Hotel & catering

Introduction Hotels in France, in need of refurbishment Overview of the French hotel sector

With total turnover of €12Bn, the hotel sector is France’s fifth largest employer. There are some 18,000 classified hotels in France, equivalent to 600,000 rooms. In addition, there are between 9,000 and 14,000 non-classified hotels. The number of classified hotels has declined by 5% over the last decade but their quality has improved: ten years ago, 0-2 star hotels made up 80% of supply, while in 2004, they accounted for 76% (13,863). The table below details the number and classification of hotels in France.

Over the last 5 years, the average capacity per French hotel has gone from 29 rooms to 33 rooms. This is similar to the rest of Europe where the average hotel has just 30 rooms. Given that between 80% and 90% of a hotel’s costs are fixed, profitability for hotels with less than 40-45 rooms is not obvious.

With global giants like Accor, it comes as no surprise that France has the highest concentration of integrated hotel chains (both subsidiaries and franchises) in Europe.

While chains represent just 16% of the number of classified hotels (2,922), they account for 38% of the number of rooms and, due to their higher occupancy rates, a 53% market share of total nights spent in hotels. In other words, hotel chains account for one hotel stay in two. The trend for concentration within the sector is still going on and today, just 4 chains control more than half of all integrated hotels in Europe with Accor alone controlling 28.5%. 

According to government sources (INSEE), French hotels have raised prices by 24.8% between 1998 and 2004, double the rate for the general economy (+11.3%). The increase came as a necessary reply to soaring construction and energy costs, employment charges (about 40% of hotel employees receive salaries around the minimum wage) and the costs of outsourcing (cleaning, maintenance, etc).

But the increased room prices have impacted demand and the small hotel operator is finding life in 2005 particularly hard. More and more small hotels are joining the larger chains or franchises. The only other way to survive is to re-invest - by creating a new concept, refurbishing, adding services and advertising.