Strong investor demand, supported by low interest rates and ample capital, is expected to drive increased hotel transaction activity and higher lodging investment dollar volume in 2026, says a Cushman & Wakefield report.

Canada’s hotel sector posted another record year in 2025, with revenue per available room (RevPAR) reaching a historic high of $142.89, up 4.2% from 2024, according to the company’s latest Canadian hospitality and leisure report. The gain was supported by continued growth in average daily rates, which rose 3.5% to $216.10, while occupancy climbed to 66.1%, the highest level recorded in the past two decades.

Transaction activity remained robust, though deal volume declined year-over-year. More than 150 hotel transactions valued above $1 million were recorded in 2025, down from more than 170 in 2024. Despite the drop in deal count, total investment volume increased to $2.2 billion from approximately $2.1 billion the previous year, driven by a greater number of higher-value, full-service and luxury asset sales.

Operationally, the sector continued to show resilience despite economic and geopolitical challenges, including trade tensions with the United States and potential guests’ shifting travel patterns. Demand grew 1.2% in 2025, outpacing supply growth of 0.7%, while domestic leisure travel helped offset softer corporate demand in major urban markets.

Overall, 2025 ranked among the strongest years for hotel investment activity in Canada over the past two decades, excluding years marked by large portfolio sales, says the C&W report.

“The expectations are that we’re going to see continued strong growth in ’26, so as a consequence, anything that comes to market, I think, is going to be, you know, widely sought after,” said Brian Flood, the report’s lead author, who serves as C&W’s hospitality and gaming practice leader.

in 2025, notable deals included Pacific Reach Properties and Dilawri Group’s acquisition of Toronto’s 263-room Ritz-Carlton hotel component and Brookfield Asset Mangement’s purchase of the hotel portion of Vancouver Shangri-La’s 20-storey hotel portion. Both assets traded for about $1.1 million per room.

In a notable early-2026 deal, InnVest acquired the waterfront 304-room Hotel Grand Pacific in downtown Victoria.

“The InnVest acquisition is actually a very strategic acquisition for them,” said Flood. “It’s a market they don’t have [other] exposure in currently. And, the Victoria market is a very high barrier-to-entry market. [It’s] very difficult to develop a hotel such as a Pacific Grand in that market. I believe InnVest really saw an opportunity there to acquire at a market price. But I think through some capital investment, and with stronger management, they will see some significant upside on that deal.”

C&W advised InnVest on the acquisition but Flood declined to disclose the purchase price, citing the client’s confidentiality request.

According to the C&W report, the average hotel-transaction size rose to $15.5 million nationally in 2025 from $12.7 million in 2024, while the average price per room surged 36.2% year-over-year to $191,000 from $144,000. Like the C&W report, Flood declined to predict how much higher the average room price could climb in 2026.

“I know brokers like to use guidance,” said Flood. “But I guess I would say that I would expect that any transactions in ’26 will be fully priced.”

Although Flood indicated that a wide buyer and seller bid-ask gap is not likely to impede investment, short supply could.

“I think the challenge is that there just isn’t a whole lot of product in the market, but anything we see that does come to market has a lot of competition for it,” he said. “So, I think that’s going to drive higher values and and lower cap rates for hotels this year.”

Consequently, Flood expects assets to spend little time on the market after their owners put them up for sale.

“I think these will go very quickly,” he said. “There’s certainly all kinds of people out there who would love to try and do direct deals and off-market deals as well. So, it is a very tight market from a sales standpoint.”

Operationally, the sector continues to show resilience despite economic and geopolitical challenges, including trade tensions with the United States and shifting travel patterns. Demand grew 1.2% in 2025, outpacing supply growth of 0.7%, while domestic leisure travel helped offset softer corporate demand in major urban markets.

Looking ahead, modest RevPAR growth of 1.9% is forecast for 2026. C&W bases that prediction on CoStar’s RevPAR-growth forecast.

But the actual RevPAR growth could be much higher, said Flood.

“What we’ve seen year-to-date, to the end of February, is 6% and a lot of markets across the country are just performing at very high levels,” said Flood. “So, I think the 1.9% will prove to be quite conservative based on year- to-date numbers.”

Although supply is tight, C&W also expects CoStar’s forecast of 5,601 additional rooms nationally, a 1.2% increase, in 2026 to fall well short of the actual new-room openings. Most (96%) of the new rooms are under construction, and the total increase would exceed those of recent years. But they should be absorbed positively on a national basis, C&W predicted.

CoStar’s anticipated 7,618 new rooms in 2027 could fall short due to a construction slowdown tied to possible cost escalation, foreign tariffs and a labour shortage due to competition from nation-build infrastructure projects, the report added.

At year-end 2025, Ontario accounted for most of the new rooms (58%) in the national pipeline, while B.C. was a “distant second” (28%.)

In 2025, RevPAR growth slowed to 4.1% in 2025 compared to prior years as the market’s recovery distanced itself further from the effects of the COVID-19 pandemic. Hotel performance varied significantly by region, with tourism-driven markets emerging as top performers amid shifting travel patterns and economic conditions. Cities such as Victoria, B.C.; Quebec City, Halifax and Ottawa recorded strong growth as more Canadians chose domestic travel over U.S. destinations. Resort markets also delivered exceptional results, with Banff, Alta., posting 15% RevPAR growth and Kelowna, B.C., performing strongly, reflecting heightened demand for leisure-focused destinations.

Western Canadian markets also saw notable gains, particularly in cities like Regina, Saskatoon, Edmonton, Winnipeg and Calgary. These markets outperformed the national average, supported by a rebound in the natural-resources and agriculture industries, along with increased capital investment. Many of these regions had lagged in previous years but are now gained from renewed economic activity and stronger hotel demand, Flood noted.

In contrast, markets more exposed to U.S. trade and manufacturing experienced weaker performance. Windsor, Mississauga and Kitchener-Waterloo all recorded declines in 2025, while larger urban centres such as Toronto and Montreal saw more moderate results. Toronto posted modest RevPAR growth of 2.8%, while Montreal experienced a slight decline.

“They’re also being impacted by these trade policies, but they’re very large, diversified markets, so they don’t feel the impact quite as much,” said Flood.

Through 2026, hotel performance is expected to benefit from major events such as the men’s FIFA World Cup in Toronto and Vancouver, as well as a continued recovery in international travel.

As a result, the report concluded: Canadian hotels remain an attractive asset class due to their ability to hedge against inflation and generate strong returns, positioning the sector for continued investment momentum in the year ahead.

Pictured: Hotel Grand Pacific in Victoria, B.C.

Photo: InnVest