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European Cities Hotel ForecastS1 2017 update - Paris
October 2017
PwC
October 2017
Paris Hospitality shows encouraging trends in S1, to be confirmed in the second half of the year
2European Cities Hotel Forecast
01Paris hospitality market performance registered in S1 17 has been in line with the trends announced in our PwC European Cities Hotel Forecast for 2017 & 2018 based on FY16 performance indicators (p.3). In all segments, RevPAR has been driven by an increase in occupancy while ADR remained relatively flat compared to S1 16 (p.4). When benchmarking the last 3 years, Paris market appears to outperform in S2 compared to S1, suggesting encouraging performance for the rest of the year (p.5).Performance
03On the supply side, the launch of innovative concepts from economy to upscale segments illustrates industry players’ answers to Airbnb and millennials’ needs (p.9). On the luxury segment, historical players are facing intensified competition and year-lasting renovations to remain attractive (p.10). Paris hotel transactions have slowed down in the first semester, while AccorHotels has continued its acquisition spree to complement its offer with services (p.11).Supply
04Paris cultural and business effervescence in S2 should reinforce the performance of Paris hospitality market registered in S1 2017 (p.12). Mid-term perspectives are also encouraging, with major events organized in Paris over the coming years such as the Ryder Cup in 2018 and the Olympic Games in 2024 (p.13).
Opportunities
02Demand
The strong performance registered in S1 2017 has been driven by a double-digit growth in international demand vs. domestic (especially from the US, China and Japan) (p.6) and in leisure vs. business (p.7). Major drivers appear to be a rise in Paris attractiveness (increased safety, easier visa procedures, increased air capacity…) and favourable economic conditions in Asia and the US (p.8).
PwC
October 2017
Occupancy rate (OR)
S1 2017 performance is in line with PwC forecasts, driven by a rise in occupancy and a stable ADR
3European Cities Hotel Forecast
Please refer to “European Cities Hotel Forecast 2017 & 2018” for further details on forecasts and 2016 historical trading
Revenue Per Available
Room (RevPAR)€159 €165 €169
69% 72% 74%
Average Daily Rate
(ADR)€229 €229 €228
FY16Actuals*
FY17 PwC forecast**
S1 2017 Actuals ***
Notes: *) FY16 STR data **) Based on FY16, released in our European Cities Hotel Forecast 2017 & 2018 ***) CRT S1 2017 (upscale segment to have a comparable scope with STR)
Sources: STR, CRT, PwC European Cities Hotel Forecast, PwC Analysis
Based on FY16 performance indicators,
PwC forecast a rise in RevPAR driven by OR.
The trends announced in our study have been
confirmed in S1 17, with a higher OR than forecast, driving
RevPAR at €169 (vs. €165 in our forecast)
Performance
PwC
October 2017
RevPAR grew in all segments with highest increase coming from mid- and upscale hotels
4European Cities Hotel Forecast
Note: S1 2016 ADR, OR and RevPAR data calculated based on CRT S1 16/17 variations
Sources: CRT, PwC Analysis
Occupancy levels grew in all segments in
S1 2017 compared to S1 2016
Despite a difficult 2016 year, ADR
remained relatively stable in S1 2017
RevPAR increased in all segments, with
sharpest increase in the mid- and
upscale segments (double-digit growth)
x
=
Performance
Occupancy rate
S1 2016 S1 2017 Var 17/16
Economy 74.7% 80.5% 5.8 pts
Midscale 72.2% 80.2% 8.0 pts
Upscale 66.9% 74.1% 7.2 pts
Luxury/Palace 60.2% 63.1% 2.9 pts
Average Daily Rate (ADR)
S1 2016 S1 2017 Var 17/16
Economy 88.2 87.0 (1.4%)
Midscale 132.9 131.0 (1.4%)
Upscale 227.1 228.0 0.4%
Luxury/Palace 600.2 593.0 (1.2%)
RevPAR
S1 2016 S1 2017 Var 17/16
Economy 65.9 70.0 6.2%
Midscale 95.9 105.0 9.5%
Upscale 152.0 169.0 11.2%
Luxury/Palace 361.4 374.0 3.5%
PwC
October 2017
With a seasonality effect in occupancy historically stronger in S2, perspectives for S2 2017 are encouraging
5European Cities Hotel Forecast
68.4%
Nov.Aug. Oct.
64.2%
74.8%
Dec.Sept.
75.8%
57.0%
July
68.6%
71.3%
May
77.2%
AprilMarch June
65.3%
Feb.
67.8%
56.8%57.0%
Jan.
