger transactions in the previous year.

Despite global economic challenges, Canada’s hospitality sector is expected to remain a strong asset class in 2025, with investors focusing on select and limited-service hotels.

The supply of new hotels is also set to accelerate in 2025. After several years of limited growth, C&W noted, CoStar projects 6,691 new hotel rooms will open, representing a 1.5% increase in supply. This forecast comes after three years of modest annual supply growth of just 0.5%. Construction activity peaked at 9,812 rooms in Q4 2024, the highest level since early 2018, with Ontario and British Columbia accounting for the majority of new projects.

Among the notable hotel transactions in 2024, Morguard Corporation completed a $410-million portfolio sale, transferring 10 hotels to InnVest Hotels for $311 million and four hotels to Manga Hotel Group for $99 million. Manga Hotel Group also acquired the Residence Inn Calgary Downtown/Beltline District for $112.25 million. Other key deals included Artifact Group’s $95.1-million purchase of DoubleTree Montreal and Atenro Limited Partnership’s majority-stake acquisition of Hilton Québec for $85.6 million.

The report was co-authored by Brian Flood, C&W’s hospitality and gaming practice leader, and Cindy Schoenauer, a senior vice-president in the firm’s hospitality and gaming group.

Pictured: Hilton Québec hotel in Quebec City, which changed ownership in 2024 in one of the notable hospitality transactions of the year.

Photo: Hilton