Canadian Lodging Industry Overview - Hospitality & Gaming

November 2017

CANADIAN LODGING INDUSTRY OVERVIEW

HOSPITALITY & GAMING A Cushman & Wakefield Valuation & Advisory Publication

A Cushman & Wakefield Valuation & Advisory Publication

Up, Up and Away! It has been a remarkable year but is 2017 the peak year for Canadian Hospitality? We don’t believe so. During Canada’s 150 th anniversary, Canadian hotels and resorts had an impressive year with record high occupancy and average daily rates (ADR). However, while 2017 has been the latest in a string of record years, Cushman & Wakefield expects 2018 will reset the level for hotel performance. Our review of key indicators shows continued room-demand and ADR growth in most markets across the country next year.

Despite softness in some energy-based regions in recent years, national revenue per available room (RevPAR) has grown at a compounded rate of 5.25% over the last five years while key markets such as Toronto and Vancouver have seen even stronger growth in the 9.5%-11.0% range. In 2017, many markets shifted to focus on rate growth as they neared functional capacity. We expect this trend to continue in 2018 with the emphasis on rate growth. The key indicators Cushman & Wakefield considers in our outlook remain positive with continued growth for the next two years.

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While indicators remain favourable, new supply will become a larger issue in some markets. To-date, new room supply has been constrained in most markets, particularly in high barrier-to-entry locations such as city centres. Although many downtown markets are performing at peak levels, and with demand being displaced into surrounding markets, new room supply will become more of a consideration in key suburban and secondary markets as we move through 2018. Within a diverse national market such as Canada, there are areas which underperform. Alberta and Saskatchewan continue to languish; however, these markets are seeing some positive signs despite the slow recovery of the energy sector. The larger issue in markets such as Regina, Saskatoon, Edmonton, and Calgary is the amount of new room supply which continues to be delivered and adds to the issue of stagnant demand growth. The investment sector has been active in 2017 with a number of notable transactions, including the largest single asset and the highest value per room transactions in Canadian history. Sellers disposing of non-core assets are

The investment sector has been active in 2017 ... including the largest single asset and the highest value per room transactions.

achieving strong pricing as active buyer pools look for opportunities to acquire and reposition properties. Strong operating performance and the abundance of capital has pushed hotel pricing to all-time highs; however, hotels still provide comparatively high returns compared to many other asset classes.

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A Cushman & Wakefield Valuation & Advisory Publication

The following chart illustrates operating performance of the Canadian Lodging Industry from 2008 through Q3 2017.

Canadian Historical Operating Statistics: 2008-2016 and Year-to-Date September 2016 vs. September 2017 Year Supply % Change Demand % Change Occupancy % Change ADR % Change RevPAR % Change 2008 60.6 % $121.81 $73.82 2009 1.4 % (6.1) % 56.1 (7.4) % 117.51 (3.5) % 65.92 (10.7) % 2010 4.2 13.1 60.8 8.6 128.71 9.6 78.31 18.9 2011 1.2 2.9 61.8 1.7 127.85 (0.6) 78.98 1.1 2012 0.5 1.6 62.3 1.0 130.12 1.6 81.08 2.6 2013 0.5 2.1 63.3 1.6 133.08 2.3 84.21 3.9 2014 0.5 3.0 64.8 2.5 137.36 3.3 89.06 5.9 2015 1.0 0.2 64.1 (0.8) 142.98 4.5 91.71 3.6 2016 0.9 1.5 64.5 0.6 149.19 4.3 96.25 5.0 Avg. Annual % Change 1.3 % 2.2 % 0.8 % 2.6 % 3.4 % Year-to-Date September 2016 66.5 % $151.19 $100.47 Year-to-Date September 2017 0.8 % 2.9 % 67.8 2.1 % 159.00 5.2 % 107.86 7.4 %

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

On a national level, the year-to-date Q3 2017 data reveals another year of high points. RevPAR has increased by 7.4%, largely driven by strong ADR growth. Through the first nine months of this year, demand growth across the country was 2.9%, exceeding the national supply growth of 0.8%.

