As tourists return once more to soak up the sights and tastes of France, its hotel sector is rebounding rapidly from its 2016 low point: Just under 89 million tourists visited France in 2017, according to French government figures, a five to six percent year-on-year rise that puts the country back on track to reach its ambitious 100 million target by 2020.
It’s a welcome turnaround from the previous year, when tourist numbers in the worst-hit region of Greater Paris fell by 1.5 million in the wake of a spate of terrorist attacks. By September 2016, hotel RevPAR (revenue per available room) was down almost 16 percent on the previous year.
Gwenola Donet, JLL’s Head of France for the Hotels & Hospitality Group, says the recovery is expected to accelerate in 2018 thanks to a wide range of positive factors.
“There are signs that the world has learned to live with terrorist attacks. We’ve seen this in Barcelona, where only a couple of weeks after the August 2017 attack tourism returned to normal levels,” she explains.
“What’s more, people are viewing France in a more positive light following Emmanuel Macron’s win in the presidential election, along with other positive news such as Paris being chosen to host the 2024 Olympics. This not only helps with tourism, but also creates hope that Macron’s reforms will make France easier to do business in from a tax and labour law perspective.”
U.S. tourists prove good for business
The more favourable climate has resulted in U.S. tourists returning to France. Romain Semmel, Senior Vice President, European Transactions at JLL Hotels and Hospitality, explains that a rise in visitors from the U.S. tends to push prices up, which should help hotel rates recover. This, in turn, is helping to revive investor interest in the country.
“There is a more positive sentiment among investors and, although it is too early to make a firm assessment, it is likely that with the UK being blocked because of Brexit and Germany’s difficult economic situation, France’s more stabilized economy will make it even more appealing,” Semmel adds.
Paris is attracting the lion’s share of investor interest but the regions, which have stayed fairly resilient over the past few years, could also see some notable deals.
High net worth individuals are seeking trophy assets in the French Riviera, while the Alps has opened up to external investors after being largely confined to deals between families. Club Med, meanwhile, has announced plans to open one new resort each year in the Alps.
Limited supply fuels an innovation boom
In Paris, the recovery is being helped by the fact that French cities, including the capital, are relatively small and so do not have the same capacity to increase hotel supply like other cities like London and New York.
This is not only helping to lift rates, but is also encouraging hotel operators to be innovative in how they attract tourists.
Donet says operators are looking at new forms of accommodation that offer “affordable luxury” and that provide a place to sleep and have fun in. The flexibility of hotel management models is also increasing – a sign, Donet says, of a mature market.
“In Germany you will find lots of leased hotels, whereas in the UK hotels are mainly managed or franchised. In France, investors can find a range of models to suit their profile, whether it’s managed, franchised, non-branded or business-only,” she explains. “Hotel operators are very flexible and will adapt their model to suit investors’ requirements; we’ve especially seen this in Paris, where operators have designed very specific, bespoke hotel management agreements.”
Meeting the needs of the modern traveler
One of the biggest challenges for France’s hotel market will be ensuring it stays up-to-speed with the tastes of modern travelers who are increasingly keen for unique features and memorable experiences.
Donet says that France still has some hotels that are aging and in need of renovation. A major catalyst could be Accor’s Booster project, which aims to free up funds to improve its properties in the country. “Accor is a massive player in France so this initiative is likely to accelerate the trend of innovation,” she says.
And the brightening picture for the hotels market could well reward hotels that refurbish in line with the times or come up with creative new accommodation concepts. Donet expects Paris to be back to its pre-2016 RevPAR growth levels by the end of the year and to continue strongly in 2019.
“This is the right moment for investors to enter the market because they can still benefit from the capital’s recovery,” she says. “It is the first time in a long time that all the KPIs (key performance indicators) are looking positive.”
This article was originally published on JLL Real Views, JLL’s news site exploring the big trends shaping the real estate industry’, with ‘Real Views’. www.jllrealviews.com. Reprinted with permission.