Good prospects for the French hotel market
But creativity required from all market players
Hamburg/Paris, 30. September 2019
The French hotel market is currently in good shape. Positive conditions are attracting equity-rich investors not only in Paris, but also in the regional markets. However, the downside is a lack of product. The modest level of transactions in Paris speaks volumes. Accordingly, investors need to take a creative approach in order to leverage the huge potential in France, which is reflected not least in the strong overnight stay figures and in rising RevPAR in the provinces. The consensus among the hotel experts who gave their assessment of the medium-term outlook at an event in Paris today organised by Business Immo and Union Investment in association with Christie & Co was that transaction levels can be boosted in France by a willingness to accept more risk in relation to hotel operations and also through new hotel concepts and services. “We see exciting potential in the extended stay segment with operators such as adagio and Hyatt House, and have already invested accordingly in Germany. In France, extended stay is well established, thanks in particular to adagio,” said Andreas Löcher, head of Investment Management Hospitality at Union Investment. Löcher sees forward funding and value-add strategies as another way of securing good investments in France. “We are not harnessing the full potential of the investment spectrum in France by a long way. The French hotel market is evolving and this calls for an appropriate response from investors as well.” Andreas Löcher expects lifestyle brands such as 25 hours, Ruby and CitizenM to significantly expand their presence in France. The Union Investment expert believes that the new soft brands – offshoots of major hotel brands, backed by powerful booking systems but with lower management fees – also offer huge potential in France. Union Investment is also monitoring developments in regional markets such as Lyon and Bordeaux very closely. Increased diversification in the hotel brand landscape is apparent here too. And while Paris is still waiting for the “Olympic effect”, industry experts predict the sale of a number of regional portfolios in various hotel segments over the next 12 months.
Löcher believes it will also be particularly interesting to monitor the new strategies that hotel operators in France and elsewhere adopt in order to generate new revenue streams. As documented in a recent survey carried out by Business Immo and Union Investment in France, hotel experts are expecting more and more co-working elements to be included in hotel operations, thus giving guests access to a wider range of services. In future, additional revenue will be generated in areas that are primarily a cost factor at present, according to the experts at the Business Immo talk in Paris. In particular, large and often unused hotel lobbies offer plenty of opportunities for hosting festivals, university gatherings and other external events. The same applies to meeting rooms which mainly stand empty in the evenings. “Going forward, we will see lots of imaginative ideas from hotel operators in the various segments as they take on the co-working competition. Innovative approaches will not only enhance the level of service for guests, they will also generate additional demand.” Change is coming to the French hotel market, which is a promising sign for investors.
Press contact
Union Investment Real Estate GmbH
Fabian Hellbusch
Head of Real Estate Marketing, Communication