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National RevPAR has increased by 64% since 2009. The following graph illustrates trends in occupancy, ADR, and RevPAR from 2008 through 2016, as well as through Q3 2017. This graph shows the overall magnitude of the improvements in all measures through September 2017. NATIONAL HISTORICAL ANALYSIS

Canadian Occupancy, ADR, RevPAR – 2008-2016, Year-to-Date September 2017

$170

80%

80%

$170

70%

70%

$150

$150

60%

60%

$130

$130

50%

50%

$110

40%

40%

$110

30%

30%

$90

$90

20%

20%

$70

$70

10%

10%

$50

0%

0%

$50

010 2011

2012 2013 2014 2015

2008 20 9 2 10

2012 2013 2014 2015 2016 YTD Sept 2017 016 YTD Sept 2017 11 12 13

14 2015 2016 YTD 20

2008 2009 2010 2011

ADR

RevPAR

ADR Occupancy

RevPAR ADR

Occupancy RevPAR

Occupancy

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

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A Cushman & Wakefield Valuation & Advisory Publication

TOP 10 MARKETS

At the national level, overall results are very positive, but the 10 major Canadian markets have fared unevenly. Compared to 2016, only one of the 10 major Canadian markets saw a decline in RevPAR in the first nine months of the year. Vancouver and Toronto continue to lead the 10 major Canadian markets, with improved results largely driven by ADR growth. Ottawa and Montreal have also shown very impressive results with improved occupancy and ADR causing a notable 13.2% and 12.3% increase in RevPAR, respectively. Halifax has the best overall improvement year-over-year, with a 4.6% increase in occupancy and a 9.9% increase in ADR, delivering a 15.0% gain in

RevPAR – the highest level of RevPAR growth shown across the 10 major markets. At the other end of the scale, Edmonton continues to battle decreasing occupancy levels this year, although there has been a slight gain in ADR. Calgary is showing signs of turning things around, with demand growth and occupancy levels up, although ADR dipped very slightly.

Top 10 Canadian Markets RevPAR Percent Change – Year-to-Date September 2017

$180

$160

10.1%

8.7%

$140

12.3%

13.2%

8.1%

7.0%

$120

15.0%

$100

0.8%

11.0%

$80

-5.5%

$60

$40

YTD September 2016 YTD September 2017

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

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NEW SUPPLY

STR reports that average supply growth over the past nine years was 1.3% annually. The latest STR pipeline report on new hotel development shows continued expansion across six of the top 10 markets in Canada. Brand proliferation continues to be a strong impetus for new hotel projects, and the majority of projects fall within the upscale and upper midscale categories. While speculation might suggest that many of the projects might not occur, the strong occupancy performance across much of the country, and the ‘in construction’ phase of many of the projects indicates a different picture is likely.

Calgary leads the hotel development pipeline in terms of percentage growth, at more than 18% – a worrisome issue considering the current market dynamics. Ottawa, Montreal, and Edmonton each are approaching 10% increase in supply on the books, followed by Toronto at 8%. Markets such as Toronto and Vancouver, with their strong performance, indicate significant opportunity for supply additions although site availability and development costs will continue to limit this growth.

