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Canada’s hotel investment market is entering 2026 on steadier but more subdued footing, as new analysis from Colliers points to moderating transaction volumes, tighter financing conditions and a more selective development pipeline despite resilient travel demand.
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Transaction Volumes Ease After Post-Pandemic Surge
The 2026 Canadian Hotel Investment Report from Colliers indicates that deal activity is normalizing after several years of post-pandemic catch-up, with total transaction volume expected to track slightly below recent peaks recorded between 2023 and 2025. Publicly available figures in the report point to a market that has moved past the rapid rebound phase and is settling into a more balanced cycle.
Sales data compiled by Colliers show that 2024 and 2025 produced robust volumes, supported by pent-up capital, strong leisure travel and a limited number of quality assets on the market. In contrast, the projections for 2026 suggest fewer large portfolio trades and a greater share of mid-market single-asset deals, particularly in secondary and tertiary cities where pricing adjustments have been more pronounced.
The report also notes that purchasers are increasingly focused on income stability and asset quality, with investors scrutinizing property-level cash flow, brand strength and renovation needs more closely than during the earlier recovery period. This shift is contributing to longer transaction timelines and a greater divergence between asking and achieved prices in some markets.
While overall sales expectations for 2026 are more conservative, Colliers highlights that Canada’s hotel sector remains attractive relative to other commercial real estate asset classes, which continue to face structural headwinds in office and, in some cases, retail. Hotels are benefiting from their ability to reset rates quickly and respond to changing demand patterns, which is helping underpin investor interest.
Financing Conditions and Pricing Gaps Shape Investor Strategy
According to the report, higher borrowing costs and cautious lending standards are among the main factors tempering activity in the Canadian hotel investment landscape this year. Debt markets remain open for well-located, branded properties with strong operating histories, but leverage levels and proceeds are more constrained than in the low-rate environment that preceded the pandemic.
Colliers points out that this financing backdrop is amplifying the gap between buyers and sellers, particularly for assets that require significant capital investment or have underperformed relative to their competitive sets. Buyers are pricing in higher debt service and capex, while many owners who benefited from strong results in 2023 and 2024 are reluctant to reset value expectations.
Cap rate trends outlined in the report show modest upward movement in several markets, reflecting both macroeconomic uncertainty and the repricing under way across broader commercial real estate. Full-service urban hotels with diversified demand bases are generally seeing firmer pricing, while older limited-service properties in slower-growth regions are experiencing more pressure to adjust.
These conditions are encouraging more creative deal structures, including joint ventures, vendor take-back financing and phased redevelopment strategies. Colliers notes that experienced investors with established lender relationships and access to flexible capital are best positioned to take advantage of selective distress and motivated sellers through 2026.
Market Performance: Urban Recovery and Leisure Normalization
Performance metrics summarized in the 2026 report suggest that the Canadian hotel sector is entering a more mature stage of recovery, with revenue per available room stabilizing after rapid gains in earlier years. Major urban centers such as Toronto, Vancouver and Montreal continue to benefit from the gradual return of international travel, corporate demand and group business, helping offset softer growth in some purely leisure-driven destinations.
Colliers’ analysis indicates that rate growth has been the primary driver of revenue gains since 2022, but that momentum is now moderating as consumers show greater price sensitivity. Occupancy levels in many gateway cities are approaching or exceeding pre-pandemic benchmarks, while certain regional markets that saw outsized leisure demand during travel restrictions are seeing a normalization of bookings and length of stay.
The report notes that extended-stay and select-service hotels have remained comparatively resilient, particularly in markets with stable infrastructure, energy or institutional demand. Full-service convention properties are seeing a more gradual recovery path, tied closely to the pace of conference and large event bookings, though forward group pace indicators are described as constructive for 2026 and beyond.
Colliers also highlights ongoing operational headwinds, including labor availability, wage inflation and rising insurance and utility costs. These pressures are prompting owners and operators to focus closely on cost control, technology adoption and revenue management in order to protect margins as topline growth slows.
Development Pipeline Becomes More Selective
Published details in the 2026 Canadian Hotel Investment Report show that new hotel development remains measured, with the bulk of the pipeline concentrated in a handful of high-barrier urban and resort markets. Toronto and Vancouver, along with select regional centers tied to government, education and healthcare, continue to attract developer interest where long-term demand fundamentals are viewed as strong.
However, elevated construction costs, higher interest rates and stricter underwriting are leading to fewer speculative projects breaking ground. Colliers notes that many planned projects are being re-evaluated, scaled back or repositioned toward limited-service and extended-stay formats with lower build costs and more predictable operating profiles.
The report underscores the importance of mixed-use schemes that integrate hotels with residential, office or retail components, which can help diversify income streams and support financing. In several markets, conversions of existing buildings into hotel uses, or vice versa, are featuring more prominently in the pipeline as developers seek to adapt underutilized assets.
Overall, Colliers characterizes the 2026 development environment as disciplined rather than expansionary. The relatively modest pace of new supply is expected to support occupancy and rate performance across much of the existing hotel stock, provided that macroeconomic conditions remain broadly stable.
ESG, Asset Repositioning and the Outlook for Investors
Beyond near-term transaction and performance metrics, the 2026 Canadian Hotel Investment Report emphasizes the growing role of environmental, social and governance considerations in shaping capital allocation decisions. Investors and lenders are paying closer attention to energy efficiency, building systems, climate risk and community impact when underwriting deals and evaluating long-term asset resilience.
Colliers notes that many ownership groups are prioritizing value-add strategies that combine physical upgrades with operational enhancements, such as introducing new food and beverage concepts, reconfiguring meeting space and deploying technology to streamline guest service. These repositioning efforts are seen as key to defending market share and supporting higher achieved rates in a more competitive environment.
The report suggests that Canada’s hotel investment market in 2026 will likely be defined by selectivity, patience and a focus on quality. Investors with a long-term horizon, strong local market knowledge and the ability to underwrite both real estate fundamentals and operating performance are expected to find opportunities, even as headline transaction volumes moderate.
For the broader travel sector, Canada’s steady hotel investment landscape signals a maturing phase of the post-pandemic cycle, where growth is less about rapid rebound and more about targeted capital deployment, sustainability and disciplined asset management.