82.6%
62.5%
72.3%
74.9%73.9%
65.0%
S1 S2
Drop in business segment in August
2014
20162015
2017
Sources: INSEE, DGE, CRT, PwC Analysis
Impact of Nice terrorist attacks
Impact of Paris terrorist attacks
Occupancy in Paris (all segments-CRT)
2014 2015 2016 2017
S1 77.6% 75.5% 67.2% 74.6%
Full year 79.2% 75.5% 69.3%
• In 2014 and 2016, Paris historical occupancy rates were stronger in S2 than in S1
• In 2015, S2 performance was impacted by November terrorist attacks, resulting in a stable OR across both semesters
Performance
Monthly occupancy rate in Paris region (all segments) – 2014-17
2014
20152016
Monthly occupancy performance is stronger in S1 2017 than S1 2016, close
to S1 2015 performance
PwC
October 2017
In S1 2017, Paris region hit a ten-year high in visitors thanks to a double-digit growth of international tourists
6European Cities Hotel Forecast
+11%
S1 16
16.1
S1 15 S1 17
16.5
56%
43% 46%
S1 08
57%
15.9
54%
46%
54%
14.9
44%
InternationalDomestic
International and domestic arrivals in Paris region – S1 2008-17 (in millions)
34527 3
49447 4
421
507
339508
406
527
988 1 008
923
908
97 0 1 006
946
1 140
145
204
S1 2016
Germany
3 740Others
S1 2017
Japan
US
UK
China
4 314
S1 2015S1 2014
4 184 4 055
Overview of top foreign countries of origin for international arrivals in Paris region (in thousands)
The decrease could be explained by a “staycation” effect due to a weaker pound following Brexit
+21%
+30%
+20%
+41%
-2%
International tourist arrivals from top countries grew in S1 17 (except UK), with sharpest increase coming from the US, China, Germany and Japan
The rebound in arrivals has been driven by international arrivals
(+14.9% in S1 17 vs. S1 16)
Sources: INSEE, DGE, CRT, PwC Analysis
Var S1 16-17
Demand
+14.9%+6.4%Growth
S1 17 vs. 16
PwC
October 2017
Tourism in Paris has been driven by a jump in leisure tourism and a steady growth in business tourism
7European Cities Hotel Forecast
8.47.8
Leisure
7.28.5
Business
15.0+8.3%
+12.7%
+17.4%
Total
16.9
S1 2016
S1 2017
Business vs. Leisure tourism in Paris (in millions of nights)
In S1 2017, Paris hosted major cultural events
• Some of the most popular temporary exhibitions in 2016 continued in 2017, such as “Icons of Modern Art: the Chtchoukine collection” (record number of visitors : 1.2m) at the Vuitton Foundation. Foundation’s number of visitors increased by ~175% between S1 2016-17
• “Vermeer and the masters of genre” exhibition was sold out and the museum had to extend opening hours
Business vs. Leisure tourism in Paris, S1 2016-17 (in % of nights spent)
140k Professionals visited the Paris Air Show in June 2017 (out of 300k visitors)
S1 2016
52%
48%
15.0m
Business
Leisure
50%
50%
S1 2017
16.9m
International congress city ranking (ICCA* 2016)
186196
181
ParisVienna
Barcelona
12
3
Notes: *) International Congress and Convention Association
Sources: CRT, OTCP, ICCA, PwC Analysis
196 # of international congresses hosted in 2016
Demand
+12.7%
PwC
October 2017
Performance in occupancy originates in a rise in Paris attractiveness and favourable economic conditions in S1
Attractivesupply with
reduced barriers to destination…
… and stronger demand driven
by favourableeconomic conditions
• Sharpest increase in arrivals of tourists highly sensitive to security (Chinese, Japanese), mostly due to:
– Enhanced security, especially around touristic attractions: €15m budget released in Nov. 16 and creation of a security label for shops and sights
– No major threats in Paris in the last 12 months and major events handled without incident (e.g. President Trump’s visit on Bastille Day)
Safer
Enhanced security measures
Easier
Faster visa procedures
Cheaper
Increased air capacity and lower
air fares
Engaging
Through promotion campaign
Affordable
with enhanced buying power of
international tourists
• As stated by the Minister of Foreign Affairs, tourism in Paris benefited from increased air capacity (62 new lines from/to Paris in 2016, incl. 5 lines opened by Air France)
• Dynamic long-haul/low-cost segment with new entrants like Norwegian Airlines (3 lines Paris-US; €318 Paris-New York)
• International traffic increased by 5.5% in Jan-July 2017 vs. same period in 2016
• Visa available in 24h for Chinese tourists since 2016
• 8 new countries (Russia, India, Thailand, Philippines, Cambodia, Laos, Burma, Indonesia) to be included in the 48h visa procedures starting Nov. 2017
• ~€8m promotion campaign launched in 2017 (vs. €1.8m in 2016 for #MadeinPariscampaign), primarily targeting leisure tourists from Western Europe, USA, Canada, France
• Thematic marketing (My romantic Paris before Valentine’s Day) and solutions for low-budget tourists (e.g. partnership with Voyage-SNCF to sell low priced tickets)
• Favourable exchange rates in Japan (S2 2016, beginning of 2017) and in the US (T4 2016, T1 2017)
• Economic growth: in Japan, 6th trimester of GDP growth in a row with +4% in T2 2017 vs T2 2016
Sources: ADP, CRT, OTCP, News, PwC Analysis
Demand
PwC
October 2017
Disruptive concepts are improving customer experience to face Airbnb competition and address millennials
9European Cities Hotel Forecast
Sources: Company websites, News, PwC Analysis
MOB Hotel, Opened in March 2017
Created by Mama Shelter’s co-founder in a former telecom facility near the flea market, this hotel offers shared facilities like a rooftop vegetable garden and a workplace for start-ups
Design and cooperative boutique hotelThe Hoxton, Opened in July 2017
4th opening for the Hoxton group, this hotel is located in a 18th century hotel particulierarranged with contemporary style
Contemporary design boutique hotel
Okko Hotel, Opened in June 2017
With “all-inclusive” formula (including room and food), digital check-in and functional rooms, this contemporary lifestyle hotel group is targeting millennials / business customers.
