Montreal 2012 - GlobalHotelNetwork.com

GHN MARKET REPORT Montreal, Quebec
Robin McLuskie
Vice President | Hotels
Colliers International Hotels
Qaiser Mian
Associate | Hotels
Colliers International Hotels
Overview
Montreal is the sixteenth largest economy in North America, making it a premier destination for
national and international hotel investment capital. Boasting a diversified and highly
competitive economy with a multitude of international and multi-national head offices, Montreal
is considered a world-class technology centre. The City is a leader in research and development,
with 400 research centres and four outstanding universities, namely McGill University,
Concordia University, University of Montreal and University of Quebec.
With a population of nearly 4.0 million residents, which accounts for half of the Province of
Quebec’s population, Montreal is the second largest city in Canada. The City is home to
approximately 70 foreign delegations and international organizations, including the Civil
Aviation Organization and the International Air Transport Association, among many others.
Notable employers in the City include McGill University, Bell Canada, National Bank, HydroQuebec, Bombardier and Air Canada.
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As Quebec’s largest city, Montreal is host to world-class industry clusters comprised of the
following sectors: Information and Communication
Technologies, Finance, Film & Television, Life
Sciences and Health Technologies, Environmental
Technologies, and Aerospace. Big multinational
corporations such as Warner Brothers, L’Oreal, IBM,
Pfizer, AON Hewit, Ericsson, General Electric, RollsRoyce and Novartis have also made significant
investment in the Greater Montreal economy over the
past five years.
Other Montreal market highlights include:
•
Montreal is the second largest French-speaking
city in the world after Paris.
•
It is a multicultural city, adding over 35,000
new immigrants per year representing over 120
cultural communities and a population that speaks
over 80 languages.
Residence Inn Downtown Montreal
•
An estimated 7.6 million tourists visited the City in 2011, up by 2.5% from 2010 and
setting new records, which makes it one of North America’s most visited cities.
•
The Montreal Grand Prix is held each year in June over three days and is one of the
largest sporting events of its kind.
The future economic prognosis for Montreal looks promising with Gross Domestic Product
(“GDP”) growth forecasted at 1.7% in 2012, followed by 2.2% in 2013 and averaging 2.4% from
2013 to 2016. The manufacturing sector grew for the second consecutive year in 2011, a
welcome change following four consecutive years of contraction. Unemployment remains stable
at 8.8%; the highest recorded amongst cities in Canada. However, net positive population
growth due to immigration inflows combined with a rebound in manufacturing and expansion of
the services sector bodes well for future economic growth in the city aided by a cost of living
below the national average.
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Key economic indicators for Montreal are provided below.
Montreal Economic Indicators (2009-­‐2016F)
GDP Growth at Market Prices ($2002)
Consumer Price Index
PopulaGon (000s)
2009
2010
2011
2012f
2013f
2014f
2015f
2016f
-­‐0.8%
2.4%
1.5%
1.7%
2.2%
2.2%
2.7%
2.4%
0.8%
1.2%
2.8%
2.2%
2.2%
2.2%
2.1%
2.0%
3,819
3,859
3,908
3,957
4,006
4,058
4,108
4,159
-­‐
1.1%
1.3%
1.3%
1.2%
1.3%
1.2%
1.2%
1,905
1,954
1,952
1,953
1,993
2,025
2,063
2,091
Annual % Change
Employment (000s)
Annual % Change Unemployment Rate
Personal Income per Capita ($)
-­‐
2.6%
-­‐0.1%
0.0%
2.0%
1.6%
1.9%
1.4%
9.2%
8.6%
8.8%
9.0%
8.8%
8.2%
7.8%
7.2%
34,722
35,666
36,008
36,451
37,572
38,663
39,962
41,206
-­‐
2.7%
1.0%
1.2%
3.1%
2.9%
3.4%
3.1%
Annual % Change Source: Conference Board of Canada
Population and Employment
Population growth in Montreal has exceeded 1% over the last five years largely due to a net
inflow of foreign migrants. Growth in population is expected to top 1.3% in 2012 and remain in
the 1.2-1.3% range through 2016. Per capita income stood at $36,000 compared to $35,171 for
the Province of Quebec and is forecast to grow by a modest 1.2% in 2012 followed by 3.1%
growth in 2013, 2.9% in 2014, and 3.4% and 3.1% in 2015 and 2016 respectively.
