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Analysis

Overview 2016 of French hotel industry: €900 million in lost earnings, Paris and Nice suffer

Analysis of monthly evolutions, key figures: discover the first overview of fiscal year 2016 for the French hotel industry. Unsurprisingly, this year was difficult in France; business results were driven down by by results in the PACA Region and even more so in the Paris Region, where the RevPAR dropped significantly. Overall, the lost earnings for the hotel industry is no fewer than 900 millions euros nationwide (CA F&B and other included), despite good performance on other markets in the provinces.

For French hoteliers, the time has come for an overview of 2016, and, unsurprisingly, professionals had a very poor year. Throughout the country, the RevPAR (Revenue per available room) fell by 5%, under the impact of a combined drop in occupancy rate (-1.2 points) and average daily rate (-3.3%). This is the strongest drop since 2009 (4.6 point drop in OR and 1.8% drop in price). This happened just after hotel performance in France stagnated in 2015 (+0.1%) and 2014 (-0.2%), while solid growth was reported elsewhere in Europe.



The cause of this 5% drop varied over the course of the year: in January and February occupancy rates brought business down within in a context where hoteliers resisted lowering prices. Although the situation appeared to show improvement at the beginning of March, which had a favorable calendar due to school holidays, the terrorist attacks in Brussels on March 22 and their indirect psychological impact on the perception of security of the french capital once again made indicators plunge in April. May and early June were marked by strikes and and the flooded River Seine. The Euro 2016 brought some respite, although only the host cities in the provinces reaped any benefit from it. The terrorist attacks on July 14 in Nice cast a pall over the summer season in the Provence-Alpes-Côte d'Azur region and thus the Paris Region although other shoreline sectors did fairly well. In light of the persisting drop in demand (along with new alternative accommodations such as AirBnB, that is growing rapidly), hoteliers then entered a new cycle of dropping prices by around 5% on the last months of the year. Thus after a first semester marked by the drop in occupancy, the latter was marked by the drop in average daily rate. Starting in November, a comparison effect could be observed with respect to November 2015; the first impact of lowered prices allowed arrivals to improve in the last two months.

Overall, taking into consideration the fact that F&B and other activities also suffered drops in targeted destinations, the shortfall for France's hotel sector is no less than 890 million euros for fiscal year 2016, of which -650 million in room turnover. This is without taking into consideration indirect effects: generally speaking each euro spent directly in hotels corresponds to more than 3€ in indirect spending in other business sectors (commerce, F&B, transportation, tourist sites, suppliers and service providers at hotels...), the impact of this drop on France's economy was undoubtedly more than 3 billion € for 2016.

But this national data, which is negative for the French hotel industry overall, does camouflage significant disparities depending on the destination. Hotels in Paris proper saw their RevPAR fall by no less than 14.6%, which also impacted Hotels in Ile-de-France outside Paris (-9%). PACA posted a drop by -2.8%, which is fairly contained, demonstrating a certain resilience in light of the tragic context of the year. But activity dropped in the greater Paris and PACA regions, and these generate more than half of revenues for the French hotel industry:



France's two usually leading areas thus pulled results for 2016 down, while the province watched RevPARs progress by 2.7%, and even +4.4% outside the PACA region. Most French regions in the provinces outside PACA and Bourgogne-Franche Comté posted increases in their occupancy rates:



The detailed analysis (results by range and by territory, by region, department, major city, specific sectors in the Ile-de-France, together with an analysis of the evolution of the hotel supply, hotel chain ranking...) will be published in the European Hospitality Report 2017, available from end January: find out more or preorder (Early Bird discount valid until 31/1/2017).

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