According to Savills latest French Hotel Market report a good level of supply of prime assets in 2012, coupled with the return of foreign investors, boosted total investment from €1.5 billion in 2011 to €2.1 billion in 2012.
According to Savills latest French Hotel Market report a good level of supply of prime assets in 2012, coupled with the return of foreign investors, boosted total investment from €1.5 billion in 2011 to €2.1 billion in 2012. The firm notes that the market was notably fuelled by the sale of five large portfolios representing approximately 75% of the total amount invested since the beginning of the year.
Savills highlights that Paris and the Riviera remain the key centres for hotel investment activity accounting for more that 85% of the total volume. In the regional markets where conditions can be challenging, activity remains subdued and sporadic. The firm also reports that yields for the sector have remained stable over the past 12 months, ranging from 4.5% to 7.5%.
Boris Cappelle, head of investment at Savills France, adds: “Off the back of such a successful 2012, we predict that 2013 will continue to see a good level of investment in the French hotel market, notably fuelled by portfolio deals and interest from overseas investors.”
In terms of occupancy rates, hotel market intelligence firm HotStats reports that average occupancy rates in the luxury four-five star market in Paris increased to 79.3% in 2012 from 78.5% in 2011. In the five star market alone in the same period the increase in occupancy rate was 79.6% up from 77.8% in 2011.
HotStats data also found that average room rates (ARR) in the four-five star market in Paris also grew in 2012 boosted by both corporate and leisure travellers. ARR were €289.34 across four-five star and €387.33 for five stars, a year on year increase of 4.7% and 5.6% respectively. Over the same period revenue per average room (RevPar) across both categories increased by 5.8% with growth per average room (GOPPAR) also up by 5.8% compared to 2011.
Lydia Brissy, European research director at Savills, comments: “The hotel market in Paris continues to be boosted by international tourism, specifically from visitors from Germany, Switzerland, Russia, the US, Canada, and Japan. Five star hotels in particular have had a very strong year, with very good operational performance. Going forward into 2013 we anticipate that hotel performance will continue to rely on international tourists, with four-five star hotels continuing to see the biggest boost from this group.”
Savills states that due to a lack of development the total number of hotels in France has been decreasing since 2005 from 18,309 to 17,000 in 2012. Hotel development starts in France between January to November 2012 totalled nearly 520,000 sq m. Ile-de-France and Paris did show an increase in development of 3% and 8% respectively compared to the previous full year. Additionally, Savills highlights that there are over 350 hotel developments in the pipeline representing more than 33,000 rooms and 55% of these have already received planning permission.