Canadian Room Supply Pipeline by Product – Year-to-Date September 2017

Independents

Economy

Midscale

Upper Midscale

Upscale

Upper Upscale

Luxury

0

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Planning Final Planning In Construction Unconfirmed

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

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A Cushman & Wakefield Valuation & Advisory Publication

Canadian Hotel Development, Supply % Growth of Major Markets by 2021

7.9%

Calgary

18.5%

10.1%

Ottawa

10.1%

Montreal

9.5%

Edmonton

9.5%

Toronto

7.9%

Winnipeg

5.6%

Halifax

3.6%

18.5%

9.5%

Vancouver

2.2%

9.5%

Victoria

0.0%

Quebec City

0.0%

5.6%

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

Rooms in Final Planning or Under Construction, by Major Market

Toronto

Calgary

Edmonton

Montreal

Ottawa

Winnipeg

Vancouver

Halifax

Quebec City

Victoria

0

500

1,000

1,500

2,000

2,500

3,000

Final Planning In Construction

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

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DEMAND GROWTH The following chart shows the performance of the 10 major Canadian markets based on growth in demand over the first nine months of 2017 compared to the same period in 2016. Strong operating results have triggered increased development activity in many markets across the country. As asset values have risen, new construction may be a more appealing option. New development offers an opportunity to enter markets with new and modern products which will often outperform their competitive set. The majority of new development across the country is in the upscale and upper midscale category, most of which is made up of suburban, focused service hotels.

Canadian Demand Growth, by Major Market – Year-to-Date September 2017

10%

8%

6%

4%

2%

0%

-2%

-4%

Demand

Source: STR Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

Winnipeg leads the country in terms of demand growth after the first nine months of the year, reaching 9.8% compared to the same period in 2016. Perhaps surprisingly to some, Calgary came second at 5.3%, although Calgary remains burdened with new supply issues. Ottawa reported a strong 5.1% demand growth, driven in large part by the 150th anniversary celebrations, somewhat mirrored by the celebrations in Montreal and Quebec City – both at 3.4%. Toronto and Vancouver had very low levels of demand growth at 0.3% and 1.0%, respectively, with further growth constrained by their strong occupancy performance and capacity constraints

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A Cushman & Wakefield Valuation & Advisory Publication

2018 OUTLOOK Nationwide, the lodging sector reported year-over-year RevPAR growth from 2010 through 2017. Gains have been attributed to stronger national and global economic growth, driven by solid growth in business travel and improvements in leisure travel. The weakening of the Canadian dollar, a stronger U.S. economy, expanded domestic and international air capacity, and improved visa facilitation for international visitors – particularly emerging markets – stimulated gains in national lodging performance.

In 2015, slower economic growth and weakened business travel within Canada’s major oil markets hampered overall RevPAR growth. Despite continued declines in RevPAR within oil- producing provincial markets, Canada’s overall performance saw a rebound in 2016 and into 2017, reaching record levels through the first nine months of 2017. With oil prices projected to gradually increase, the outlook for Canada’s energy-focused provinces is more positive for the medium-term.

RevPAR ($) vs. Economic & Tourism Indicators

8%

A decline in oil prices and slower economic growth leads to a slower RevPAR growth in 2015.

YTD Sept: 7.4% YE Forecast: 6.0%-7.0%

Following the economic recession of 2008/2009, the Canadian lodging industry saw a strong resurgence between 2011 and 2014.

7%

YTD Sept: 7.4% YE Forecast: 6.0%-7.0% Record growth achieved by non-resource-based markets in 2016 through Q3 2017.

A decline in oil prices and slower economic growth leads to a slower RevPAR growth in 2015. 5.8%

ing the economic ion of 2008/2009, anadian lodging try saw a strong ence between 2011 014. 6%

Record growt by non-resour markets in 201 Q3 2017.

5.0%

5.8%

5%

5.0%

3.9%

4%

2018F: 3.0%-4.0

2018F: 3.0%-4.0%

3.9%

3.0%

3.0%

3%

2.7%

2.7%

2%

0.9%

Is Calgary turning the cor Demand is up but new su is still on the way.

Is Calgary turning the corner? Demand is up but new supply is still on the way.

