x Abu Dhabi, UAETuesday 23 January 2018

French hotels remain resilient amid economic crisis

Higher occupancy rates and revenue per room have helped the hotel industry in France ward off many of the ill effects of the economic crisis. Paris and the Riviera consistently bring in the tourists and buck the larger trend elsewhere.

Hotel occupancy rates in France were generally better than last year's and the industry is close to reproducing its performance in the pre-crisis year of 2007. Eric Piermont / AFP
Hotel occupancy rates in France were generally better than last year's and the industry is close to reproducing its performance in the pre-crisis year of 2007. Eric Piermont / AFP

The summer is over, the weather is cooler and tourists have departed from the beaches of the Côte d'Azur.

Paris, although a magnet for overseas visitors year-round, is again populated by the Parisians who desert the city each August.

Tax rises, factory closures and austerity have brought uncertainty in abundance to la rentrée, as the French call the resumption of normal life after the holidays.

In few parts of Europe is there belief that the end of the financial crisis is in sight.

But, according to an assessment that seems at first glance at odds with reality, French hotels are in resilient spirits.

The first reports of the season suggest a good year in all categories, from no stars or one to the top of the range, including the coveted "palace" designation.

If August - the height of France's summer season - is the most telling barometer, these findings justify the headline in Le Figaro's business pages: "French hotels resist the crisis". Occupancy rates were generally better than last year's and that was already a year of growth; the industry is close to reproducing its performance in the exceptional, pre-crisis year of 2007.

The enduring charms of Paris, the city of light and romance, and the sunny Riviera weighed heavily in the findings by the French arm of the international accounting firm KPMG. As with last year, luxury hotels have played a large part in the success story that bucks economic trends.

Other factors include a strong stay-at-home attitude adopted by French people who can still afford to take holidays but do not wish to pay for foreign travel. The tourism industries of Egypt and Tunisia, highly favoured in recent times by the French, have suffered the impact of the Arab Spring and its legacy of instability.

KPMG says its annual study of the hotel sector, carried out at the end of August, revealed "rather encouraging" signs. Taking all hotel grades, there was a small but significant year-on-year increase in occupancy levels of 1.2 per cent, to 65.2 per cent.

Luxury hotels were the "engine" of a strong performance last year.

And with the generously endowed Qatari sovereign fund recently acquiring two prestigious hotels in Paris - the Concorde La Fayette and Hotel du Louvre - and two on the Côte d'Azur, the fabled Martinez in Cannes and the Palais de la Mediterranee in Nice, there is plenty of business confidence at the top end of the sector.

Why otherwise would Mohamed Al Fayed be willing to sanction a €140 million (Dh673.6m) renovation of the Ritz in the swankiest of Parisian squares, Place Vendôme?

At 79, the Egyptian tycoon, who sold his flagship London store Harrods to Qatar Holdings for £1.5 billion (Dh8.89bn) in 2010, has lost none of his appetite for entrepreneurial adventure.

He is eager to establish the Ritz among the small group of Parisian hotels granted palace status, which it has been denied amid reports of staleness and decline.

When the work is finished, 103 rooms and 56 suites will be more sumptuous and, presumably, more expensive. Traditionalists will take heart from commitments to keep the elegant facade and also the renowned Suite Impériale, which for €14,000 a night replicates Marie Antoinette's chamber at Versailles.

But the upgrade is consistent with a view that Paris saw itself as years behind London in the luxury hotel field. With an eye to attracting even wealthier guests, Mr Al Fayed will be keen to see the proportion of visitors from the Middle East rise from 6 per cent (Americans, long drawn to the Ritz, accounted for 27 per cent with the Russians and British next with 10 and 8 per cent, respectively). And the well-heeled visitor who craves privacy will be cheered by news that the project includes more discreet entry and exit arrangements for VIPs, perhaps inspired by memories of Mr Al Fayed's son, Dodi, and Diana, the Princess of Wales, departing by a revolving side door before the car crash that killed them both in 1997.

For the 35th edition of its study of the French hotel industry, KPMG examined the performance of 2,700 hotels, with a total of 224,130 rooms - 37.5 per cent of the sector.

Revenue per room, considered by the industry to be the truest test, experienced stronger growth than occupancy, ranging from 2.2 to 3.7 per cent. "The performance is partly explained by the attraction Paris holds on the entire world," said Stephane Botz, who heads KPMG's tourism team. This translates as more than 23 million nights spent in the capital by foreign clients last year, producing an "outstanding" occupancy level of 78 per cent.

Business on the Riviera also remains solid, with the customary mix of sun-seeking holidaymakers and professional visitors continuing to flock to Cannes and other locations for festivals and conventions. As one possible concession to belt-tightening in the middle range, there was some evidence of business travellers downgrading from hotels with three stars to two.

Mr Botz said hoteliers in other traditional holiday regions, from Normandy and Brittany down the Atlantic towards Spain, had been affected by a loss of corporate business.

Amid tough competition from holiday villages, mobile-home campsites and other alternatives, hoteliers - especially in the middle range - will do well to maintain their recent progress.

Atout France, the national tourism body, says the season more generally has been patchy, with some areas doing significantly better than others. Strong interest from the Bric group of better-performing economies - Brazil, Russia, India and China - is tempered by a more cautious approach from people in France's neighbouring countries, such as Spain and Italy, where the euro-zone crisis has been hitting pockets hard.

But KPMG's report remains relatively upbeat. "As in 2011, the customer has refocused on European destinations seen as safe or cheap," it says.

"France should continue to benefit from this situation from domestic customers and the return of some foreign customers with high purchasing power and from emerging countries."

The 2016 Uefa European Football Championship will bring a boost to France's hospitality coffers.

But for this year's promise to triumph over prudence about the short-term future, hoteliers depend no less than the rest of the commercial world on brighter news on the economy.