France’s plunge into troubled waters continues. And once again it can to thank the calendar. The shift of Easter holidays to April lessened the damage... but certainly did not stop the fall. The national RevPAR shows a new double-digit drop by XX%. France’s major cities are experiencing a preoccupying phenomenon as they gradually join the downward movement that began in Paris. Until April, the hotel industry in the provinces could still let it slide with respect to the capital, starting with Strasbourg and Lille which had a successful beginning to the year. But the difference is shrinking. In Paris, the drop in the RevPAR may be explained by a clear drop in average rates due to major competition. In the provinces, and to a certain extent in the Ile-de-France, demand is lacking. At a time when niches are showing 5 to 9 point drops in occupancy, France’s economy segment continues to increase its average rates. But for how much longer? This situation will be very difficult to maintain in the months to come.
While the economy segments are able to keep their heads above water thanks to growth in their average daily rates, the 3* and 4* categories continue to post results that are significantly below the .oat line. The drop in occupancy, which is quite strong for upper categories, forces hoteliers to adapt to the new deal. Since the beginning of the year, the price difference between midscale and upscale categories is constantly dropping, and is turning into a barbed sales and marketing war. The economy segment is still protected from attacks on the field, because there is still enough of a margin between its rates and those of higher categories. Nonetheless, the drop in demand (-3.7 pts and – 4.6pts compared to April 2008 for 0/1 and 2 stars) could lead to rate adjustments. In light of this brutal turn around in the cycle, hoteliers are crossing their fingers as a traditionally very strong month of June and summer holidays approach. Each market observer apprehensively awaits the summer results, hoping that in the fall indicators will level out.
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