Perhaps unsurprisingly, the services sector remains the largest employer in the Greater Montreal
Area, employing 82.3% of the workforce in 2011, compared to 17.7% of the workforce
employed by the manufacturing sector. Growth within the services sector was recorded at 0.8%
in 2011 and is forecast to be 0.5% in 2012 followed by stronger growth periods from 2013
through 2015 led by growth in the financial, insurance and real estate service sectors.
Education
Montreal has the highest number of post-secondary students in any major city in North America
with nearly 250,000 students. The most notable of the Universities in Quebec, McGill (amongst
the top 25 in the world), also happens be one of the most recognized and oldest Universities in
Canada. Other globally recognized establishments include Concordia (home to the
internationally renowned Institute for Aerospace Design and Innovation and the Centre for
Studies in Behavioural Neurobiology), Universite de Montreal and Universite de Quebec a
Montreal. Recent tuition hikes have resulted in significant local strife amongst the school going
population, however, Montreal based Universities remain amongst the most affordable in the
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world and are expected to continue attracting significant numbers of students from within the
province and the country as well as foreign students.
Transportation
A modern network of roads and highways
facilitate access to other North American
centres. Highway 20 links to Highway
401 for access to Ottawa and Toronto to
the west, and Trois-Rivières, Quebec City
and Chicoutimi to the east. Highways 10
and 15, the two major north-south
arteries, travel south towards New York
and Boston/New England. Montreal
boasts the largest in-land port in the
world, and is a key transfer point for
transatlantic cargo. The Port of Montreal
is serviced by modern infrastructure and
railway and highway links that permit the
efficient logistical distribution of container shipments throughout North Holiday Inn Pointe Claire
America, primarily with cargo that originates from Northern European
and Mediterranean markets. Montreal is also one of the main cruise
attractions on the St. Lawrence River and the North American East Coast.
The Montreal-Pierre Elliott Trudeau International Airport (IATA: YUL) is the third largest airport
in Canada and handled some 13.7 million passengers in 2011, up about 5.4% from 2010. For Q1
2012, passenger volume is up another 3.4% compared to the same period last year, with gains in
domestic, international and transborder passenger volume. The Airport serves about 120
destinations worldwide, making it one of the most connected airports in North America and it is
connected to all major cities and hubs in the United States and Europe, among them New York,
Chicago, Atlanta, Miami, Dallas, London, Paris, Amsterdam, Frankfurt and Zurich.
Significant investment has been made in improving and upgrading the Airport since 2006,
including a $1.5 billion investment in runway improvements, gate and terminal infrastructure,
which features a new trans-border jetty with 17 boarding gates to serve flights to and from the
United States. The Airport is also equipped to handle the world’s largest aircraft and in May
2011, Air France began a daily direct flight between Montreal and Paris utilizing the extra widebody Airbus A380 with a passenger capacity of approximately 550 people. Montreal is only the
fourth destination to be serviced by Air France using the state-of-the-art A380 aircraft.
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Future projects at the Airport include the expansion and refurbishment of both the domestic and
international arrivals hall, and the development of a new multi-level parking facility (to be
completed by 2013). Other future plans at the Airport include the relocation of the trans-border
departures area, improvements to the Dorval interchange, construction of a three mile (five
kilometres) connector loop and
new rail station to link rail
transport along the Ottawa and
Toronto-Kingston corridors. The
Airport Authority is in the
preliminary design/ feasibility
stage of developing a proposed 12
mile (20 kilometres) rail shuttle
service from the airport to the
downtown core.
Tourism
Courtyard & Residence Inn Montreal Airport
Montreal attracts over seven million tourists each year,
with generated economic spin-offs in excess of over $2.0
billion annually. Some of Montreal’s more famous events
include the Montreal International Jazz Festival, Cirque de Soleil and the Formula One Grand
Prix of Canada. The City is also known for its Montreal Symphony Orchestra and Opera de
Montreal, as well as such venues as Place des Arts and the Bell Centre, and numerous smaller
stages and theatres. Montreal also gained the distinction of being the first city in the world
chosen by the National Geographic Society to sign the Geo-tourism Charter in recognition of
promoting responsible tourism.
The Palais des congrès de Montreal completed a significant expansion in 2001 and is now a 1.4
million SF (133,000 SM) facility, offering 200,000 SF (18,580 SM) of exhibition space, 131,700
SF (12,247 SM) of meeting space and 331,700 SF (30,827 SM) of commercial rental space. For
its fiscal year ending March 31, 2011, the convention centre reported hosting 350 events and
attracting 631,000 visitors, which generated an economic spin-off of about $225 million.
