The government in France was due to decide at the end of May when conditions will be suitable to open hotels.
As the country took cautious steps to lifting its lockdown, we were told that its hotel market was one of the most attractive in Europe to investors, aided by its hosting of the Olympics in 2024.
Speaking to the National Assembly, Édouard Philippe outlined plans to ease restrictions, as long as certain infection targets were met. He said: “The risk of a second wave, which would strike a weakened hospital fabric, which would impose a 're-confinement', which would ruin the efforts and sacrifices made during these eight weeks, is a serious risk.”
Philippe Doizelet, managing partner, hotels, Horwath HTL France & Ivory Coast, told us: “It is likely that people will get ready for a soft opening around early June and full operating capacity by mid-June, but we anticipate only moderate activity. There is concern around MICE business because it means early planning - most people are postponing events in September.
“There is a question mark over resort areas. Beach access is currently not permitted, although they may open in mid-June, but we do not know how people will book, it may be that there are more last-minute bookings. At the moment you can travel less than 100km [without certification], but you need a reason to go beyond that distance. There is a chance to go away near your home for the weekend, but this won’t fill the gap left by domestic and business travel.”
Last month saw STR and In Extenso TCH report that the country’s daily hotel occupancy fell to as low as 3.3% on 17 March.
Daily occupancy in the country was as high as 65.3% on 26 February and had been positioned above 30% through 12 March. The market’s daily occupancy remained above 50% as late as 3 March, however, downward movement began on 1 March, and absolute occupancy fell 97.2% year over year to 1.8% on 17 March amid the closure of the European Union borders to most non-EU citizens.
Looking to the long term, Doizelet pointed to extra capacity required in the country. He said: “When we first assessed France in 2012, the plan was to have 25,000 to 30,000 extra rooms by 2030, coinciding with the post-Olympic period and the Grand Paris Express metro system. There is no over-capacity at this time and there are no reasons not to build the 25,000 to 30,000 rooms.
“However, in two to three years to come, before the rebound expected by 2023, the pre-Olympic year, it would be difficult to have the development rolling out at the same pace and some projects are likely to be cancelled because they are too weak financially or not relevant.
“A lot of properties, particularly in the Île de France, were built in the 1970s and 1980s and are likely to be outdated, but as we see a deep demand crunch there is likely to be a risk to these properties. But there are other projects which are likely to come forward, with the Olympics and Grand Paris Express metro system being the two drivers which will sustain the market after a difficult two years. The investment cycle is different from the development cycle, but in this case one may impact the other.
“Domestic business in France is strong, supported by strong chains powerful enough to expand overseas. The characteristic of the French market is to have a strong domestic market, fuelled by a centralised high-speed rail network and a strong domestic airline market, which explains the high penetration of domestic chains. I am confident that the segment will rebound when business travel is permitted, but it is quite difficult to imagine that you will see satisfactory occupancy levels before mid-September.
“The investor appeal remains in France because of the long-term capacity. The question remains for investors: will the sector be considered as an attractive asset class, having just emerged as a mainstream asset class? But the other side of that is that offices and logistics are in no better state.
“Is the French market better than the other countries in Europe? Perhaps yes. Some countries, such as Germany, have their growth behind them and a large pipeline and less growth for investors. Before the crisis Italy was attractive because it was not consolidated, but the question is now one of tourism there. France is pretty attractive with the visibility that we have.”
Insight: As France looks to 2024, Tokyo has this week faced the likelihood that if the Olympic Games planned for this year can’t take place in 2021, they won’t be taking place at all. This is something of a blow not only to fans of archery and surfing (the latter due to have debuted in the Games this year) but also to the country’s hotel sector, which had anticipated an Olympic boost.
Tokyo had been expected to see double-digit increases in revpar in both July and August, with hotel developers planning for the expected bonanza, focusing in particular on the luxury market. The good news there is that many of them were delayed, so that next year’s deferred Olympics would take advantage. If not, Tokyo must turn to the destination marketers.
France, being the most-visited country in the world, has no issues persuading people to visit and has already been overhauling and adding to its luxury stock. The Olympics were likely to come just as the sector recovers, allowing peak profits.
So far, so predictable. What will be interesting to note in the coming months is how investor’s view the country in comparison to, say, Germany and Italy, as Doizelet notes. Rumours persist - from who knows where - that the country is besotted with paperwork and can be hard to enter. It may be that enthusiasm to jumpstart the economy will help with this.