• While the number of foreign tourists continues to falter in France, even though the French are increasingly staying at hotels in the national territory, the total French hotel supply has fallen for the second consecutive year.

• As of January 1st, 2005, with some 662,000 rooms and 20,140 rated hotels, all categories mixed, the French hotel supply registered a slight drop of 0.1%.

• With 262,500 rooms and 3,320 hotels, the corporate chain hotel industry holds 40% of the hotel supply, a rise of 0.9%. On the contrary, the independent hotel supply fell once again. With 399,500 rooms and 16,820 hotels, it only totals 60% of the supply.

• Within a context that remained difficult in 2004, the chain hotel industry in France nevertheless improved its revenue per available room (RevPAR) by 2.4%. Driving this average, the hard-budget hotel sector posted results that improved by over 3%, while the midscale and upscale sectors saw a 1.5% growth rate.

• In light of a hotel demand that will be stimulated by the 2005-2006 economic recovery and the hypothesis of future major events such as the Olympic Games in Paris in 2012, two points must be addressed: the improvement in the financing mechanisms for hotel development, and the role of regulator of a new supply by the CDEC.

Like last year, the hotel supply registered a minimal drop of 0.1% in the number of rooms. With 661,779 rooms as of January 1st 2005 versus 662,327 in 2004 and 20,140 hotels as of January 1st 2005 versus 20,398 last year, the difference between the openings and closings of hotels shows a slight diminution: 258 fewer hotels, and 548 less rooms.

Nonetheless, this relative stability in the total supply manages to hide an undercurrent. The supply of corporate chains increased after a year of moderation on the part of hotel developers. The independent hotel supply held 61.3% of the French hotel supply in the beginning of the year 2004 and only represented 60.4% at the end of the year. The market share of corporate hotel brands rose by 0.9 points in 2004 and followed a rise of 0.5 points during the previous year.

With a penetration rate of 64.4%, the chain hotel industry led the dance on the 0* hard-budget segment. The fall of 6.9% in the independent chain hotel sector, registered in 2004, was not compensated for by the growth in the hard-budget chain hotel sector, on the rise by 2.1%. Finally, the 0* category lose nearly one hundred hotels.

The clear drop in the independent hotel sector resulting from growth in the chain hotel supply is still more evident in the 1* segment. Overall, the rate of expansion remains stable (+0.1%), with a strong internal disparity: 5.3% for independents, +6.2% growth rate for corporate chains. The chare of corporate brands is quickly approaching the 50% mark, with a market share of 49.4%.

Consequence: independent hoteliers are slowly leaving this segment. Owners have difficulty in finding buyers, and even sometimes in passing on their business to their children. In addition, some cannot resist the tempting offers from real estate promoters for them to leave the hotel market.

The 2* segment is still largely dominated by the independent hotel industry which holds ¾ of its supply. However, this category, which constituted the large majority of the hotel industry in France (45% of the total supply) also registered a decline in the independent hotel sector in 2004 (-1.8). This led to a general drop of 1.2%, which did not manage to balance out the limited growth of the chain supply (+0.7%). The 3* and 4* categories still managed to escape this undercurrent with an increase more or less pronounced, both for independent and chain hotels. In the midmarket, which totals more than one quarter of the French supply, independents and corporate chains are simultaneously expanding: +0.4% and +1.9% respectively. In the upmarket segment, the expansion of independent hotels was similar to that of corporate chains: +3.7% versus 4.1% for 4* hotel brands. The development of means of distribution available to independent hoteliers, notably via the internet, facilitates their sales towards the more profitable international markets. Independent hoteliers do not hesitate in joining consortia chains, which are able to offer increasingly efficient reservation and sales systems.

While we are awaiting a recovery in hotel demand, tied to an economic recovery that should appear in 2005 and continue into 2006, France cannot allow its hotel capacity to be reduced. This is even truer since major events, such as the rugby world cup and the possible holding of the Olympic Games in 2012 imply the improvement in the lodging supply in France. The easing of financing these necessary investments, including for independent entrepreneurs must be rapidly undertaken. Likewise, the effective role of regulator by the CDEC in hotel development must be re-examined.

Methodology

The analysis of the rated hotel supply is a result of an exhaustive compilation of official data gathered from prefectures, CDT, tourism boards, hotel groups, etc. MKG Consulting has the largest hotel database in the world, excluding the USA, with the best coverage of all hotel segments.