Originally published in Eastern and Western Hotelier Magazine, this Q&A features insights from BMO Financial Group’s hospitality finance leaders on how lenders are navigating today’s hotel market. The discussion explores current lending conditions, sectors of opportunity, and the factors shaping financing decisions across Canada’s hospitality landscape.

BMO continues to remain constructive and supportive of the hospitality sector. While we are seeing some moderation in operating performance across hotels, results are generally trending 5–7% lower on RevPAR, driven by a combination of slightly lower occupancy levels and ADR. While many markets demonstrate their own nuanced changes in performance from past years, the sector is coming off a couple of years of very strong performance. General moderation across the sector is expected. This environment has not led to changes in our underwriting criteria, nor have we introduced new or additional covenants. That said, we are being appropriately mindful of current market conditions, particularly when structuring transactions that rely heavily on high growth forward-looking pro formas. In today’s environment, location fundamentals and sponsor quality, including experience, financial strength and liquidity are even more critical considerations when evaluating new lending opportunities.

Sanjay Arora, managing director and regional VP, BMO. We are most comfortable with full-service and select-service branded hotels located in primary and secondary markets. These assets tend to benefit from diversified demand generators and stronger brand-driven performance through economic cycles. We are seeing more pronounced slowdowns in certain markets that are disproportionately impacted by external factors, such as tariffs or concentration risk. Some examples include regions with heavy reliance on a single industry or cross border activity. In evaluating opportunities, we place a strong emphasis on locations with multiple, sustainable demand drivers to support long-term performance.

Despite a less robust development pipeline, overall activity levels have remained strong. In fact, 2025 was among the most active years we’ve seen for hotel M&A and refinancing transactions. Slowdown in other real estate sectors, improving environment relating to construction and labour costs will drive future development activity which BMO is well-positioned to support.

One of the key challenges is ensuring strong sponsorship with demonstrated operating experience in the hospitality sector. Lenders are also focused on deals that are priced appropriately at acquisition and supported by an appropriate capital structure, rather than business plans that depend on overly aggressive assumptions. Lastly, obtaining credible appraisals from experienced hospitality-focused appraisers remains critical, as valuation quality plays a significant role in underwriting confidence. Ultimately, financing solutions that demonstrate appropriate means to absorb changing costs or other financial uncertainties will ensure the necessary capital is available for owners and operators to execute their plans. BMO has experienced teams across the Canada to help guide continued growth in the hospitality sector.