1%

0%

1

2012

2013

2014

2015

2016

2017f

2018f 2 19f

2019f

2011

2012 2013 2014 2015 2016 2017f

2018f

2020f

Real GDP at market prices (2007 $ millions) -

Retail sales (2007 $ millions) -

Overnight Visits (000s)

Total expenditures (overnight visits, $ millions)

RevPAR ($) -

Source: STR, Oxford Economics, Statistics Canada, and Conference Board of Canada Republication or Other Re-Use of this Data Without the Express Written Permission of STR is Strictly Prohibited

Over the 2011–2017 period, RevPAR performance has shown a strong correlation with Real GDP, Retail Sales and Total Overnight Visitor Expenditures. Economic forecasts indicate a tempering in performance can be expected over the next few years. Based on an analysis of historical lodging market performance, key economic indicators, and in consideration of expected supply increases – balanced against anticipated demand growth – 2018 is expected see Canada’s RevPAR increase about 3%-4%.

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TRANSACTIONS MARKET The following chart summarizes Canadian hotel transaction volumes for the last 11 years. Since 2010, the Canadian economy has seen steady gains and the outlook for Canada has remained positive. This, combined with a low exchange rate and geopolitical factors, has made Canada a desirable place to invest. These global factors have resulted in the Canadian commercial real estate market seeing strong gains in income and valuations over the past five years.

Canadian Hotel Transaction Volume – 2006 to Year-to-Date October 2017

$5,000

$4,500

$4,000

$3,500

$3,000

$2,500

$2,000

Volume (Millions $)

$1,500

$1,000

$500

$0

2006 2007 2008 2009 2010 2011

2012 2013 2014 2015 2016 YTD Nov 2017 Oct 2017

Single Asset Transactions

Portfolio and Entity Level Transactions

Total

Source: Cushman & Wakefield, CBRE, and Colliers International

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A Cushman & Wakefield Valuation & Advisory Publication

Last year (2016) was a near record year for hotel investment in Canada with total transaction volume at $4.1 billion. The record high transaction volume was largely attributed to the 112-property InnVest REIT sale which traded for $2.1 billion in 2016. Despite the weak investment climate in energy-based Canadian markets, investment activity has remained strong, particularly in Metropolitan Vancouver, Toronto, and Montreal. Activity has been fueled by the lower Canadian dollar, an abundance of equity capital, resilient debt market conditions, and an overall stable national economy. In 2017, the total transaction volume reached approximately $2.625 billion in October. Central Canada continues to lead transactions at 52% of the national total, followed by Western and Atlantic Canada

Transaction Volume by Region Year-to-Date Traditional Sales Province Properties

%

Ontario

52 50% 18 17% 12 12% 10 10%

British Columbia

Quebec Alberta

New Brunswick

5 2 2 1 1

5% 2% 2% 1% 1%

Nova Scotia

Manitoba Nunavut

Prince Edward Island

Year-to-Date Total Traditional Sales Year-to-Date Total Rooms

103

10,642

Year-to-Date Total Traditional Sales Volume Total $ Volume Price per Room

# of Sales

$1,334,631,934 $152,251

95

* Excludes eight sales due to confidential pricing

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FEATURED TRANSACTIONS Notable transactions as of year-to-date November 2017 include:

Notable Transactions

# of Properties

# of Rooms

Property

Buyer

Price

bcIMC/SilverBirch Hotel Portfolio Leadon Investment

$1,100,000,000 25

6,757

Westcorp Edmonton Boutique Portfolio (Matrix, Metterra, Varscona)

DSOL Canada Ltd.

$61,150,000

3

371

Rosewood Hotel Georgia

Pacific Reach Properties $145,000,000

156

Sheraton Centre

Thayer Lodging

$335,000,000 $77,000,000

1,372

Thompson Toronto Hotel

Mohari Canada Inc.

