HAF "We investors have a duty to continue investing alongside entrepreneurs".

8 min reading time

Published on 01/12/22 - Updated on 05/01/23

Hospitality Asset Forum Pascal Savary

Pascal Savary, President of Atream, shares his vision of investment in hospitality. He believes in a strong tourism industry that generates economic activity in the territories and for the success of which investors have a key role to play.

At Atream we are a management company and a long-term investor. We are atypical in that we invest in real estate, both listed and unlisted, as well as in private equity. I am convinced of the importance of the tourism industry. On a global level, it is an industry that has grown very strongly over the last twenty years. Before the health crisis, there were 1.5 billion tourists in the world with 50% of these customers in the Euro zone, which makes it the world's largest market.

In France, this industry has not always received the treatment it deserves. It is a major industry that generated 240 billion euros in turnover in 2018-2019. Like others, it has undergone transformations, technological for example. Booking.com has been in the market for 25 years, Airbnb for 15 years, smartphones have also had an impact and the tourism industry has become a media. This is a good thing because it means focusing on the customer - the 90 million foreign tourists who come to France and the French tourists who use the infrastructures.

Let's not forget that our industry is a supply industry, which means that it needs investment. Rather a long-term investment to accompany the changes. It is also a service industry which must make an essential transformation, in terms of employment, training and management. We are investing in the men and women who will manage these companies.

I cannot talk about this industry without talking about those who, in my opinion, founded it. Gérard Blitz and Gilbert Trigano for Club Med went from the Balearics to a global brand. It was an entrepreneurial, visionary move in the face of financial adversity, these entrepreneurs were not supported by investment. Paul Dubrule and Gérard Pélisson turned a Novotel in Lesquin into a global group, Accor. Here too, we should remember that when Paul Dubrule sought his first financing for the Novotel in Lille Lesquin, he did not find it. Gérard Brémond, one of the initiators of Avoriaz, founder of Pierre & Vacances, founded one of the first European groups in the field of local tourism industry by buying Center Parcs in the 2000s.

Entrepreneurship, the will to do, tenacity and the conviction that we have to transform ourselves in the face of adversity are essential elements. If we look at this tourism industry and stop at the last 10 years before the health crisis, the average growth per year was between 2.5 and 2.6%. This is not a linear growth, it is a growth that is subject to hazards. Let's remember that in the last 3 or 4 years before the health crisis there were demonstrations, the yellow jackets and we had to constantly remobilise and adapt to customer expectations. I often refer to Club Med which, in my opinion, is the one that has taken its approach to customer relations and customer satisfaction the furthest. This has been in the group's DNA since its founder and it is an essential element. Today, the customer is central.

Thirty to forty years ago, tourism professionals imposed their vision of the world. They imposed their hotel room, their supply, their service and the customer bought this service. Today, it is the customer who constantly imposes his expectations on us. We must therefore listen to them and take their comments into account. Today customers are extremely volatile and concerned about certain criteria that are essential to them and that they will check. This energy crisis that we are experiencing today, for various reasons, will have a strong impact on the results of companies. All or part of these extra costs or inflation will have to be put back into the ADR.

Beyond this energy crisis, we are facing a climate crisis and the energy transition will be essential. Our customers are very sensitive to all these changes and in particular the younger generation. They are going to put a lot of pressure on the operators to adapt and check that we are making the right investments in terms of transition, the useful and necessary savings. Our impact on the territories and on our environment is essential.

With Club Med, we have just built on the historic site of Vittel. We bought this site with the Caisse des Dépôts and the Crédit Agricole to transform it. To make it a new destination with a positive impact on the territory. We investors can only do this with the operators present.