Business hotel targeting millennials
MotelOne, Opening end of 20173 stars
With ~50 hotels in Europe, the German design and low price business hotel chain will open its first hotel in Paris.
COMING - Business hotel targeting millennials
Yooma, Opened in March 2017
Designed by Ora-Ito in collaboration with Daniel Buren, this “urban lodge” concept targets families and groups with rooms for 2, 4 and 6 people.
“Urban lodge” designed for groups
Jo & Joe, Opening in 2019
AccorHotels is targeting millennials with this new concept. With a capacity of 570 beds and featuring shared facilities, it will be located near Paris University student residence district.
COMING - “Open house” between private rental, hostel and hotel
ComingOpened
Supply
PwC
October 2017
Competition has intensified in the 5* hotel segment:
Number of 5* hotel rooms in Paris grew from 4,946 in 2013 to 6,430 in 2016 (CAGR:+9.1% a year in 2013-16)
Confronted with intensified competition, luxury players enrich their offer through renovations
10European Cities Hotel Forecast
Sources: INSEE, CRT, Company websites, PwC Analysis
ComingOpened
Supply
Le Crillon, Reopened in July 20175 stars
After 4 years of restoration, the iconic 5-star hotel reopens with more spacious rooms (124 vs. 147) , a renovated facade and a pool.
Renovation of the iconic 5* Hotel de Crillon
Le Fouquet’s, Reopened in July 20175 stars
After a 6-month restoration period, Group Barrière’s flagship hotel reopened with restored rooms, restaurants and spa. Expansion will continue until late 2018 to add 19 rooms.
Renovation of Barrière’s flagship in Paris
Hotel de Berri, Opening early 2018
Hotel de Berri will be the second Parisian hotel of “The Luxury Collection” (Starwood brand). It will include a 2,000 sqm private garden and be located near the Champs Elysées.
COMING – Starwood’s Luxury Collection 2nd hotel in Paris
Hotel Fauchon, Opening early 20185 stars
The iconic luxury food brand Fauchon will open its first hotel in 2018. The hotel will include 54 rooms and be located at brand’s birthplace Place de la Madeleine.
COMING – Fauchon 1st hotel opening
Cheval Blanc, Opening end of 20185 stars
Located in the Samaritaine building, this luxury hotel will be the third under the LVMH brand “Cheval Blanc”. It will open in 2018 with 72 rooms after nearly 30 months of renovation.
COMING – LVMH 1st Parisian “Cheval Blanc” hotel
Lutetia, Reopening likely to happen early 20185 stars
After 3 years of restoration, the Lutetia will reopen with fewer rooms (190 vs. 231), a pool and a spa.
COMING – Reopening of historic Lutetia
PwC
October 2017
Paris hospitality transactions were limited in S1 2017. AccorHotels continues to diversify into travel & hotel services
11European Cities Hotel Forecast
• Only a few acquisitions in Paris hospitality market in S1 2017:
— BPI investment of €24.5m in Paris Inn Group to support the international development of Maison Albar(luxury boutique hotels)
— Acquisition of 4* Best Western Premier Opéra by Paris Inn Group and Blue Bear Capital
Supply
Sources: Zephyr, Company websites, News, PwC Analysis
A very limited number of
transactions in Paris hospitality segment
in S1 2017…
… and an acquisition spree from
AccorHotels to diversify into
services
• Over the first half of 2017, AccorHotels invested in 6 hotel services companies to:
Add complementary services to existing offer
Gain more control of hotel distribution
Invest in the sharing economy
Acquisitions of AccorHotels in Hotel Services - Jan-Oct 2017
Date Target Stake Deal description Enterprise
value (€m)
Revenues
FY16 (€m)
Feb-17 TRAVEL KEYS 100%
After the acquisition of 100% of onefinestay and 49% of Squarebreak in 2016, Accorhotel
consolidates its position in the luxury Private rental market by acquiring this US-based online
platform.
c.10.0* n.a.