105

(left) The sale of Rosewood Hotel Georgia in Vancouver set a new price per room sales record in Canada

(right) The sale of Sheraton Centre in Toronto was the largest single hotel transaction in Canadian history

BUYER PROFILE & ORIGIN In terms of buyer profile, private investors have dominated the market in 2016 and year-to-date 2017. Of these private investors, foreign investors represented $2.7 billion out of the total $4.1 billion transaction volume in 2016. The largest portion of this was the acquisition of the InnVest portfolio by Bluesky Investments, a Chinese investment group. As of year-to-date November 2017, private investors and hotel investment companies represented the most dominant buyers with foreign buyers contributing to a significant portion of sales volume. This was driven by the SilverBirch/Leadon portfolio sale at $1.1 billion. Leadon is also a Chinese investment group.

2016 Total: $4.1B

Domestic Buyers Foreign Buyers

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A Cushman & Wakefield Valuation & Advisory Publication

Get the lowdown on influential trends within

the hotel industry.

HOT TOPICS Direct and Third Party Bookings

design standards. In Canada, existing modular-constructed hotels are mainly in the focused- and limited-service levels. Challenges for this innovative approach include finding shipment storage during installation, a limited number of experienced contractors, and limited exposure to and understanding by lenders and regulators. Soft and Conversion Brands Major hotel chains are expanding their portfolios by launching soft brands, defined by STR as, “individualized hotels that give owners and operators the opportunity to affiliate with a major chain distribution while retaining their unique design, name, and orientation.” While initially positioned for the upscale and luxury classes, more recent launches have expanded to include midscale products. Soft brands provide owners with access to hotel chains’ sales and reservation systems and loyalty programs, while having greater independence and fewer operating standards as compared to ‘traditional’ brands. Hotel chains, meanwhile, obtain greater diversification and coverage while capturing more customer segments. Intended to improve financial performance and value, hotel conversions have become quite common – not only between peer brands but also between different brand tiers. Key considerations for selecting a conversion brand include brand strength, market opportunity, customer demand, and physical asset. Other key considerations are upcoming product improvements required by the existing brand and an expiring franchise agreement. In Canada, converted hotels have generally raised their product class and/or changed brand. Many converted hotels were previously independent (non-branded) properties.

Competition for hotel room bookings continues to escalate as online travel agencies (e.g., Expedia) and metasearch engines (e.g., Booking.com) have evolved from additional distribution channels to true competition. More recent and major entrants are TripAdvisor and Google. Both the share of bookings and commission per booking of third-party channels have increased in recent years. These significantly add to hotels’ distribution channel costs and negatively impact revenue yields and, ultimately, profits. Hotel chains have responded by encouraging direct bookings with such initiatives as rate parity and loyalty membership perks. In addition, chains have continued to invest in mobile and on- property technology. Third party channels continue to account for significant room bookings, particularly by leisure customers that are generally price sensitive and/or brand neutral. Modular Construction As land and building costs continue to rapidly increase, particularly in high barrier-to-entry markets and major cities, modular construction in the hotel industry is currently in early adoption stage. Modular construction involves manufacturing and assembling building materials and components off-site, which are shipped for on-site installation. It is typically used for new builds but can also be used for extensions/expansions. Reported key benefits include cheaper development costs, shorter construction timeline, improved quality control, and reduced environmental impacts from using a climate-controlled factory. Full modular construction involves all guest rooms completely assembled off-site, but public areas, infrastructures, and systems are often still built on-site. Modular construction is particularly suited for franchised hotels with pre-defined architecture and

