French hotel trends: Q1 2011 in France in the wake of the election aftermath

• RevPAR in March suffered a slight decrease despite strong positive from last Spring until January and February 2011. It falls victim to a series of circumstantial events.
• Upscale sector takes most of the credit for the entire quarter’s upward growth with an overall rise of 5% in the RevPAR.
• Exact consequences of the world’s geological and political troubles are still hazy whilst France benefits from its clear and privileged outlook in 2011.

March’s results hindered the first quarter’s forward movement even though RevPAR in January and February grew by 8.7%, occupancy rate increased by two percentage points, and average prices went up by some 4%. In March, for the first time in a year, the available RevPAR shows negative growth. Though small (-1.2%), this decrease comes from the fall of occupancy rates throughout the board, especially the Economy sector.

The month of March saw many circumstantial events take place which explain this slight decrease. Firstly, the improvement of French hotel industry results started in March 2010 with a high 3.5-point growth in the Occupancy Rate. The 2011 growth would have difficulty being at the same rate this year, especially because vacation periods were pushed back. This played a role in the decrease in activity of certain ski resorts. Also, French election periods are never very conducive to domestic business trips and seminars. With two weekends of regional elections, even if the absentee rate was high, business meetings around these periods are traditionally far and few.

"It's the Economy segment that recorded the biggest decrease in its occupancy rate and it is indeed the largest segment in the French regions. However, the luxury segment was more resilient," states Georges Panayotis, President of MKG Group.

"The average prices thankfully haven't moved because of this decrease. The economy hotel segment has reacted to this decrease in activity through a very prudent price-adjustment policy. The upscale segment can still progress forward by living off its margins from last year."

Considering the entire first quarter 2011, all the results are still rising, with an occupancy rate that is flattening out, but a regular upward progress of the average rate. It is a sign of the hotel cycle still getting back in shape, lead by the progress of the upscale segment.

In the months to come, the French hotel industry should take advantage of an excellent calendar of events in order to catch up to average rates of yesteryear. Indeed, there is still a way to go before reaching the results of the golden years before the crisis. "It's still difficult to measure the impact of the recurring disasters in Japan," continues Georges Panayotis. "The luxury segment feels the circumstances from the absence of this rich clientele. But on the other hand, the events in North Africa encourage the French to stay within the perimeter of their country during vacation time and for our neighbours to choose nearby destinations."

Furthermore, one can await the positive impact of international events that generate room nights like the G8 conference in Normandy in May, the Airshow in Bourget in June, the World Cardiology Congress in August, and the different meetings of the G20 that take place one after the other crowned by a major meeting in the French Riviera in September. For France, MKG Hospitality expects an annual growth rate of RevPAR between 6.5% and 8.5%.