european cities hotel forecast s1 2017 update - paris · european cities hotel forecast 01 paris...

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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


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


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


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


+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


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


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


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


• 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


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


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&


Jean-Baptiste DESCHRYVER

Partner PwC Audit


Thomas ABIER

Manager Strategy&


Diane TOUCHELAY

Associate Strategy&


Geoffroy SCHMITT

Partner PwC Transactions


mailto:[email protected]

https://www.pwc.com/gx/en/hospitality-leisure/assets/european-hotels-forecast-report-2017-2018-web.pdf

http://www.pwc.fr/fr/secteurs/medias-et-loisirs/tourisme.html






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