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A Cushman & Wakefield Valuation & Advisory Publication Alternative Accommodation Alternative accommodation providers like Airbnb and HomeAway increasingly compete with the hotel industry. Airbnb now operates in over 191 countries and recorded over 200 million guest arrivals since 2008. Arrivals in 2016 equaled those recorded in all previous years combined, perhaps illustrating just how rapidly this sector is growing. While accurate numerical impacts on hotel occupancy and ADR may be unclear and vary by market, Airbnb has recently begun advertising to business and extended-stay travelers. Interestingly, alternative accommodation providers are also increasingly competing with OTAs. In response to the competition from these alternative accommodation providers, some hotel chains have entered into or expanded into the home-sharing sector, such as Accor Hotels purchasing three companies under OneFineStay; Hyatt investing in Oasis Collections; and Wyndham acquiring Love Home Swap. Alternative accommodation providers are currently subject to few regulations, including those regarding insurance and health/safety. In an effort to control the sector, various steps are being initiated in an effort to level the playing field. The Hotel Association of Canada is advocating for an amendment of the Excise Tax Act to impose HST and income tax for alternative accommodation providers. Meanwhile, municipal governments are drawing up their own regulations; in Toronto, a report to council suggests both the platforms (Airbnb, VRBO etc.) and unit owners pay a registration fee and perhaps a booking fee, while also limiting the available rental units to those only within the primary residence. The City of Vancouver is considering a similar regulation but, as with other jurisdictions, is trying to sort out exactly what constitutes a primary residence. In the end, it appears as if these alternative accommodations will continue to compete in the hotel industry, although it seems likely that some degree of regulation will be imposed at the local level. Airbnb Airbnb continues to be a hot topic in the hotel industry, with antagonists suggesting that this alternative accommodation provider cuts deeply into the domain of hoteliers. There are clearly ‘issues’ associated with Airbnb, primarily a lack of regulation in such matters as licensing and insurance, but also the occasional consumer criticism regarding the product not matching the description, a lack of responsiveness from the host, or even units being rented out without the knowledge of the owner. It is likely that the frequency and extent of these issues will decline as

regulation and self-regulation impose controls for the common good. There is clearly an active interest by many travellers to seek alternatives to the traditional hotel stay – in much the same way as people choose Uber over traditional taxis. They are often considered to be less expensive and offer a more appealing product, in spite of some of the inherent risks. In order to better understand the extent of Airbnb and its appeal across Canada, Cushman & Wakefield commissioned reports from AirDNA, the company most commonly regarded as the authoritative source of data on the performance of Airbnb. As a backdrop to the information presented below, it is important to note that the Airbnb supply is very fluid, with units moving in and out of inventory as various circumstances dictate. As a simple illustration, a home owner may elect to list a room for rent with Airbnb for a week at a time through different times of the year – so the unit is in and out of the available inventory. Given this fluidity, it is common to see significant swings in listings from month-to-month; home owners and unit owners generally tend to make product available when the opportunity exists to maximize revenues. As shown below, the number of listed units available (units actively listed or booked) across Canada ranged from a low of 294,000 in February 2016 to 779,000 in December 2016. The data shows an upward curve in both listings and booked units, with a 123% increase in listings between year-to-date September 2016 and the same period in 2017, while booked units increased by 125% over the same period. In 2016, AirDNA reports almost 1.9 million room-nights of what is deemed ‘hotel comparable’ demand stayed at Airbnb locations across the country; however, for the first nine months of 2017, the volume had increased to 2.5 million room-nights, up almost 90% from the 1.3 million room-nights in the same period in 2016. It is unclear, at this time, how the future will shape up for these alternative accommodation providers. While there is a huge appetite from consumers, and the rate of growth has been extraordinary, this growth will likely temper as municipal governments and other agencies strive to impose controls over what product can be made available and when, combined with the much-needed imposition of regulations, including licensing and insurance requirements. The following graph illustrates the number of Airbnb unit nights available, by month, since October 2015, with comparison to the number of unit nights occupied and the resulting occupancy factor.

