Let me get this off my chest right away:  InnVest Real Estate Investment Trust is not a Dividend Champion. It has a poor dividend-payment record, too much debt and resembles a classic attempted turnaround, with all the business and investment risks that go with it. In addition, the share price still languishes at 50% below its initial public offering in 2002.

Therefore, you may ask, why bother? There are five reasons why this company could have a major stock-price gain and turn itself into a great Dividend Champion over the next few years. In the meantime, if all goes according to plan, you can collect a 7.8% yield while waiting for the turnaround.

First, some background: InnVest (TSX: INN-U, OTC: IVRV.F) owns Canada’s largest hotel portfolio—14,000 rooms in 109 hotels—as well as 50% of the franchisor, Choice Hotels Canada. Its brands include Comfort Inn, Holiday Inn, Quality Suites, Quality Inn, Delta, Travelodge, Hilton, Fairmont, Sheraton and Best Western. These hotels are managed by Westmont, Delta, Fairmont and Hilton.

Reason 1: Management Change

In 2014, a New York–based activist investor led a successful revolution that eventually resulted in wholesale changes at InnVest. A key concern from the investor, Orange Capital, was the apparent conflict of interest from Westmont Hospitality Group’s influence over InnVest’s management. Westmont provided InnVest’s part-time CEO and chairman of the board while also acting as the appointed external manager of a large part of the hotel portfolio.

During 2014 and 2015, the company made many changes, including appointing several new independent directors, replacing the chairman and  hiring a well-regarded, full-time CEO.

In addition, the property management agreement with Westmont was renegotiated so that asset management fees were discontinued and property management fees became more aligned with results. Bottom line: a considerable reduction in fees paid to Westmont.

These changes resulted in a business that could focus on delivering results for its own unitholders, as opposed to Westmont. Also encouraging, members of the board and management now own 35% of the issued units.

Reason 2: Upgraded Hotels

InnVest is making good progress with the sale of underperforming properties. By the end of March 2015, the company had sold 29 properties, raising $255 million. Another five properties are currently earmarked for sale.

The company also acquired two high-quality assets in two core tourism and business hubs. It  bought the 644-room Hyatt Regency in downtown Vancouver in December 2014 for $140 million and acquired a 20% interest in the 1,363-room Fairmont Royal York in downtown Toronto for $38 million early this year. Both transactions were good values.

Since 2013 the company spent $137 million to renovate much of the hotel portfolio, including 58 Comfort Inns. It plans to spend $60 million to $80 million more this year on other renovations.

The early results from the capital investments are promising. The Comfort Inn portfolio (renovated in 2013 and 2014) grew room revenues 15% during the first quarter of 2015 and had a 74% improvement in hotel gross operating profit compared with last year.

Reason 3: Improving Balance Sheet

The company wants to cut its leverage ratio of debt to gross asset value to below 60%. At the end of March 2015, the leverage ratio stood at 60.7%, substantially down from a year earlier. The company is also actively cutting the cost of its debt by redeeming pricey convertible debentures early, and this year it plans to further lower the cost of much of its mortgage debt.

Reason 4: Reviving Tourism Sector

As discussed in the In Focus story, the Canadian tourism sector should benefit from the weaker Canadian dollar. Not only will Americans travel more to Canada, but Canadian tourists will think twice before they venture abroad.

When the Canadian dollar was strong and global tourism was  growing robustly, overnight stays from foreign visitors to Canada declined 20% between 2000 and 2011, which included a 25% drop in overnight stays from U.S. visitors. Canadians also took advantage of the strong Canadian dollar to explore the world as the country’s ballooning travel deficit (travel-related expenditures of Canadians abroad minus spending by visitors) indicates. The travel deficit amounted to $18 billion in 2012, up from $2 billion in 2000. These factors resulted in poor performance of the domestic hospitality industry and a low growth rate for new hotel development.

However, the dynamics are changing. Since the Canadian dollar peaked against the U.S. dollar in 2011, international visitors have flocked back to Canada, with overnight visits up more than a million from 2011 (see graph). Overnight U.S. travel to Canada is forecast to rise 3.5% in 2015, and according to HVS Global Hospitality Services, Canadian national hotel occupancy will rise to 65.4%. If this indeed pans out, the occupancy rate will be at its best level for at least 15 years.

Reason 5: Attractive Valuation

The latest quarterly results were hurt by the seasonal factors as well as the sale of a number of hotels in 2014. However, several measures indicate that the company’s performance is moving in the right direction, including the 10% jump in same hotel gross operating profit.

We believe InnVest can grow its adjusted profits more than 20% over the next two years from improvements in business conditions, higher occupancy and firmer pricing, yet the stock trades at a discount to U.S. hotel REITs. The dividend yield is currently 8.1%, and although no growth is expected this year, improved cash flow from 2016 onward should provide scope to increase the dividend.

Here is an opportunity to earn an attractive yield over 8% while management increases the company’s value by enhancing its hotel portfolio just as the Canadian tourism industry improves. Risks remain, and the turnaround is a work in progress, but in this case I am breaking my own Dividend Champion investing rules because the potential reward adequately covers the risk. Buy InnVest below C$6.00.