V ancouver's real-estate market for hotels is so weak that companies holding the properties are diversifying to other real estate asset classes to build stability.
Vancouver's Mayfair Properties Ltd. is currently increasing its stock of non-hotel properties.
The diversification follows a year when Vancouver hotel property values rose but were a laggard among Canadian cities, according to Colliers International's 2013 Canadian Hotel Investment Report.
Mayfair's largest division is its Mayfair Hotels and Resorts, which owns 12 B.C. hotels, including seven in downtown Vancouver, such as:
.the Best Western at 718 Drake Street;
.the Landis Hotel and Suites at 1200 Hornby Street; and
.the Viva Suites Downtown Vancouver at 1311 Howe Street.
Mayfair expects to finalize a deal soon to buy two Vancouver residential towers. Last year it developed a small residential building in North Vancouver and bought four residential towers in Burnaby that have a total of 518 units.
The company also recently built a ministorage building and owns a small office building.
"No one in their right mind would develop new stand-alone hotels right now," said Mayfair vice-president Zack Bhatia. "Land is going for $200 per square foot in downtown Vancouver. By the time you do the construction costs, you could buy existing hotels cheaper."
But hotels are not on the market, because owners are unable to get what they believe is full value for their properties, say industry insiders such as Coast Hotels and Resorts president Robert Pratt.
Pratt said the Vancouver hotel market is sluggish both operationally and in terms of real estate values. His company's 2013 convention business is below its target and last year's sales.
That has hurt cash flow and reduced the properties' value for buyers.
"When we sell properties, we do it based on trailing cash flow," he said. "Owners are not going to want to sell their hotels based on the 12-months trialling [cash flow] that we have seen."
"There [are] no hotels on the market because whatever is on the market gets scooped up very fast," he said. "People know that they won't get the value by selling now, so they're just holding on."