Airbnb Nights Availability & Occupied Trends

20% 30% 40% 50% 60% 70% 80%

100,000 300,000 500,000 700,000 900,000 1,100,000 1,300,000 1,500,000

Jul-17

Jul-16

Jan-17

Jun-17

Jan-16

Jun-16

Oct-15

Mar-17

Apr-17

Oct-16

Sep-17

Mar-16

Feb-17

Apr-16 Supply

Sep-16

Dec-15

Feb-16

Dec-16

Nov-15

May-17

Aug-17

Nov-16

May-16

Aug-16

Demand Occupancy

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Source: AirDNA

A Cushman & Wakefield Valuation & Advisory Publication

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A LOOK AHEAD Generally, the hotel industry in Canada over the last year has surprised even the most optimistic experts, with RevPAR by year-end likely delivering close to 7% improvement over 2016 and establishing 2017 as another record year. This buoyant environment is driven by a number of factors, including the anniversary celebrations mentioned previously. However, the exchange rate (both cross-border and internationally) continues to play an important role, making Canada an attractive and affordable destination to visit for key source markets. The great work done by Destinations Canada has reinforced Canada as a great place to vacation, and the appeal of our Prime Minister across much of the globe has also helped. The upcoming years look to be equally positive, with demand growth expected in virtually all markets. New supply is likely to temper occupancy gains, and it is concerning to see some markets, which are already struggling, with fairly large supply increases in various stages of the development pipeline. In reality, we believe some of these new hotel developments in the softer markets will be realigned to some alternate use, or delayed until better conditions prevail.

Hotel financing continues to be readily available as long as the project makes sense, and both domestic and foreign lenders continue to actively pursue deals – what a difference a few years make! There appears to be an increasing interest in hotel investment by first-time buyers, while the seasoned hotel investors sift through opportunities in search of the best way to deploy capital and optimize future returns. Perhaps one of the biggest concerns looking forward is the rapidly increasing price points associated with hotel transactions over the past few years. In 2017, we have seen the highest price per room paid for a hotel, as well as the highest-priced single hotel transaction in Canadian history. We are also seeing deals moving forward at price per room and with cap rates at unprecedented levels; this underlines investors’ optimism about the long-term future of the industry, but also raises the question as to how much higher can prices go. Another concern is potential increases in interest rates, although there is little evidence of any material increase in the near future, and most lenders impose fairly conservative financing criteria which will also help to hedge against rate increases.

For more information, contact: Brian Flood AACI P.App., MRICS Vice President Practice Leader, Hospitality & Gaming +1 416 359 2387 brian.flood@cushwake.com Charles Suddaby, CMC, MRICS Vice President Practice Leader, Hospitality & Gaming +1 416 359 2407 charles.suddaby@cushwake.com Cindy Schoenauer, AACI, RI Vice President Hospitality & Gaming +1 604 340 9141 cindy.schoenauer@cushwake.com Curtis Gallagher Vice President National Hospitality Services +1 416 359 2567 curtis.gallagher@cushwake.com

Through the expertise of more than 1,750 professionals in 130 offices, Cushman & Wakefield’s Valuation & Advisory group provides sophisticated advice on real estate equity and debt decisions to clients on a worldwide scale. Our capabilities span valuation and advisory services relating to acquisition, disposition, financing, litigation, and financial reporting, and 17 practice groups deliver real estate strategies and solutions to clients with unique operational, technical and business requirements. Access to real-time market data, the insights of Cushman & Wakefield’s leasing, research and capital markets experts, and the experience derived from more than 35 years of operation ensure the application of best practices and proven, successful methodologies. In 2016, the group completed assignments involving more than 245,510 properties valued at over $2.86 trillion. This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or

complete. Published by Corporate Communications. ©2017 Cushman & Wakefield, Inc. All rights reserved.

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About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.

Brian Flood AACI P.App., MRICS Vice President Practice Leader, Hospitality & Gaming +1 416 359 2387 brian.flood@cushwake.com Charles Suddaby, CMC, MRICS Vice President Practice Leader, Hospitality & Gaming +1 416 359 2407 charles.suddaby@cushwake.com Cindy Schoenauer, AACI, RI Vice President Hospitality & Gaming +1 604 340 9141 cindy.schoenauer@cushwake.com Curtis Gallagher Vice President National Hospitality Services +1 416 359 2567 curtis.gallagher@cushwake.com

Copyright © 2017 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

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