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January: A cold front wafts over France’s hotel industry

After the fat years, the time has come to tighten our belts. The favorable scenario of 2006 and 2007 is now seeing its opposite re.ected in the mirror. The drop in the RevPAR is clear (-7,4%). France’s hotel industry which held up well in December 2008, standing out among the European countries, vacillates. All hotel segments are experiencing a drop in occupancy by around 4 points. However, while the most economic categories are managing to sustain the growth trajectory of their average daily rates, upmarket hotels must resign themselves to much more aggressive pricing policies and opening up to less pro.table distribution channels that result in a drop in average daily rates by more than 5 %. The difference in behavior between Paris, the Ile de France and the other regions illustrates lash back reaction to the previous strong years. When the drop in occupancy rates is widespread and of a comparable scope, prices resist better outside Paris intra muros.

The day after too much of a good thing often leads to repenting. The beginning of the year is certainly not the most active and has relatively little effect on the overall results at the year end. However, it prefigures a worrisome trend after the euphoria that still reigned in January 2008 that was riding in the wake of an exceptional last quarter 2007. Paris and the 4*, the two components of France’s hotel industry that are the most sensitive to international vicissitudes, are being hit full force by the beginning of the recession and cutbacks on business travel budgets. Paris’s upscale hotel industry is dragging down national indicators whereas in recent years it was the most dynamic motor behind growth. Fortunately for France’s hotel industry on the whole, the shock-absorbing effect of its large economy hotel supply and the counterweight of large regional cities did their job. While the entire territory and all segments are effected, the proportions of this drop are less important.

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