French Hotels: is there a Macron effect?

By On September 14, 2017

After several years of stagnation when the country recovered very slowly from the impact of the global financial crisis, the French economy is on the rise. During the really tough years, growth in real GDP was limited in 2014/15 and 16 to 0.9%, 1.1% and 1.2% respectively; a pace not sustained enough to reduce the endemic French unemployment rate, stagnating around 10%. However, the newly elected French President Emmanuel Macron, only 38 years old, in May is likely to set a new boost for the country.

Prospects for a country are not only a matter of numbers but also confidence. The OECD’s Business Confidence Index (BCI) for France reached 101 in August a level last seen in 2011. Likewise, the Consumer Confidence Index (CCI) bounced back to its pre-crisis record of 2007. France also reached the top of the Soft Power Index, ahead of the UK, USA and Germany. So is there a Macron effect?

On the development side, some major projects are under way. The Greater Paris regional council has engaged a budget envelope of €24.7 billion to create a circular metro system, known as the “Grand Paris Express”, aimed at connecting more efficiently the Parisian airports to the city center and to suburban business hubs as La Defense, St Denis and Saclay. And now, only a day or so ago, the International Olympic Committee has nominated Paris as host city for the 2024 games, one century after the city hosted the Olympics for the last time. By then, France will also have hosted the Ryder Cup (September 2018). Undoubtedly, improved infrastructure and the events planned already are a catalyst for tourist demand and hotel investment.

But where are we today in terms of hotel performances? According to the French hotel professional organization UMIH, occupancy of hotels as of July 31 year to date reached 67% a gain of 3 percentage points over previous year. The growth in RevPAR reached 2.3% over the same period witnessing that the growth in volume has been partly offset by a drop in average daily rates where French hotels cut their price after the attacks of le Bataclan and Nice. But it is a fact that international tourists are back in 2017. As expected, Paris and its surroundings will get most of the benefits of this uplift, whilst the provincial market remains stable. In the same vein midscale and upper categories are on the rise whilst economy and budget hotels are sluggish.

Another factor of importance for hotels will be the impact of reforms currently conducted or in preparation by the Macron administration. A first set of five laws will deeply modernize the French labour regulation including increased flexibility, improved parameters for casual contracts and social negotiation within sectors. As the most important professional organization of the sector, UMIH welcomes the set of reforms as far as the hotel industry is concerned.

As stated by the USC Center on Public Diplomacy, “This result may come as a shock given the French landscape just a year ago” but it seems like France is back!

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