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November 2013, a cold front on hotel activity

Much like the weather in November, cool and rainy, French hotel activity was down in all categories compared to last year.

The RevPAR drop is marginal (-0.9%) in a month of relatively weak activity, but it is indicative of a still gloomy atmosphere amid the continuing economic crisis, of unemployment, and of disputes of all kinds. The regular workings of the government and announced tax measures are not conducive to the confidence of businesses that are limiting their spending and business travel. The driving upscale hotel sector is down at the end of the year and thus increases the downward pressure. Occupancy rates are stagnant or declining, and management costs are prudent.

While Paris and its suburbs still show a positive trend in RevPAR (+1.5% in Paris and 3.4% for the periphery), it does not hold true for the rest of the country whose RevPAR plunged 2% under pressure from lower average daily rates in all categories.The persistent shortage of Parisian hotel capacity helps maintain high levels of occupancy rate (over 81%), but average daily rate increases have reached a limit. Thus the phenomenon of alternative commercial accommodation (apartments, houses) is growing, the effect of which is now being felt, especially in times of higher activity.

"The growth prospects of the French economy are not strong enough to encourage businesses and individuals to move. It is still resting on the economy", says Georges Panayotis, President of MKG Group. "There is a real danger that hotel guests have permanently been captured by other forms of cheaper accommodation, such as unregulated holiday apartments. It is urgent to stimulate the creation of a new hotel supply."

In a cumulated 11-month period, ending in November, the results are very mixed with -0.8% RevPAR loss in French hospitality, the result two major indicators dropping: -0.3 points in occupancy and 0.3% in average daily rate. The year will end at the bottom of the MKG Hospitality forecast range in the absence of economic recovery in the second semester.

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