Developments
Major developments that will increase the appeal of the Greater Montreal area proposed or under
construction include:
•
Major Hospital Developments – Over $3.6 billion of planned spending on various
hospital projects, including McGill University Network’s $1.7 billion redevelopment
project of several downtown hospitals, with development anticipated to stretch into 2018.
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•
University of Montreal Upgrades – $325 million project at Universite du Quebec à
Montreal to include student space, retail and office space, parking and an improved bus
depot. Upgrades completed late 2010.
•
SITQ-Hines Office Development – A $150 million office development with some
400,000 SF (37,200 SM) of leasable space located at 900 De Maisonneuve West in
downtown Montreal. This 28-storey building is currently planning stages and expected
to comprise approximately 750,000 SF (69,675 SM).
•
Casino Montreal Renovations – $300 million in renovations and a major expansion of
the existing Casino Montreal. The Casino attracts about six million people per year and
the expansion is expected to generate an additional $60 million, to over $600 million
annually.
•
La Maison Symphonique de Montreal – A $110 million three-storey and 1,900 seat
Orchestra Concert Hall capable of housing 200 singers and 120 musicians on stage to
replace l’Orchestre symphonique de Montreal’s existing venue opened in September
2011.
•
Investment in Montreal’s Waterfront – Some $800 million in a waterfront revitalization
through Montreal’s Vision 2025 project, with the planned relocation of a highway and
development of 12,500 housing units and improved parkland. The project is in the
preliminary stages and is envisioned to position the City with a world-class waterfront.
•
Infrastructure Upgrades – Over $16.5 billion in infrastructure projects are proposed in
Montreal. This total excludes over $10 billion in reconstruction costs to the Turcot
Interchange, completion of Highway 25 and a planned rebuilding of the Champlain
Bridge, a key route between the island of Montreal and the South Shore.
Hotel Market Review
The Downtown Montreal lodging market experienced recent top-line growth fuelled by a
recovering local economy. From 2008 to 2011, market occupancy levels increased at a
compound annual rate of 1.08% from 63.5% to 66.3%, nearing a pre-financial crisis high reached
in 2007 of 67%. RevPAR grew by 0.83% over the same period on a compound annual basis
from $87.89 to $90.85 in 2011. Year-to-date April comparisons reflect healthy increases in 2012
versus the same period last year; occupancy rose by 2.10%, Average Daily Rate (“ADR”) rose
0.62% and RevPAR climbed a healthy 2.72%. According to PKF Consulting, Montreal
experienced a 5.5% increase in RevPAR in 2011, in large part to a rebound in local travel, the
return of the Grand Prix to the city as well as city-wide convention activity.
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Montreal -­‐ Historical and Forecasted Occupancy, ADR and RevPAR
2008
Occupancy %
2009
2010
2011
YTD April 2011
YTD April 2012
55.9%
ADR
63.5%
$137.93
59.1%
$29.53
63.7%
$135.14
66.3%
$137.08
$127.23
57.1%
$128.02
REVPAR
$87.89
$76.60
$86.15
$90.85
$71.15
$73.14
Source: PKF Consulting (Canada)
New Room Supply
Hotel supply growth in Montreal has been tempered in recent years as hotels have been
converted to alternate uses (see Transaction Activity section). Since 2009 a mere 880 rooms have
been added to the market not including the 130-room Ritz Carlton Montreal which re-entered the
market in 2012. A total of 643 rooms exited the market over the same period, resulting in a net
supply increase of 2.3% from 2009 through year-to-date 2012.
Hotel Supply Growth -­‐ Montreal vs. Canada
2007
2008
2009
2010
2011
Montreal Supply Growth
1.9%
2.0%
0.1%
0.8%
0.0%
NaGonal Supply Growth
1.7%
1.8%
1.9%
1.5%
1.5%
Source: PKF Consulting (Canada)
Hotels currently under construction include the 154-room ALT Hotel (completion estimated for
summer of 2013) located at the corner of Wellington and Peel Street, the 220-room Courtyard by
Marriott (completion estimated for early 2013) and the 130-room Ritz-Carlton Montreal which
opened in the early part of June following extensive renovations.