Mar-17 POTEL & CHABOT 40%The acquisition of this French catering specialist brings a complementary expertise to AccorHotels
event organization strategy. n.a. 119.4
Apr-17 VERYCHIC 75%AccorHotels enters into the private sales business with the acquisition of Verychic, a French player
in the online private sales of luxury and upscale hotel rooms and breaks. c.29* 7.8
Apr-17 AVAILPRO 100%
Following the acquisition of Fastbooking in 2015, AccorHotels strenghtens its position in digital
services and complements its offer for independent hotels by acquiring Availpro, French company
specialized in digital hotel booking and management solutions for independent hotels.
n.a. 12.5
May-17 NOCTIS EVENTS 31%
Through the acquisition of Paris-based events, catering and entertainment company Noctis,
AccorHotels reinforces its position in Paris and expands into catering (after the acquisition of Potel &
Chabot).
n.a. 70.0
Oct-17 GEKKO 100%The acquisition of the French B2B hotel distribution solutions Gekko is in line with AccorHotels’
strategy to enhance the range of services offered to business travelers. 100.0 c.190.0
* Equity value
PwC
October 2017
Major cultural/business events and political measures should be a catalyst for tourist demand in S2 2017
12European Cities Hotel Forecast
Sources: CRT, News, PwC Analysis
51%
of interviewees consider that Sept. 2017 reservation status is “good” or “very good” (vs. 38% in Sept. 2016)
58%
of interviewees consider that activity in the summer 2017 (June, July and Aug.) has been good
72%
of interviewees anticipate an increase in their activity in the medium-term (Aug. 2017, vs. 64% in Aug. 2016)
Perception of Paris tourism industry players for S2 2017
Oct. 17 Nov. 17 Dec. 17
Oct.3rd: • Opening of Yves Saint-
Laurent Museum
Oct. 11th:• Temporary exhibition “Being
Modern: MoMA in Paris” opens at the Vuitton Foundation with ~200 masterpieces tracing MoMA’s history
Sept. 17Aug. 17July 17
Nov. 17: • Inauguration of a new convention center,
the “Paris Convention Center” within “Paris Expo Porte de Versailles”.
• This center can contain up to 5200 people in plenary session
Dec. 1st : • Landlords intending to rent their
apartments on Airbnb will need a registration number from the Paris mayor’s office
July 28th: • Macron’s government announced its plan to reach
100m international tourists by 2020• Measures include reduced waiting time at the
borders (airports) / less time to obtain a visa, enhanced security and promotion of Paris destination
Political measures
Cultural / business perspectives
Opportunities
PwC
October 2017
Starting 2018, Paris can count on further opportunities to strengthen its position as top destination in the world
13European Cities Hotel Forecast
Dedicated to contemporary art, Pinault-Paris Collection will open
in 2019 in Paris Bourse de Commerce
2019Pinault-Paris Museum
Sources: CRT, News, PwC Analysis
Opportunities
250,000 visitors are expected to attend this prestigious golf
competition
Sept. 2018Ryder Cup
Paris is candidate for 2025 World Expo, along with Osaka (Japan), Baku
(Azerbaijan) and Yekaterinburg (Russia)
2025World Expo?
• ~€6.6bn budget:― €3.0bn invested in permanent infrastructures― €3.6bn Organizing Committee budget
• 13m tickets to be sold• Strong visibility before and during the event, with boosted occupancy during construction works
2024Olympic Games
Creation of a large cultural and artistic hub in this former
industrial site of Renault factories
2021Contemporary art at
L’Ile Seguin
Further reading and contacts
Further reading Contacts
Arnaud THIBESART
Partner PwC Transactions
[email protected]+33 156577334
For further details, please refer to our European cities hotel forecast for 2017
and 2018
Visit our website:http://www.pwc.fr/fr/secteurs/medias-
et-loisirs/tourisme.html
Vladislava IOVKOVA
Director Strategy&
[email protected]+33 156577173
Jean-Baptiste DESCHRYVER
Partner PwC Audit
[email protected]+33 156575925
Thomas ABIER
Manager Strategy&
[email protected]+33 156578247
Diane TOUCHELAY
Associate Strategy&
[email protected]+33 156578822
Geoffroy SCHMITT
Partner PwC Transactions
[email protected]+33 156578452