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Analysis

What is the situation for tourism investment in France?

At the second edition of the Tourinvest Forum, Christian Mantei, CEO Atout France, and Philippe Maud’hui, Director of Engineering and Projects, Atout France, presented an overview of tourism investment in France, using the Tourism Investments Scoreboard produced in collaboration with MKG Hospitality.

"The structural trend towards under-investment continues: tourism investment represents only 3.2% of the global investment in France, while tourism accounts for 7.3% of the country's GDP," points out Christian Mantei in his introduction to the second edition of Tourinvest Forum. The CEO of Atout France continued, highlighting the importance of immaterial investment: "Beyond investments, the value of tourism is increasingly a part of all that is immaterial and the image. Is it possible to talk about economics while evoking a sunset? I think more immaterial investments are necessary."

Philippe Maud'hui followed with a presentation of an overview of tourism investment in France:

Market Situation

Domestic tourism is affected by the vacation departure rate of French nationals that evolved quite differently depending on household incomes, with a drop in departures for households with the lowest revenues. Foreign tourism, instead, is dynamic, with France continuing to be the most visited destination worldwide with 84.7 million international tourists in 2013 (+2%). Foreign visitors thus represent one third of total tourism consumption in France, up by 7.4% over the previous year, versus growth by 0.8% for the domestic market. Together, French and international tourists have spent 149 billion euros, which is similar to pre-crisis revenues.

At 29% of the total, transportation represents the bulk of tourism spending; this share nonetheless varies significantly from one region to the next. After transportation follow accommodations (26%, of which 16% are commercial), restaurant and food (18%) and other services, particularly cultural and leisure (6%). In terms of geographic breakdown, the Paris Region, PACA and Rhône-Alpes capture more than half of tourism spending realized in the country. The Ile-de-France and Corsica are the areas that show the strongest growth rates for tourism consumption (up by more than 20% in 6 years).

Tourism investment status and trends

In 2013, the total sum of investments in France is for 12.5 billion euros. It is down slightly with respect to last year, which prevents it from regaining its level prior to the financial and economic crisis. The share of immaterial investments (R&D, digital, business, concessions, patents) overall continues to progress as it has for a few years, and has reached 27%. As for the breakdown of global material investment by the tourism sector, we may observe that more than two-thirds of tourism investments are dedicated to accommodations. Secondary residences follow with 40% of the total, and commercial accommodations account for 30% of the total, of which 19% are in the hotel industry. Restaurants (16%), culture and other equipment (14%) bring up the rear.

As far as evolution is concerned, structural trends are unchanged and the chain hotel industry remains a growth engine for investment observed since the 2000s, with investment up in 2013 and growth expected in 2014. Driven by development in the urban sector, investments realized in tourism residences should leap up in 2014, and the drop observed for the past 2 years in the independent hotel segment should come to a halt in 2014. The investment cycles of other types of accommodations are fairly specific: investment in the outdoor hotel industry is slowing after strong growth corresponding to its improved quality, while vacation rentals continue to follow a positive structural trend that is nonetheless slowing down. Finally, catering lags behind and is regaining its investment level of 2000, this sector suffers from a climate of uncertainty in terms of demand and regulatory environment.

It is important to observe that three quarters of tourism investments are made in seven geographic areas: 20% in the Alps, 18% in the Mediterranean, 15% in Greater Paris, 15% in the Atlantic Arc, 10% on the channel and 4% in the Pyrenees. The Southern Alps and Greater Paris stand out for their higher level of investment over the last three years. Finally, investments in commercial accommodations are concentrated mostly in cities, particularly for the hotel industry (2/3 of the total in cities) and tourist residences (46%).

Outlooks

The dynamic of future investments may be understood in a double context of a temporarily difficult macroeconomic situation: almost zero growth, debt close to 100% of the GDP, tight credit conditions for companies and a failing construction market; on the other hand, strong structural factors with continued growth in international tourist arrivals, dynamic investment in transportation, very strong positioning of the brand France on the BRICS markets, especially in China. The implementation of Destination Contracts and Areas of Excellence translates the desire to place investment at the heart of development priorities.

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