In June 2004, hotel results indicated the continuation of the turnaround in the French hotel industry, with a 2.4% rise in RevPAR. During the first semester, the rise in RevPAR reached 3.9%.

The budget categories stimulated growth in RevPAR by the increase in average daily rates, despite a slight drop in the occupancy rates.

The midmarket and upmarket hotel industry conceded to a slight fall in average daily rates in order to improve hotel occupancy. These strategies have been fruitful, since the RevPARs are positively oriented.

Compared to the monthly assessments previously released by MKG Consulting, the rise in RevPAR of 2.4% observed in June 2004 may appear deceiving (+8.1% in March, +3.5% in April and +8.5% in May). It is nevertheless necessary to keep in mind that these recent increases in monthly RevPAR, moreover in March and in April, may be attributed for a large part, to the highly unfavourable situation last year (beginning of the war in Iraq, SARS).

In addition, the change registered in June was less spectacular than in May, though certainly translated better the overall reality that characterises the French markets: that of a pick-up in activity, slow, but effective, after a highly stable month of January, and a month of February that was down versus last year (-1.6% change in RevPAR).

The first semester of the year was rather positive for French hoteliers. RevPAR rose by 3.9% versus the first semester of 2003 to hit 46.7 euros. The occupancy rates were stable, rising by 0.7 points. The average daily rates saw an overall rise of 2.9%, following the evolutions of each of these categories and the modifications of the categorical structure of the hotel supply over the years, increasing the weight of the upmarket hotels.

This increase seen in the first semester resulted from different RevPAR optimisation strategies depending on the categories. The budget categories, notably hard-budget hotels (0* and 1*), saw average daily rates sustain growth in RevPAR, situated between 2.6% in 2* and 4.4% in 0*. Due to a large increase in supply in preceding years, occupancy rates in these types of hotels saw a definite slide in recent months.

The 3* and 4* segments owe the increase in their results to the clearly improving occupancy levels (+1.8 points in 3* and +3.2 points in 4*). Because of this, activity figures are up, and the average daily rates of 3* and 4* hotels increased in total by the end of June.

During the course of this period, the region of Ile-de-France recorded changes corresponding to the national average (+3.9). The situation was nevertheless rather contrasted between the capital, which saw its customers return to the city centre (+3.0 points), due to an availability, which remains rather high, and the rates, which remain affordable. This is true when compared to the other European capitals, mainly in the budget and midmarket categories, and the departments surrounding the capital - where hoteliers are obliged to concede with drops in rates in order to retain their customers.

In the provinces, certain regions saw very positive changes. This is notably the case in Lower Normandy, which was able to benefit from efforts surrounding the D-day commemorations (+10.1% increase in RevPAR). This is notably the case in the regions of Pays de Loire (+11.2%) and Nord-Pas-de-Calais (+8.8%). Lille profited from its status as the European Cultural Capital and its related events.

Nevertheless, these results, within a context that is improving that does not yet lead one to euphoria, demonstrate the strong reactivity of professionals in the sector. Faced with a drop in demand, they have been able to adapt to the expectations of new market niches that they have sought to develop in order to replace customers (notably international) that have been missing because of reducing costs, concerns related to the tense international context or due to the economic slowdown in recent months.

Professionals also note a change in reservation habits of customers that are increasingly using the internet. These changes in the business mix and the emergence of new sales methods play a role in the lowering of average daily rates, notably in the midmarket and upmarket segments. However, these sales policies seem to have been fruitful, since they have allowed ending the semester with an increase in RevPAR.

However, the game is far from over, notably in that which concerns "leisure" customers. The summer season is turning out to not be very favourable for the hotel industry, which is competing with emerging destinations (Croatia, Maghreb), and punished by the high cost of the Euro. The summer results concerning "leisure" customers and those of autumn for the "business" sector will be decisive for making 2004 the year of recovery for the sector.

Methodology

The European database of MKG Consulting contains a sample of 6,000 corporate chain hotels representing 600,000 rooms in Europe. The data, gathered monthly from each hotel, is redressed by categorical division of the corporate chain hotel supply and by weight in the European Union. 

MKG Consulting has the largest hotel database in the world outside the USA, with a good representation of all the hotel segments.