On a positive note, the announcement that Vancouver/Whistler has won the right to host the 2010 Winter Olympic Games should provide a needed boost for the B.C. economy and encourage international investment in our province. Vendors, however, need to maintain some sense of reality in their pricing expectations, as few buyers will be willing to pay the prices that are being asked.

This problem is enhanced by the fact that during the past couple of years, most properties have faced a substantial decline in net operating income. As a result, asking prices with cap rates of 10% and below, (and they may be negative due to negative cash flows), are deterring investors.

This trend indicates that there are a lot of hotels unofficially on the market for sale in Vancouver and throughout our province, however, the majority of buyers are looking for deals with upside potential, so only properties that at least have some net income to cover debt service, are likely to sell, unless receivership or bankruptcy scenarios force the sale of the hotel.

• According to the Pannell Kerr Forster (PKF) Trends report for 8 months through August of 2003, B.C. as a whole is down 2.7% over the same period of 2002 in occupancy and 3.1% in average daily rate (ADR), for an overall decline of 5.7% in revenue per available room (RevPAR).
• The trend is similar in Greater Vancouver, however, the other areas of B.C., which includes the interior and some northern communities, is only down 0.2% in RevPAR in 2003 with Kamloops actually posting a 13.3% increase.
• The most improved markets over 2002 during the first seven months of 2003 include Parksville/Qualicum, Other Areas of Vancouver Island, Kamloops and Penticton with RevPAR gains of 8.3%, 20.6%, 13.3% and 4.8% respectively.
• In contrast, the Downtown Vancouver market has seen the largest decline with a 8.5% decline in RevPAR, followed by other Vancouver hotels and Greater Victoria with declines of 7.8% and 6.6% respectively.
• Alberta has also seen the effects of the decline with the province down 8.0% through August with the only positive growth coming in the City of Red Deer which saw RevPAR grow by 4.4%.
• Most regions of Saskatchewan continue to show improvement over 2002 with the province posting a 2.4% increase.
• While the Greater Vancouver area is down 8.0%, it pales in comparison to the declines that have ravaged the Greater Toronto Area where RevPAR is down 24.6% due to the effects of SARS, the Iraq war and other international crisis situations that have deterred visitors from travelling.

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Looking forward through the last quarter of 2003 and into 2004, we believe that more hotel investors will look at Vancouver as a place where the hotel sector will continue to show signs of increased activity with the expectation that the market will prove to be resilient and that with the generally safe economic and political climate in western Canada, tourism and the convention business will rebound faster than in other parts of North America.. We are seeing signs that more hotel owners may be forced into selling, as the banks are starting to tighten their credit policies, as mortgages mature or hotels are unable to service the debt.

Tyne Hospitality Services Limited is a commercial real estate brokerage firm specializing in the sale of hotels and resorts in western Canada. For more information, we invite you to visit our website at www.tynehospitality.com or contact us by phone, fax or email.

The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Tyne Hospitality Services Limited.

Tyne Hospitality Services Limited

Angus G. Wilkinson, CGA, MHCIMA
President Hotels & Resorts
450 � 1090 West Georgia Street 
Vancouver, B.C. V6E 3V7
(604) 618-8778 Phone
[email protected]

Eric S. Pateman, MHCIMA
Investment Consultant
(604) 812-9660 Phone
[email protected]

tynehospitality.com