Vast sums of money are pouring into Penticton as investors bet big on the local hospitality industry. While two brand-new hotel starts have garnered significant attention, a flurry of motel sales have also taken place in the community as purchasers look to get in on steadily increasing room revenues in the city. Managing broker Tim Down explains that a “perfect storm” of increasing tourism and a shortage of investments providing cash flow has created sky-high demand for the product. “Hotel/motels are starting to become popular again because of the return, and the lifestyle that it offers for people to move to the Okanagan and manage a business where they are still earning a decent living,” Down said. Down’s firm has recently sold the Slumber Lodge Motel for $3.5M and the Jubilee Motel for $1.2M. The Beachside Motel ($3.5M), Rochester Resort Motel ($2.9M) and Spanish Villa ($5.9M) are all currently listed for sale by NAI. “We’ve got a lot of money moving out of the Lower Mainland, we’ve got a lot of money moving out of Alberta,” he said, adding new immigrants have also been attracted to the sector.
Room revenues in Penticton have climbed 42 per cent this decade, to $29.5M in 2016, according to Stats BC. Data collected through the local room tax is complete to just June of this year, but shows a small dip likely attributed to the elevated level of Okanagan Lake.
While revenues rose, the total number of registered properties with four or more rooms fell, as many older motels were torn down or converted to low-income housing. The Hansel and Gretel Motel became the Skaha Sunrise Apartments in 2010, The Bel-Air Motel was rechristened the Fairhaven in 2016 and work is currently underway on the Motel Super 8 to convert it into the Compass Court social housing complex. Down says in many ways, investors in the motel market are being drawn in by the same market forces that has spurred an expansion at the Lakeside Resort and two brand-new hotel projects getting underway this year. “Those are sophisticated investors that are monitoring the economics of the cycle, and typically want to get in knowing they have a strong economic cycle,” he said, noting it takes about two to three years to get a new hotel operation established. “It’s just a challenge right now, to find good quality commercial investment product,” Down added. **a previous version of this story stated the Spanish Villa Motel had an accepted offer on the property. NAI later clarified that a deal has not been completed. The story has been changed to reflect that.