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August 2014 & beginning September: Indian summer for the French hotel industry

After a fairly slow beginning of the summer and a drop in performances in July, the hotel industry revived in August, with results up and a RevPAR that grew by 5.7% over the previous year. August thus saved the summer season for Paris and the provinces alike, and Indian summer continued in the first two weeks of September. And yet the dynamic is not yet homogeneous across the categories, the upscale continues to drive French growth, while the economy hotel segment continues to be affected by the budgetary constraints of its clients.

Under the combined effects of the calendar (end of Ramadan, shortening of the period of French holidays) and more conducive weather than in July, August proved, as expected, to be positive for France's hotel industry, catching up with a summer season that started poorly in July, when all the indicators were down.

With an occupancy rate higher than 71%, hotel occupancies in August were up by 2.1 points over the previous year. The average daily rate posted growth by 2.6%, driven by growth in the upscale (+4.7%), while the other categories post a stable average daily rate (excl. VAT). In the end the RevPAR is up by 5.7%.

This global increase in indicators in August made it possible to compensate for the decreases in July: for the entire summer (July and August), the occupancy rate settled at 71.8% or 0.6 points more than in 2013, and the hotel industry posted an increase by 1% for its average daily rate and by 1.8% for its RevPAR excl. taxes to reach 60.1€.

In August, the upscale segment posted the best growth and saw its RevPAR leap by 11%, as it was not affected by Ramadan like in 2013 when Middle Eastern clientele in particular were less present at the beginning of August. The midscale category is no different: while its results were down in July, they show growth in the RevPAR by 4.3% in August. The budget and economy segments also reported improved performances, but their growth continues to be slowed by household budget restrictions of domestic clientele.

Above all, this positive trend for August may be observed throughout the French territory. Paris and its region naturally show strong increases with growth by 9.5% in the RevPAR. In the provinces, indicators are finally in the green and the RevPAR is up by 3.8%. This growth is largely born by an improvement in occupancy: only the upscale category has seen its average price improve. Inversely, the average daily rate seems stable or decreases slightly in the other categories due to the fact that hoteliers partially absorbed the increase in the VAT rather than pass it on to their clientele.

Despite a globally positive summer, hotel occupancy on the first 8 months of 2014 is stable with respect to 2013 with an OR of 65.6%, while the 1% drop in average daily rate led to a 1.2% drop in the RevPAR excl. taxes to 54.2€.

Nonetheless, the uptrend observed in August made it possible to make up for the shortfall at the beginning of the year, and this improvement is confirmed in the first two weeks of September: during this period the occupancy rate rose 2.5 points over 2013, and average daily rates posted an increase by 3.8%, allowing the RevPAR to grow by 7.3%. After a slow beginning of the summer hoteliers appear to be heading into an Indian summer....

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