Market Report France

April 2014 Somewhat Better and a Lot of Hope for the French Hotel Industry

Deloitte French Hotel Industry Performance April 2014

Deloitte Further to a difficult first trimester, the French hospitality industry recovered in April. National occupancy progressed by 2% to 6%, as did RevPAR. Average rates were still under pressure, although to a lesser extent than in previous months. Another positive point: this was felt throughout most of the country and not just in a few specific areas. The slight improvement in the economy was behind this albeit fragile growth, which has nonetheless raised hopes for a recovery.

April saw welcome growth in hotel demand indicators: nothing exceptional, but a slight improvement felt by almost all categories. The situation is all the more heartening since occupancy growth is not the result of school holidays or bank holidays falling favourably. Instead, April’s growth can be essentially explained by an improvement in the economy and the resulting “catch-up effects”. Further to several years of recession, the European economy is starting to recover, as are hotel overnights.

This improvement in hotel demand was felt throughout most of the market. Paris, the Côte d’Azur, Regional France and large cities thus posted occupancy increases. Admittedly, some hotel categories in certain towns recorded drops in performance, but the general trend was higher occupancy.

Unfortunately, average rates are not following the same pattern – stagnating in April or even falling in a number of categories and destinations. Although regrettable, this is far from catastrophic. First, declines remain modest, and secondly, it is hardly surprising that hoteliers are maintaining prudent pricing strategies, given the results of the first trimester. Average rates are only likely to grow once recovery has had time to properly take effect.

The only exception during this rather encouraging month was the Super-budget sector that continued to post declining occupancy and RevPAR. Competition from alternative products and increased demand from budget guests for higher-positioned hotels left the Super-budget sector by the wayside.

Ultimately, April was favourable for the French hotel sector – not exceptional, but for the first time in several months, occupancy grew. Moreover, growth was observed throughout France, rather than being just a one-off event. For all that, progressions were modest and the economic context remains difficult, particularly in France. May – with its bank holiday weekends– will be the acid test to see whether or not the industry is really out of the woods, as is hoped by so many.

Table - French Hotel Industry Performance April 2014

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