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French Luxury Hotels and Palaces in 2015: diverging trends for activity

Although activity for the luxury and palace segment drove industry results throughout the territory in 2015, the market is very contrasted depending on ranges and spaces. Data published by MKG Hospitality thus show a drop in activity in the capital and for palaces, while the Côte d'Azur and luxury resort hotels show significant growth.

In 2015, the luxury hotel industry performed better than palaces. Palaces were hit hard by the attacks in Paris (all the more so since the supply of palaces is primarily in Paris), and also by the recent growth in the supply (opening of the Peninsula mid-2014). Consequently, they reported a 5.3% drop in their Revenue per available room (RevPAR) with respect to the previous year, due to a 4.4 point drop in their occupancy rate that was not compensated for by the slight (1%) improvement in their average daily rate. Inversely, the luxury hotel industry, which is better distributed throughout the territory and less affected by the supply in Paris, remained on a positive trend for annual performances, with 2% growth in its RevPAR in 2015 that was made possible by the 1.5% increase in its average daily rate and maintenance of its occupancy rate (+0.3 point). The same trend may be observed for most months in the year, except October and November.

Paris is usually a geographic growth engine for the sector, but in 2015 it's results were behind other markets and drove results at luxury hotels and palaces down. Luxury hotels and palaces in the capital ended the year with their RevPAR down by 3.8% due to the 3.7 point drop in their occupancy rate despite 1% improvement in their average daily rate. Luxury hotel activity in Paris was hit hard by the attacks, first in January and again, even harder, in November. Attenuated in November overall, (RevPAR down 1.1%) because of the arrival of a number of important government leaders prior to and for Cop21 last November 30, this impact was very strong in December with a 27.7% drop in the RevPAR at five-star hotels and Parisian palaces.

During the past year, the levers for luxury hotel activity nationwide were properties on the Côte d'Azur and also beach resorts and alpine resorts (La Baule, Deauville, Courchevel, etc.) and major cities in the provinces.

The prestigious addresses on the Côte d'Azur thus showed growth in their RevPAR by 12% on the period, driven by 2.3 points growth in occupancy rate and 7.8% growth in average daily rate. Their activity reached highs in July with a 57.3% leap in their RevPAR, thanks to the arrival of the Saudi king and his entourage on the Croisette. Moreover, the impact of their visit was boosted by the dates of Ramadan (read our article), which benefited all hotels in July and especially the upscale segments. Outside the Côte d'Azur and Paris, other French luxury hotels and palaces ended 2015 with a 6.3% increase in their RevPAR, a solid result.

In the years to come, France's luxury hotel segment should grow its capacity, particularly in the capital with openings and reopenings expected at the Ritz, Crillon, Lutetia, Cheval Blanc and Fauchon. Will activity on the market make a visible impact? The evolution of demand, particularly from emerging economies, should play an important role in its determination.

Also read:

  • 2015: French hoteliers mark a balance within contrasting circumstances
  • The Ramadan effect will be less significant on the palaces’ 2015 season

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