For the first time in five years, France’s global hotel supply is growing. After hitting the bottom last year, the commercial hotel capacity climbed back over the 648,000 rooms mark with a net gain of close to 13,500 rooms. While chains have continued to grow in recent years, independent hotels are on the rebound and driving growth. Another observation for France’s hotel supply: upscale and budget segments are driving this growth.
Looking more carefully at the supply, the first observation bears on the renewed growth at unbranded properties, those that experienced the worst losses in recent years. The loss of 15,000 rooms in 2013 has turned around to net growth by 10,500 rooms across all segments for global growth in the category by 3.1%. But the renewed global supply, and even more so that of independent hoteliers, does not occur on the same segments: growth is more rapid at the two ends of the spectrum, meaning the Budget and Upscale segments. In fact, the economic crisis changed consumer behavior in two different areas: demanding more quality for price, which rewards good budget properties; and a desire for a personalized experience that encourages the emergence of boutique-hotels with a strong character in town centers. This is the area where creations by newcomers in the hotel industry are most evident. The hotel industry has become a “placement refuge” for investors who have made their fortune in other activities and wish to avoid taxes on capital gains. As a work tool, the hotel exempts them from a net wealth tax and other taxes upon sale. Many join the game of the centrally located charming hotel that requires no branding, while joining consortia to benefit from assistance in management and sales, or they simply sell their rooms through OTAs. With net growth by 2,800 rooms, or +12% on the previous year, this hotel segment is currently the most dynamic.
The branded hotel sector continues to progress but did sovery prudently in 2014: with fewer than 2,600 new rooms, hotel chains post their lowest growth rate since the crisis of 2009 (+1%). Hotel chains even show some losses on the Economy and Upscale segments, despite development in Paris. The capital city is one of the growth engines in France’s hotel supply: its supply grew by more than 1,600 rooms in the past year, more than 700 of which are upscale and luxury, particularly the hotels Peninsula Paris, MGallery, Molitor Paris, AC Hotel Paris Porte Maillot. But one of the remarkable trends of the year is the strong increase in the independent supply, often with hotels that improve their segment range after renovation, or reconversion of office buildings (hotel 5 Codet). Outside Paris and its immediate suburbs, which are also experiencing growth, several departments stand out for growth in their supply by more than 400 rooms; all are near a major city. Inversely, some rural or coastal departments have lost rooms.
Another highlight is the Budget segment which has renewed success. More than 2,500 new rooms became available at chains alone in 2014. High volumes were created under Première Classe, Fasthotel, Roi Soleil, and ACE Hotel, an association in Auvergne that federates independent hoteliers around a very economic brand found along major motorways.
In the end, strong growth may be observed on the Budget segment, 40% of the new contingent of rooms available in France (5,361 rooms), followed by an increase on the Upscale segment (2,525 rooms) and the Midscale segment (3,620 rooms), the economy segment is a bit slower in its recovery (+0.8%).
Despite these variations, the structure of France’s global supply did not change much among independent hotels which still represent the majority, but relatively few at 54% of the supply, and corporate chains that are up slightly to 46%.
One of the main differences that remains is the average capacity of properties. On average, unbranded properties have around 25 rooms versus 80 at chain hotels. If voluntary chains, which are increasingly structured within the independent hotel segment, are also taken into account, it may be affirmed that hotels belonging to a structured organization with an organized sales force are the majority in France.
This article is an extract of the 2015 European report
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