Jeff Hyslop began his hospitality career on the front lines, working as a busboy and night auditor in hotels across Ontario, British Columbia and New Brunswick.
Now, as senior vice president of asset management and investment at InnVest Hotels, he oversees the largest hotel portfolio in Canada.
In his own words, his team is the link between the hotel business and the business of hotels. They focus on the day-to-day performance of the assets while maintaining relationships with brand partners, including Marriott International and Fairmont, and communicating with stakeholders and lenders.
Hyslop spoke to Green Street News about the challenges and opportunities he expects 2025 will bring for Canada’s hotel industry, and what lies ahead for InnVest.
As Canada’s largest hotel owner and operator, InnVest’s portfolio spans markets and hotel tiers. Coming into 2025, where is your attention focused?
We have a few gaps in the Canadian market where we would love to own a hotel. Downtown Montréal is a big one, we’re certainly focused on that market. Victoria is another. We’re always eyeing additional resorts – we love Banff [Alta.] and Whistler [B.C.]. We’d still look to acquire another asset or two in the GTA.
We’re also starting to explore outside of Canada, in the U.S. and potentially overseas. But obviously, currency makes it a challenge right now. So, that’s going to be more exploratory – learning about markets and looking at assets – and we’ll see if we can make something make sense given where our currency is.
What has the reception been like in the U.S.?
We bought our first U.S. asset in 2023, in Seattle. It was our first foray in the U.S., and it was good, but it was a lot of learning. There are some nuanced differences to buying real estate in the U.S.
There are different tax structures, there’s more municipality and state granularity. The debt there is a little more complicated. The underwriting parameters and closing requirements are more significant than in Canada.
So, we’re learning our way in different markets, and we’re trying to dip our toe in and get our head around the market before we go full on.
Hotel markets are expected to have a more normalized year – what does that look like for InnVest?
2024 was a great year. Q4 ended up being very strong. Taylor Swift was a huge benefit if you had assets in Toronto and Vancouver, which we do. So, Q4 came in quite a bit stronger than we even anticipated.
I expect next year we’re going to have 2% to 2.5% [revenue per available room] growth, which is really an old school, ho-hum year. For us, it means a much more significant focus on cost.
We have labour cost to catch up on with some major union contracts that have rolled recently. That came with large increases because of the recent inflationary period, so there’s going to be pressure on margins.
From an asset management and operations perspective, we’re very focused on making sure our costs are all reset, and we’re leveraging the size of our portfolio on everything from elevator contracts to buying key cards.
From an acquisition standpoint, do you see this as a time to pause and reevaluate your portfolio, or a time to expand?
We’re always looking for opportunistic deals, but we’re not in a rush. There’s no pressure to grow. We’re always working to improve our balance sheet, and so it gives us the chance to grow as opportunities arise in the future.
[W]e continue to look and explore opportunities, and we’re open to doing deals. But there isn’t pressure.
What sort of opportunities do you expect to arise this year?
We are seeing more developers with mixed-use opportunities pivot from an office use, or even condos, to hotel. There have been some projects that have already seen that shift, given the challenges in those markets.
“We’re seeing hotel move up in terms of the highest and best use priority in certain markets, which is something we haven’t seen in Canada for quite a long time”
We’re seeing hotel move up in terms of the highest and best use priority in certain markets, which is something we haven’t seen in Canada for quite a long time. The Canadian market is primarily made up of private, long-term owners, so Canada always has a bit of a muted transaction volume in the hotel space relative to other markets, like the U.S. or overseas.
What challenges do you foresee in underwriting?
It’s a lower growth environment, which makes it harder to push your expectations for top-line growth. Usually, when we’re doing deals there’s rebranding or renovation, and so the [capital expenditure] cost drivers, due to inflationary pressures, make it tougher to pencil.
There is also a bid-ask gap on high-quality assets that poses a challenge as well.
Speaking of renovations, with the cost of construction and labour both climbing, do you think more owners will opt to sell rather than invest in their performance improvement plan?
Yes, I think that could be a driver for people to make a divestment decision. There’s more pressure from the brands to reinvest in the assets, and the cost to do that is high.
Owners see the market performance with strong fundamentals. So, I do think some opportunities will be unlocked because of those factors for sure.
How are those strong fundamentals playing into the debt market?
The Canadian debt market for hotels is probably as good as I’ve seen it in my 20-year career. It’s healthy, it’s competitive. There are bigger lenders engaged in the sector. RBC and BMO are competitive in the space.
National Bank is buying [Canadian Western Bank], which is quite active in the space, so I think between the two of them, they’ll also add competition. A lot of credit unions are very aggressive on hotels as well.
“The Canadian debt market for hotels is probably as good as I’ve seen it in my 20-year career”
So, I think the lenders are more comfortable with hospitality now, having seen the industry get through an experience like the pandemic and come out the other side with very few foreclosures. Obviously, I think we’ve proven ourselves to be a relatively safe sector to lend to. So, I think the debt situation in Canada is definitely quite positive right now.
If you had to pick a market in Canada that would be the most active in terms of top-line revenue growth in 2025, what would it be?
Toronto is going to have a tough year. We have the Taylor Swift effect and Collision Conference moving to Vancouver this year, so I think that’s going to be a bit of a challenge.
Looking across our portfolio, we continue to see decent strength in Vancouver, despite the Taylor Swift effect. We see strength in places like Calgary and Vancouver. We are expecting to continue to grow and get back to more normal levels.
And what market do you think will be really strong a few years from now, and would make for a strategic acquisition right now?
I think western Canada will be strong. With the expected change in government and the opening up investment in our resource sector, typically places like Alberta and Saskatchewan do well in that type of environment. I do think there could be potential strength in some of those markets.
Even northern Ontario, Québec and B.C. will benefit from investment in our mining sector. I think there’ll be more investment into resource sectors in Canada, which will create growth.
How does your own background in the hospitality world translate into your current role?
I think it helps me a lot. I started in the field as a busboy and worked in food and beverage and night audits. It gives me a better connection to our operators because I’ve been in the trenches.
I appreciate the complexities of a hotel operation and the importance of making sure the team and the working environment are really respectful of our colleagues, because that’s really our job as hotel asset managers. We need to give our operations teams the tools they need and environment they need to be successful so that they can then provide great guest service, which is really what drives our revenue.
