MKG Reports

The year 2003 was delicate for the French hotel industry. To the drop in international customers observed since 2001 was added a degradation in the national economy, leading to a pronounced drop in RevPAR by 2.4% in total, though moreover by 12.7% in the 4* category. 2004 ended on a rise that equalled the loss of the previous year: +2.3% for RevPAR in all categories combined.
This change is perfectly inline with the forecasts published by MKG consulting at the beginning of the year, which anticipated a RevPAR growth rate of between 2% and 4%.

The mitigated business results registered in 2003 also seem to have led the majority of operators to ease up on their development in 2004. The results in terms of change in the hotel supply will be published later, though should lie between +1.5% and +2.5% (in number or rooms available). We note, for example, the opening of the Hilton Arc de Triomphe and the Concorde Palais de la Méditerranée.

Paris managed to do better than the rest of Ile-de-France, for which RevPAR remained stable over the two years. The Marne la Vallée zone in particular, felt the consequences of a very high increase in supply in recent years. Throughout the rest of France (the provinces), RevPAR growth remained largely sustained by rises in the average daily rate, +4.2% in one year, while occupancy rates saw a slight drop (-0.5 points), notably due to the significant expansion of numerous corporate chains throughout the territory.

The assessment for 2004 is thus satisfactory. The year marked a pickup in demand, notably pertaining to “business” customers. Even though operators went through a mitigated summer season, the good results of the rest of the year 2004 allowed for a strengthening of the movement towards a recovery, and to forecast the continuation of this trend for the year 2005.

What will the consequences be for the tsunami in Asia?

Finally, we note that it is still too soon to forecast the possible consequences of the tsunami in the Indian Ocean on tourism and the hotel industry in Europe. The volume of overnights generated by tourism in the affected countries is very high. European customers are notably at the origin of over 28 million rooms sold in 2003 for Thailand alone, for example. The preliminary indications from tour operators show that, concerning French customers, alternate destinations will, in the short term, be relatively similar destinations to those in Asia in terms of products, such as the Caribbeans, Mexico, La Réunion, and South Africa.

In the medium term, the upcoming summer season may be positive for France. The hotels along the coast should notably benefit from an increased number of customers. MKG Consulting believes that the establishments located along the French coast may thus gain 1 to 2 additional occupancy points.

Finally, the rooms revenue generated by the corporate chain hotel industry in France should reach around 4.6 billion euros in 2004, inclusive of tax, a rise of around 4%. Less profitable customers in the 3* and 4* categories in 2004

In the budget and hard budget segments, growth in RevPAR results from the very favourable rise in average daily rates, while the occupancy rates registered a drop of between 0.7 points in 0*, and 0.1 points in 2*. The slight drop in occupancy levels is explained largely by the increase in supply in recent years. The positive change in demand has continued, which has allowed for an increase in average daily rates.

Concerning the 3* and 4* categories, aggressive policies in terms of rates have allowed, during the course of the year 2004, a rise in occupancy rates. While it is true that this improvement in hotel occupancy occurred in the opening months to the detriment of the average daily rate, the drops in rates eventually subsided in 2004, notably in recent months.

Hotels in Paris are given a boost by fall exhibitions

In 2003, the Paris hotel industry was hard hit by the economic slowdown. In 2004, it rebounded significantly, and registered a rise occupancy rated by 2.4 points. In the capital, the average daily rates took a while however to pick up with the growth, which was mainly due to the high pressure of rate reductions that were made in 2003. Notably, the very low value of the dollar has penalised the 3* and 4* categories, which are more heavily dependent on international customers. This was essentially true for inner-city Paris, a sullen summer, but a September and October that were positive for the hotel sector, notably thanks to the success of exhibitions, such as, for example, the World Automobile Show. Over the entire year, RevPAR in all categories combined rose by 4.2%.
——-