France Sees Growth As Uncertainty Looms

-- Hotels, 1/12/2009 8:43:00 AM

The year 2008 proved to be a good year for the hotel industry in France, driven by healthy performances in the first semester, as well as the country’s widespread and mature hotel supply.
Low Midscale hotels helped France escape the year with a minor growth, as experts predict a continued decline over the next six months.

According to end-of-year data release by MKG Hospitality, Economy hotels achieved a €46 Revenue per Available Room (RevPAR), representing a 4% increase over 2007 – the highest growth of all categories. This was driven by a relatively low decrease in Occupancy Rate (OR) of 0.8 points and a 5.3% increase in Average Daily Rate (ADR).

The Midscale category was the next best performer, with a RevPAR growth of 3.3%, fuelled by a 5.5% increase in ADR and an OR decrease of 1.4 points.

“The Economy and Midscale hotel segments will certainly be a lot more resilient during the difficult months ahead, and help France somewhat weather the storm,” stated Director of Development, Vanguelis Panayotis.

“People will of course continue to travel, be it for leisure or business, as it is a necessity these days. Their travelling habits will change however. Consumers and companies alike will continue cutting back on costs, making Economy and Midscale hotels a much more practical and efficient option,” added Panayotis.

The upscale hotel segment suffered the biggest loss, ending the year with a RevPAR of €142, a decrease of 0.7% compared to 2007, driven by an OR drop of 2.1 points and a modest rise in ADR of only 2.2%. Overall, the French hotel industry sustained a 1.9% growth in RevPAR, reaching just over €58.

The year’s OR ended at 68.4%, a decline of 1.3 points and ADR at just over €85, an increase of 3.9%.

Parisian hotels remain the country’s most profitable, with 80.3% or, €151 ADR and in turn a RevPAR of just over €121. Meanwhile, Ile-de-France enjoyed the highest RevPAR growth, at 4.1%.

“The last few months have sent out warning signals. Although ADR growth has remained positive, OR fell considerably. We will now see hotels reducing their rates in order to fill their rooms, and therefore a reduction in ADR,” continued Panayotis.

“If they haven’t already, hotels should begin taking drastic action, especially knowing what the rest of the year might have in stall. Revenues and costs will be fundamental. This can be achieved by applying appropriate rate strategies and executing profit protection plans. Added-value and a focus on guest services will also be crucial, as they will aid in upholding a competitive advantage.”

According to Panayotis, although companies will be battling hard to maintain the high results of previous years, they should use this difficult period as an opportunity to plan for the year ahead. “When the tables turn, and indeed eventually they will, those who are well prepared will reap most of the rewards. Not all companies are structured the same way. Certain companies will find it easier to survive the downturn,” concluded Panayotis.