Paris

The City of Lights remains an appealing destination to investors and tourists alike, despite recent instability. Gwenola Donet, head of France for the Hotels & Hospitality Group at JLL, talks us through the opportunities and challenges that France’s capi

Tourism demand

Paris is one of the most visited cities globally and the most popular destination for international tourists visiting France by far. The city has many tourist attractions, large convention and congress venues, and at the same time, is a political, administrative, economic and financial center. Historically, Paris has benefited from a well-diversified client mix. Corporate demand represents a stable average of about 45-50 percent of hotel bed nights. International bed nights make up between 66 and 70 percent of total demand, with the US and the UK topping the list. Demand produced a positive trend between 2009 and 2014, driven mainly by rising levels of international arrivals. Visitors from China showed the strongest growth, with bed nights from this segment up 283 percent between 2009 and 2015. In 2012 and 2013, strong growth in international visitors compensated for a decline in domestic demand, sparked by the challenging local economic conditions. Since 2015, Paris has felt the weight of geopolitical events, including Russia’s domestic difficulties and sporadic terrorist attacks. The biggest declines were in the international leisure segment, especially in the number of visitors from the US, Japan, Italy and Russia which were down significantly. However, business and domestic demand has remained stable.

Upgrading supply

Hotel supply in the capital of France comprises around 1,550 properties with a total of 80,200 guest rooms. The number of hotel rooms in Paris has increased by just three percent during the last decade. However, in the past five years, Paris has experienced an upgrade in supply, with the volume of four-star and above segments up by around 18 percent, mostly through the repositioning of lower-category properties and the opening of boutique and luxury hotels, particularly in the Palace segment. In the budget-to-midscale segments, new supply has been limited, resulting in a market that’s well balanced between three, four and five-star hotels, but undersupplied when it comes to budget and economy properties.

Performance

Due to security concerns, hotel performance in Paris has been in decline for 15 consecutive months, bringing to an end the upward revenue per available room (REVPAR) cycle that has been in evidence since 2010. The upper luxury segment registered the biggest drop, falling 22 percent in 2016, due to lower demand and rising competition from providers such as