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Summer 2021: which "world afterwards" for the hotel industry in French cities?

While July and August allowed the French hotel sector to get back on track after long months of lockdown, not everyone was in the same boat this summer and locally the situations are extremely contrasted. How has the pandemic affected the performance of cities in the summer of 2021? In the longer term, has it also changed the hierarchy of French cities in terms of attractiveness for hotel development?

THE REST OF THE COUNTRY AGAINST THE PARISIAN HOTEL INDUSTRY

 

While hotels in the Province are almost back to their 2019 level of activity, with an average RevPAR of €65 this summer, Parisian hotels are still at a standstill with -56% of their pre-COVID activity.

Indeed, Paris, which is dependent on international and business customers, is suffering the most from its absence, with an occupancy rate barely reaching 40%. The average price remains 14.4% lower than before the crisis, while most French cities have managed to recover. It now stands at €93.6 in Paris, while those in Saint-Nazaire, Saint-Malo, La Rochelle and even Lorient have almost reached or exceeded €100.

As a result, the RevPAR in the parisian hotel industry has fallen by more than half compared to the pre-crisis period. This summer, the capital's performance (€37.4 RevPAR) has fallen below that of cities such as Limoges (€42.3).

Broadly, the parisian hotel industry has proven to be much less resilient than its counterpart in the rest of the country during the crisis, even though it is much less valued on the hotel real estate market, whether in terms of EBITDA multiples or per room, and has traditionally been much less popular with hotel investors than with the developers of large international chains. Will we then see the gap in attractiveness between Paris and the Province narrow more permanently?

Hotel performances in France - Summer 2021
Infogram

NEW DESTINATIONS FOR A NEW CLIENTELE

The long-haul clientele that is missing is being replaced by a domestic or local European clientele, and this change in profile is turning upside down the usual patterns of attractiveness.

On the one hand, cities where the hotel industry could usually rely on a large international clientele are still in sharp decline this summer: Bordeaux (69.2% occupancy rate), Caen (51.9%) and Reims (54.2%) are suffering from the absence of this international clientele. Nice, however, fared well with an 81% occupancy rate, but relative to the pre-Covid period, the city is simply returning to normal. Although it was able to benefit from a combination of the arrival of holidaymakers and a shift in the events calendar (the Cannes Film Festival was exceptionally held in July this year), which allowed it to compensate the lower presence of its traditional long-haul clientele, the corresponding losses had already been incurred in June.

On the other hand, other medium-sized cities seduced the French tourists this year, particularly on the Atlantic coast, which reached 88% of the visitor rate. Indeed, La Rochelle (89.6%), Bayonne (83.7%), Saint-Nazaire (85.4%) and Saint-Malo (86%) were among the cities with the highest visitor numbers.

And on the other side of the country, Annecy reached an unprecedented level of occupancy: with an occupancy rate of 90.2%, it was sometimes difficult to find a free room this summer.

Summer 2021 in France was also marked by the return of certain types of events: festivals, sporting events (such as the 24 hours of Le Mans, which was rescheduled from June to August), weddings and other private festive events that supported the activity of many hotels throughout France this summer, leading the French to discover new destinations.

The lesson of this COVID period is that in France, it is the coastal, mountain and resort destinations that have performed best through the crisis and have been able to capitalize on their appeal to French clients. Even if the international clientele will one day return, the domestic appeal of these cities and the resilience that this provides should be remembered, especially since the dynamics of globalization seem likely to slow down for a longer period.

It is therefore no longer inconceivable that Marseille, Annecy, La Rochelle or even Biarritz will become tomorrow's drivers of hotel development in France, as Paris or Bordeaux were yesterday.

 

VACATIONS AT ANY COST

In all urban areas, average prices rose in the summer of 2021 compared to the pre-crisis period, reflecting the need for hoteliers to catch up financially, but also the fact that tourists needed holidays and were willing to take it at any cost.

Unsurprisingly, Nice obtained the title of number 1 with an average price of €220.5, which was also supported by the attractiveness of the Cannes Film Festival in July. Saint-Nazaire (La Baule), Bayonne and Saint-Malo are among the summer's top performers in terms of average price, while Paris is not even in the top 10.

Thus, at the end of the pandemic, while companies are still limiting business travel and destinations seeking to attract them are forced to reduce or limit price increases, in leisure destinations, the increase in savings and purchasing power combined with customers' desire to travel seem to have triggered a price inflation dynamic. This could eventually increase as soon as the uncertainty subsides, as economic indicators seem favorable and capable of restoring the confidence of companies and business customers. This is a good thing, as the hotel industry seems to be facing recruitment difficulties and will have to re-evaluate the salaries of its employees...

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