The last Center Parcs opened this spring in Landes de Gascogne, it is an investment that took 10 years. This new activity provides 400 direct jobs and 150 indirect jobs. We are creating an economic dynamic around this Center Parcs, and we are getting craftsmen to work in our environment and participate in the economic life. 70% of the jobs created are for people who were on the RSA [minimum income for unemployed people - NDR], and we are taking them on board with us on a new life project. They will be trained and involved in the success of this site. From my point of view, this is also giving meaning to one's investment. We create jobs, we bring in tourists who will discover the region. Today the offer has evolved and opens up to its environment and encourages its customers to discover the territories.

All these models are models of openness. Mama Shelter is a concept in which we are investors alongside Serge Trigano, these are properties where 60% of the turnover is generated by people who do not stay on site. This was unimaginable 15 or 20 years ago, when the concept was launched. We are agents of change. I have this deep conviction that the tourism industry has this capacity to transform itself and it has extraordinary success stories. We have a lot of talent in this industry, a diversity of high-level supplies and I have real confidence in this transformation.

As far as financing is concerned, we are entering periods where rates are rising and the notion of risk is also increasing. Yes, we will face complicated times, but we must have a medium and long-term vision. Beyond what will happen in the coming months, the trajectories are focused on strong growth.

For me, service is essential; we cannot talk about moving upmarket or premium if there is no service. Whatever the target clientele, the future of this tourist industry also depends on customer requirements and their relationship to price. Behind these issues of customer satisfaction there are training issues, in France we tend to confuse service with servitude. We must constantly look at the customer as an opportunity. Welcoming tourists and giving them pleasure during the time they spend with you, as Brillat-Savarin taught, is a magnificent profession. It's a profession that is evolving very quickly, that has opened up internationally, and what's interesting is the 57 billion in economic revenue generated by these 90 million foreign tourists in France, 80% of whom are European. If we had been as successful as our Spanish neighbours, this amount should have reached 70 billion in returns with the same midscale.

We are an attractive, diversified country with extraordinary destinations. Among our offers in France, there is wine tourism which concerns 10 million tourists, 40% of whom are foreigners, but the supply is not available. The supply linked to well-being and fitness is also lacking, whereas demand is growing by 3.5 to 4%. For assets of the Mama Shelter type, the growth reaches 8%.

These are heavy investments, real estate weighs heavily in our businesses. We are in a supply industry, which implies a lot of investment. We also have to take into account the reversibility of assets to continue to adapt. Thirty years ago, when you did work on a room, it lasted 10 years, today it goes very quickly. We have to be irreproachable at all times and the product must not age.

These are very important investments. There has been a split between real estate investors and funds, walls only. The Pierre & Vacances-Center Parcs group, carries and operates but does not own. The portfolio represents about €7.5 billion of assets. It is an investment that is carried by institutional or private investors and we owe it to them to respect our contractual commitments, whether it is a lease, management contract or franchise. This is also based on a permanent dialogue. This health crisis has enabled us to change the owner-operator relationship.

Before the crisis, very few operators came to see the investors to explain their strategy. This health crisis has led us to discuss together, to negotiate, and we have decided to be mutually transparent. I am willing to accompany a reduction in rents because I understand that the activity has stopped. This crisis has reached a stage that we had never seen before, we were discovering a model. It was not a questioning of the model but a health crisis. This situation forced us to move from distrust to trust. We obtained this transparency and dialogue from all our operators, from the largest to the smallest. This has enabled us to re-establish trust between us as investors and the operators.

This is also an essential element for the future. We investors owe it to ourselves to continue to invest alongside the entrepreneurs. When I meet with project leaders, it is the human aspect that matters most to me. I want to know who has the vision and the commitment, because it is always a human story. Once a relationship of trust has been established and the information circulates well between all the stakeholders, it is possible to support and invest. For us, Pierre&Vacances - Center Parcs was a strategic asset, a French group with a European dimension, with a turnover of 1.7 billion euros, 12,000 employees and 8 million customers. These 8 million customers are an extremely important asset for the value of the company. These customers know us and we don't know them. It is the challenge for a number of companies to adapt and become effective with these customers.



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  • Atream France
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