Paris hotel

Parisian hotel market: a spectacular start to the recovery

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Tourism in Paris was heavily impacted by the COVID-19 pandemic and travel restrictions, at a time when the market was recovering from the terrorist attacks (2015/16), the movement of yellow vests (2018/19) and the transport strikes (2019). However, the strong government support combined with the city’s global appeal has resulted in a dynamic rebound in the tourism sector. The easing of travel restrictions and the successful roll-out of vaccination in France and across Europe enabled an increase in tourist numbers from June 2021, leading to a substantial market rebound in the second half of the year, in line with the economic growth of the country. Paris has remained one of the most popular destinations for hotel investment for more than a decade thanks to solid economic and tourism fundamentals.

Sources: INSEE;  Paris airports;  VHS research;  CCI Paris Ile-de-France — Photo by HVS
Sources: INSEE; Paris airports; VHS research; CCI Paris Ile-de-France — Photo by HVS
Source: IMF — Photo by HVSSource: IMF — Photo by HVS
Source: IMF — Photo by HVS

Tourist demand

Overall Paris footfall is robust and remained broadly stable between 15 and 16.5 million until 2016, which marked the aftermath of the 2015/16 terrorist attacks. From 2017 to 2019, demand recovered strongly, with 2019 being a record year in terms of tourist arrivals: challenges such as the movement of yellow vests, the June heat wave and transport strikes were offset by successful international events and strong growth in domestic arrivals. As in the rest of the world, tourism demand dropped significantly from March 2020 following the outbreak of the COVID-19 pandemic. However, compared to other gateway markets, Paris has seen a strong rebound in demand from June 2021, supported by a well-balanced customer mix, diversified demand sources and strong market seasonality. A recovery initially driven by domestic and European leisure customers is further supported by the slow but steady return to face-to-face events, which are expected to accelerate from mid-2022. Furthermore, the staging of the Rugby World Cup in 2023 and the Olympics in 2024 should crystallize the recovery of international tourism to pre-pandemic levels.

Visits and overnight stays (in thousands)

Sources: Paris Tourist Office;  INSEE — Photo by HVSSources: Paris Tourist Office;  INSEE — Photo by HVS
Sources: Paris Tourist Office; INSEE — Photo by HVS

Hotel performance

  • The entire Paris hotel market recorded a compound annual growth rate of 4% in RevPAR between 2009 and 2019, mainly driven by an increase in average rates due to the growing share of international customers and the move upmarket of the Parisian hotel offer (see below). );
  • The sharp decline in performance following the emergence of the COVID-19 pandemic remains more modest than for other European capitals. The recovery from the second half of 2021 demonstrates the resilience of the market, with RevPAR reaching around 50% of 2019 levels in 2021 compared to around 20% in Amsterdam or 30% in Brussels.
Source: HVS Research — Photo by HVSSource: HVS Research — Photo by HVS
Source: HVS Research — Photo by HVS

hotel supply

The Parisian hotel market has experienced a strong move upmarket over the past ten years, with the share of high-end and luxury hotels increasing and that of unclassified and economy hotels remaining stable or even declining. At the start of 2022, Paris has 1,585 hotels offering some 84,000 rooms. Notable openings in 2021 include the 149-room Kimpton St Honoré Paris (August), the 72-room Cheval Blanc Paris (September), the 82-room Madame Rêve (October), the 76-room Bulgari Paris (November) , and the first Soho House in France, offering 36 rooms and opening in September.

Going forward, Paris has a reasonable pipeline of 3,600 rooms to market over the next five years, which represents approximately 4% of existing supply. The five-star hotel segment should be challenged, as 900 rooms in this category are expected to enter the market by 2024, representing 11% of the five-star room stock. New hotel openings include the first SO/ (Accor) branded hotel in July 2022 as part of the Morland Mixite Capital mixed-use development and the 139-room Tours Duo MGallery (Accor) on floors 17-27 of a new tower in the 13th arrondissement of Paris, which is scheduled to open in the spring of 2022.

The modest hotel pipeline combined with a reasonable existing hotel supply should allow the city to capitalize on the additional demand from the Olympics in 2024, while limiting post-Olympic performance adjustments, as has been the case in the markets with a major pipeline leading into the event. The outlook for this market is, in our view, very solid.

Hotel pipeline

Source: HVS Research — Photo by HVSSource: HVS Research — Photo by HVS
Source: HVS Research — Photo by HVS

investment market

The Paris market remained among the top destinations for hotel investment in Europe, with prices pushed to record highs despite performance being affected by a series of difficult events since 2015/16. However, since the outbreak of the COVID-19 pandemic, investor appetite has tended to shift to immature markets where potential distressed assets are found as prices in Paris have remained high. At the same time, the liquidity of the assets has been undermined by the reluctance of lenders to finance the home.

For the latest value trends, please refer to our annual European Hotel Valuation Index (HVI), which showed that Paris maintains – by a significant margin – the highest value per room compared to other markets Europeans.

Hotel transactions

Source: HVS Research — Photo by HVSSource: HVS Research — Photo by HVS
Source: HVS Research — Photo by HVS

Outlook

Paris remains one of the most popular destinations in Europe, both for tourists and investors. The pandemic proved the resilience of the market, with no assets sold at a discount, and again the highest price per room in our HVI. The performance recorded in the second half of 2021 suggests that the hotel market could recover much sooner than expected, in particular with the 2023 Rugby World Cup and the 2024 Olympic Games. The main uncertainty lies in the ability of the industry to absorb the explosion of costs resulting from the pandemic, subsequent wage negotiations and the war in Ukraine.

Source: HVS Research — Photo by HVSSource: HVS Research — Photo by HVS
Source: HVS Research — Photo by HVS

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