• The French chain hotel industry posted revenue per available room at 46.5 euros for the year 2003, for a drop of 2.4% versus 2002.

• According to the economic model developed by MKG Consulting, the cost of particular events in 2003 (the war in Iraq, SARS, performing artist strikes, forest fires, heat wave, devaluation of the dollar) have led to a deficit of 300 to 400 million euros in lodging revenue for the chain hotel industry.

• The three categories of the budget hotel segment  (0*, 1*, and 2*) have continued to see gains of 2.0%, 2.8%, and 2.0% respectively.

• The upmarket segment is responsible for the plunge in RevPAR in 2003 as a result of a drop of 3.1% in the 3* category, and 12.7% in the luxury category.

• At the Regional level, the drop was mostly felt in the Il-de-France Region, which ended the year with a fall in revenue per available room of 7,8%, while this indicator was otherwise globally on the rise in the other French Regions.

• Activity for the month of December 2003 showed encouraging recovery: the occupancy rates were once again greater than those of 2002, and only the upmarket sector still posted a negative RevPAR (-4.7%) due to price wars, which continue in several regions with a high concentration of 4-star hotels.

In France, the year 2003 ended with a drop in revenue per available room (RevPAR) of 2.4%, which followed a rise of +1.7% in 2002 and +1.3% in 2001. After a start to 2003 that seemed to continue in the direction of a progressive recovery, the accumulation of negative events: weakened European economy, the war in Iraq, the SARS epidemic, rise in the number of terrorist attacks, the stunted growth of the French economy, the heat wave, forest fires, etc., led to a constant fall in occupancy rates in all categories.

Forecasts from MKG Consulting�s econometric model, published in March 2003, announced a rise in RevPAR for 2003 from 2% to 4%, while calculating on the basis of a normal improvement in the international context. It turns out that the cost of the unexpected perturbations due to the prolonging of the war in Iraq, the appearance of the SARS epidemic, the summer strikes in France, the heat wave, and the large forest fires in Côte d�Azur, as well as the sudden rise of the euro against the dollar have actually led to a drop between 4.4% and 6.4% in the course of the RevPAR. Transposed to lodging turnover in the French hotel industry in 2002 (6.4 billion French francs), this corresponds to a deficit of 300 to 400 million euros.

The drop in demand was kept under control in the budget hotel industry, which continued to rely upon a continued domestic market. Two phenomenon have nevertheless accented an unusual fall: the increase in the beginning of 2003 in the supply of the hard-budget category as a result of projects launched during the more prosperous years, and a more noticeable side-effect of the creation of the 35-hour workweek that affected business guests during the weekends. The drop in international tourism has produced more pronounced effects in the midmarket and upmarket segments. 

This drop in occupancy did not have an impact in the pricing policy of budget-sector hotels, which continued, for the most part, their increase in their rack rates. This resulted in a qualitative improvement in their services and a repercussion in operational costs, increased by payroll and its costs. The attitude of hotel chains was identical for the 3* and 4* categories up to the summer of 2003. The memory of the price wars during the first Gulf war was a strong stimulus to not repeat that painful experience. However, the competitive pressure was too strong in the 4* category, which preferred seeking a rise in occupancy, counting on the additional spending of its guests. 

The impact on RevPAR demonstrates this clear difference in behaviour between the two large hotel categories. A good showing in the budget hotel industry, which held on to a rise equal to or greater than 2% in the three categories of 0*, 1*, and 2*, and a more or less weakness in upmarket propertied, marked by the drop of 3.1% in the 3-star category. It was a "dark year" in the 4-star category, which underwent a drop of nearly 13% in RevPAR.

The importance of the upmarket hotel market in the region of Paris, and the price war that began in the second half of 2003 explains why at the Regional level, it was Ile-de-France that saw the largest drop in RevPAR with a fall of 7,8%. All other regions of France recorded quasi-stability at worst, or in certain exceptional cases, a strong improvement in the situation such as in Pays de la Loire (+14.8%), with the exception of two "border" Regions, affected by the weakness of their neighbours: Alsace was down by 1.4%, and Nord-Pas-de-Calais was down by 3.6%.

These contrasting results show that the difficulties of the French hotel industry in 2003 may be explained, in a way which is a bit schematic, by the drop in high-paying international customers in upmarket Paris hotels. A recovery in this segment would permit a rapid return to good results overall, since the rest of the sector has demonstrated remarkable resistance. 

With this in mind, the relative improvement observed during the month of December is a good sign. RevPAR rose by 3.8% over December 2002, resulting from a rise in the average occupancy rate by 1.1 points and in the average daily rate of 1.7%. All the occupancy rates were upward-oriented, with the exception of stability in 0-star hotels. The average daily rates were up by 4.4% in the 1* and 2* categories, and by 5.3% in the 0* category. They were stable at +0.5% in the 3-star category. They remained down by 8,3% in the 4-star category, which maintained its policy of increasing the rise in occupancy by more attractive rates.

For 19 years now, the consultancy firm, MKG Consulting has presented the exclusive official statistics of hotel chains. Data concerning activity for 2003 in France will be supplemented by a more complete analysis and by the presentation of the data at the European and Global level at the 2004 edition of the Hotel Makers� Forum on March 8th 2004 at the Press Club de France � Sofitel Champs Elysées. For information and subscription: www.hotelmakersforum.com

Methodology

This report is based on a sample of 6,000 corporate-run chain hotels in Europe, representing 600,000 rooms. The data, gathered monthly and from each hotel, are redressed according to the categorical division of the corporate chain supply and by the weight of each country in the European Union. 

These results are from data that has been supplied by the chain hotels in France and Europe, for which MKG Consulting is the official statistics supplier. The complete dossier relating to hotel activity in France and Europe will be published in the February/March issue of HTR magazine.

MKG Consulting has the largest database outside the USA, with the best coverage of all the hotel segments, i.e. the data from 10,000 hotels / 1,000,000 rooms throughout the world.