With abundant natural resources and growth rates in excess of all other G7 nations, Canada's fundamentals are outstanding, however, the Canadian hotel market is often overlooked by investors.

"Canada is an underserved market characterized by strong lodging fundamentals and a growing economy. Hotel transaction levels have soared over the past several years," said Alan Tantleff, an executive vice president for Jones Lang LaSalle Hotels.

"While often overlooked by hotel investors, the clear up-cycle of the Canadian lodging industry is increasingly attracting foreign capital across the country. Vancouver, Calgary, Fort McMurray, Grande Prairie and Ottawa present particularly strong investment opportunities," said Kristina Paider, senior vice president of research and marketing for Jones Lang LaSalle Hotels.

"On the world stage, as the host of the 2010 Winter Olympics, Vancouver is the entry point for Western Canada. Hotel demand is in growth mode, as evidenced by the double-digit increase in RevPAR to date in 2008," Tantleff said.

Calgary is the largest city in Alberta. While the city's economy and development is led by the oil industry, its transformation from a mid-sized prairie city to a cosmopolitan metropolis has been supported by the city's efforts to diversify its economy. The escalating oil prices have led to a thriving local economy marked by the fastest-growing population in the country. "Hotel rates have grown in Alberta commensurate with the level of economic activity," said Tantleff.

Fort McMurray is located in the heart of Alberta's oil industry. With just 1,000 hotel rooms, only three out of 17 hotels are internationally branded. "The elevated price per key of several hotel trades in 2007 show that the properties traded at a premium to replacement cost, implying the huge supply imbalance and opportunities for future development," said Tantleff. In Grande Prairie, only a handful of hotels are affiliated with a major brand, further supporting opportunities for branded product.

Ottawa benefits from the safety and security of being home to the seat of the federal government. Ottawa has become a top center for research and development. As a G7 capital, Ottawa is perceived by many as being undervalued compared to other capital cities such as Washington D.C., London and Paris. "While Ottawa does not have the economic vitality of some other world capitals, it is still significantly undervalued. The risk/reward fundamentals are out of whack," said Tantleff.

Improving hotel performance and lower interest rates have contributed to the increase in hotel values. Average target yields for hotels in Canada have converged with those in the rest of the world but continue to remain higher than return expectations in the U.S., according to Jones Lang LaSalle Hotels' research.

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