Hotel Acquisitions in Ontario: Navigating the Post-Pandemic Recovery

Ontario's hotel market has staged a remarkable recovery from the depths of the pandemic. RevPAR (Revenue Per Available Room) across the GTA has not only recovered to pre-pandemic levels but has exceeded them in many submarkets, driven by pent-up leisure demand, the return of corporate travel, and a significant reduction in new supply.

Why Hospitality Now

The investment case for Ontario hotels in 2025 is compelling for several reasons:

Supply constraints: New hotel development has been limited by construction costs, financing challenges, and lengthy approval processes. This supply discipline supports occupancy and rate growth for existing properties.

Demand recovery: Corporate travel has returned to approximately 90% of pre-pandemic levels, while leisure demand has remained elevated. International tourism to Toronto and the broader GTA continues to grow.

Cap rate compression: As the investment case has become clearer, institutional capital has returned to the sector. Quality flagged assets in the GTA are now trading at 6-7.5% cap rates — attractive relative to other commercial asset classes.

Flagged vs. Independent

For most buyers, flagged hotel assets — those operating under a recognized brand such as Best Western, Marriott, Hilton, or IHG — offer a more predictable investment profile than independent properties. Brand affiliation provides:

• Access to global reservation systems and loyalty programs
• Established operating standards and quality controls
• Brand recognition that supports occupancy and rate premiums
• Easier financing from institutional lenders

Independent hotels can offer higher margins for experienced operators, but require more active management and carry greater execution risk.

Key Metrics for Hotel Underwriting

RevPAR (Revenue Per Available Room): The primary performance metric for hotels. Compare against the competitive set and market averages.

Occupancy Rate: Stabilized hotels in the GTA typically operate at 65-75% occupancy. Properties below this level may represent value-add opportunities.

ADR (Average Daily Rate): Rate growth is the primary driver of NOI improvement. Markets with limited new supply support sustained ADR growth.

Franchise Agreement Terms: Understand the remaining term, PIP (Property Improvement Plan) requirements, and royalty structure before acquisition.

The Opportunity

Several motivated sellers in the GTA hospitality market are considering dispositions in 2025, driven by estate planning, partnership restructuring, and the desire to redeploy capital. These transactions are being handled off-market, through direct relationships with brokers who understand the sector.