New Market Supply – Greater Montreal
Year
2009
Hotel
Montreal Airport MarrioZ Hotel
# of Rooms
275
2009
Le PeGt Hotel
24
2009
Le WesGn Montreal
454
2010
Hotel St-­‐MarGn Centre-­‐Ville
123
2012
Ritz Carlton Hotel Montreal+
130
Source: Colliers International Hotels
+ Property closed in 2009 to undergo extensive renovations
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Transaction Activity
From 2009 to July 2012 there were a total of 19 hotel transactions in Greater Montreal with
3,565 rooms sold. Notable among the transactions are the sale of such assets as the Four Points
by Sheraton Centre-Ville, the Courtyard by Marriott Montreal and the Clarion Hotel and Suites
Centre-Ville all of which were converted to alternate uses; student residence or multi-family
apartment in the case of these assets. This trend has been a boon to the market as supply erosion
has resulted in improved performance for the market overall. A lack of quality assets coming to
market and historically low cost of capital is expected to result in a seller’s market over the next
several years as local and international capital seeks opportunities to invest in this market.
Cap rates in the Montreal market range from 9.0% to 12.5% for select-service assets with an
average price per room of $87,000 recorded on transactions that took place from 2009 to July
2012, ranging from $35,000 to $153,000 per room. A summary of transactions recorded for the
Montreal market is presented below:
Greater Montreal Area Hotel Transactions 2009 to YTD 2012
Name
Rooms
Date
Grand Plaza Montreal Centre-­‐Ville Hotel 1
319
Apr-­‐12
$26,900,000 Price
Price / Room
$84,275 Courtyard & Residence Inn by MarrioZ Montreal Airport
329
Jun-­‐11
$39,000,000 $118,500 Holiday Inn Pointe Claire 2
308
Feb-­‐11
$12,200,000 $39,600 Best Western Europa Downtown 3
174
Jun-­‐10
$10,000,000 $115,000 Courtyard by MarrioZ Montreal 4
181
Apr-­‐10
$12,300,000 $68,000 Montreal Hotel Gault
30
Apr-­‐10
$4,200,000 $140,000 Celebrity Hotel & Suites Downtown Montreal
26
Mar-­‐10
$1,600,000 $61,500 Clarion Hotel & Suites Centreville 5
266
Feb-­‐10
$17,100,000 $64,300 Hotel Chateauneuf Laval
70
Nov-­‐09
$5,700,000 $81,400 Motel Chez-­‐Nous
43
Jun-­‐09
$1,545,000 $35,900 Four Points by Sheraton Montreal Centre-­‐Ville 6
196
Apr-­‐09
$18,750,000 $95,700 Hotel XIXe Siecle
58
Apr-­‐09
$8,894,000 $153,300 Hilton Montreal Airport Hotel
486
Mar-­‐09
$20,000,000 $41,200 Days Inn & Conference Center Montreal Airport
92
Mar-­‐09
$8,800,000 $95,700 Berri Suites Montreal
23
Jan-­‐09
$1,045,000 $45,400 Total
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Notes
1. The property was closed at the time of sale.
2. Purchaser invested approximately $50,000 per room in renovations immediately after
purchase; includes excess land for future development.
3. Sale of 50% interest in asset.
4. Purchased for conversion to student residences.
5. Purchased for conversion to rental apartments.
6. Purchased for conversion to student residences.
Valuation
The Colliers Hotel Value Index monitors the annual rate of change in hotel values based on
operating performance in a market and industry trends, as well as the return expectations of
investors. The value of hotel real estate dropped in 2008 and 2009 with the national average
declining by -1.4% and -7.3% respectively, with 2009 being the largest annual decline since the
recession of the early 1990s. The Montreal Downtown area had healthy hotel value increases
over the Canadian National Average from 2010 to 2012F, although Montreal Airport experienced
below-average levels in large part due to increases in supply.
Colliers Hotel Value Index
2008
2009
2010
2011
2012F
Montreal Downtown
-­‐5.4%
-­‐5.6%
5.2%
7.0%
5.2%
Montreal Airport
-­‐8.2%
-­‐8.7%
1.4%
4.3%
4.8%
Canadian NaGonal Average
-­‐1.4%
-­‐7.3%
3.0%
4.8%
4.4%
Source: Colliers International Hotels
The Colliers Hotel Value Index for other major markets across Canada, along with the 2012
Canadian Hotel Investment Report can be obtained at http://www.colliershotels.com/research.
Colliers Toronto is a Member of GlobalHotelNetwork.com. Alam Pirani, Executive Managing
Director, Colliers International Hotels, serves on GlobalHotelNetwork.com’s Investment
Committee.
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