T
he hotel sector has experienced a remarkable resurgence over the past decade, driven by pent-up demand resulting from the pandemic. Once considered an underdog in real estate investing, hotels now offer a distinctive combination of income potential and value-add to surrounding developments, making them a highly attractive investment option.

    Historical data shows that hotel revenues in downtown Toronto have outpaced other asset classes, with an average annual compounded growth rate of 6.5% over the past decade. The sector is projected to continue growing at a rate above inflation, driven by population growth, increasing travel demand, and urban revitalization efforts.

    In comparison, the office sector faces significant challenges due to the rise of remote work, leading to sustained decreases in demand for traditional office spaces. This has led to a surge in interest from developers looking to pivot to the hotel sector, with many projects incorporating mixed-use developments.

    Hotels offer unique advantages, making them an attractive option for investors seeking diversification and navigating market uncertainties. According to Deloitte's 2025 Commercial Real Estate Outlook, hotels have risen significantly in investor interest, ranking fifth among asset classes expected to present the greatest opportunity over the next 12-18 months.

    The Greater Toronto Area is grappling with underutilized office space, a challenge that is expected to persist for two decades. This has led to opportunities for office conversion projects, including hotel uses. Successful conversions have been undertaken in major U.S. cities and Canada, with Calgary leading the way in providing incentive programs for adaptive reuse.

    As the real estate industry continues to evolve, the hotel sector presents a dynamic and intriguing option worth exploring for both seasoned and new investors.