France Hotel Activity Summer 2009: Storms rage in August following short sunny spell
- According to MKG Hospitality's market monitoring database, HotelCompSet, France has recorded a Revenue per available room (RevPAR) decrease of 9.1% in August, whilst July dropped by 7.3%; the decline for July and August together reached 8.1%. This decline is lower than the first eight month's average of -9%.
- Occupancy rates (OR) have fallen by over 5 points in both July and August, compared to 2008. Following a diminishing business segment, decline in international clients has been noticed as well in the leisure segment.
- Most notable in July is the good performance from international upper upscale clients, with luxury establishments in Paris and the French Riviera benefiting from this activity. In contrast, August is mainly driven by local clients on more affordable and family-oriented packages to French coastal destinations, subsequently benefiting the 3* hotel segment.
- Midscale hotels managed to stand out with a satisfactory OR (-2.5 points). Attractive business practices have allowed usual economy hotel clientele to move upmarket. In turn, the 2* hotel segment faced a difficult situation in July and August, with a decaying OR: -7.1 points compared to a -5.4 point average since the beginning of the year.
- Results in the 4* category are different between July and August. In July, upscale hotels, especially palaces benefited from a more favourable environment, whilst August collapsed (almost -20% in RevPAR). With an early Ramadan this year, beginning August 22, Middle Eastern/Arab clients arrived earlier than usual and left beginning to mid August.
- In August, coastal destinations along the Atlantic and Golfe du Lion recorded better performances than in July. Meanwhile, RevPAR in all categories declined by almost 15% along the French Riviera and 17% in Paris. However, OR in Paris remains at a satisfactory level (almost 75% on average in July and August). In a gloomy global economic climate, the capital's tourist appeal remains strong.
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According to MKG Hospitality's market monitor, incorporating 2,000 hotels in France and over 200,000 rooms in all categories and based on the first 25 days of the month, daily data collected somewhat diminished the optimism generated in July.
Although July posted a RevPAR drop of 7.3%, this was an improvement compared to the beginning of 2009. Results in August declined even further, with a 9.1% decrease. July and August together recorded a drop of 8.1%, slightly better that the first eight month's average of -9%. Compared to 2008's results, OR decreased by over 5 points in both July and August. Since the beginning of the year, demand for accommodation remains generally lower than previous years. Following a frail business segment since the beginning of the 2009 fiscal year, a decline in international leisure clients has further confirmed the industry's situation.
A deeper analysis reveals a mixed picture for the summer season. The upscale hotel segment recorded a 15.1% RevPAR drop in July/August against an almost 18% average decrease since the beginning of the year. This was driven by a better situation in occupancy than expected compared to previous months.
This result however hides a different situation between July and August. In July, upscale hotels, including palaces benefited from a more favourable environment, recording one of their better performances for the year. August however proved to be a difficult month for this segment, with RevPAR decreasing by almost 20% and OR falling by over 6 points, as per MKG Hospitality's preliminary estimates. The main reason for this drastic change is an early Ramadan (August 22), obliging Middle Eastern/Arab clients to travel earlier than usual and leaving beginning to mid August. The second half of August has been difficult for many hotels.
The 3* segment managed to stand out during the summer. The RevPAR decrease is less marked than at the beginning of the year thanks to an improvement in OR: -2.5 points, the lowest decrease among all hotels categories. This is achieved through good performances in August. July's RevPAR decreased by 7.7% with OR falling by 4 points, while estimations for August are for a 2.2% RevPAR decline and OR close to August 2008 level (-1.1 points). This segment most likely benefited from an increase in local clientele, who otherwise would normally spend their holidays abroad, but due to the global economic climate chose to stay closer to home. Another possible explanation is the postponement of summer vacations, traditionally taken in July, but this year brought back to August. The 2* segment has faced a difficult summer season, with a dramatic reduction in OR of -7.1 points (July/August), compared to a -5.4 points average since the beginning of the year. Attractive deals from 3* hotels has stolen some market share from the economy segment.
Looking at the various regions, while activity in the upscale segment improved in Paris and the French Riviera in July, a decline is evident in August. The Parisian hotel industry recorded a RevPAR decline of 7.7% in July and a limited OR decline of 2.3 points. Estimations for August reveal a 17% decline in RevPAR. OR however remains at a satisfactory level (almost 75% on average in July and August). In a gloomy global economic climate, the capital's strong tourist appeal certainly remains a pillar for the hotel industry. Along the coast, the French Riviera's RevPAR increased by 1.2% in July for all categories, but showed a decline of almost 15% in August. In contrast, the Atlantic, Channel, as well as Golf du Lion (from the Roussillon until the Bouches-du-Rhône) all record better performance in August than July.
Finally, a preliminary assessment of the summer season can be drawn:
- July is driven by upscale international clients, benefiting mainly upper upscale Parisian and French Riviera hotels, and
- A slowdown in August and core activity generated mainly by domestic clientele on more affordable and family-oriented vacations along the coast, benefiting midscale hotels.
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