www.pwc.com European Cities Hotel Forecast S1 2017 update - Paris
Paris Hospitality shows encouraging trends in S1, to be confirmed in the second half of the year 01 Performance Paris hospitality market performance registered in S1 17 has been in line with the trends announced in our 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). 02 Demand 03 Supply 04 Opportunities 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). On 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). Paris 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). 2
S1 2017 performance is in line with forecasts, driven by a rise in occupancy and a stable ADR Performance FY16 Actuals* FY17 forecast** S1 2017 Actuals *** Occupancy rate (OR) 69% 72% 74% Average Daily Rate (ADR) 229 229 228 Revenue Per Available Room (RevPAR) 159 165 169 Please refer to European Cities Hotel Forecast 2017 & 2018 for further details on forecasts and 2016 historical trading Based on FY16 performance indicators, 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) Notes: *) FY16 STR data **) Based on FY16, released in our 2017 & 2018 ***) CRT S1 2017 (upscale segment to have a comparable scope with STR) Sources: STR, CRT,, Analysis 3
RevPAR grew in all segments with highest increase coming from mid- and upscale hotels 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% x = 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) Note: S1 2016 ADR, OR and RevPAR data calculated based on CRT S1 16/17 variations Sources: CRT, Analysis 4
Performance With a seasonality effect in occupancy historically stronger in S2, perspectives for S2 2017 are encouraging Monthly occupancy rate in Paris region (all segments) 2014-17 S1 72.3% 73.9% 74.9% 71.3% 82.6% 77.2% S2 Drop in business segment in August 75.8% 74.8% 2017 2015 65.0% 62.5% 67.8% 65.3% 68.6% Impact of Paris terrorist attacks 68.4% 64.2% 2014 2016 2014 2016 57.0% 56.8% Monthly occupancy performance is stronger in S1 2017 than S1 2016, close to S1 2015 performance 57.0% Impact of Nice terrorist attacks 2015 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. 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 Sources: INSEE, DGE, CRT, Analysis 5
Demand In S1 2017, Paris region hit a ten-year high in visitors thanks to a double-digit growth of international tourists The rebound in arrivals has been driven by international arrivals (+14.9% in S1 17 vs. S1 16) International tourist arrivals from top countries grew in S1 17 (except UK), with sharpest increase coming from the US, China, Germany and Japan International and domestic arrivals in Paris region S1 2008-17 (in millions) Overview of top foreign countries of origin for international arrivals in Paris region (in thousands) +11% 16.1 57% 43% 46% S1 08 Growth S1 17 vs. 16 15.9 54% 14.9 56% 44% 16.5 54% 46% S1 15 S1 16 S1 17 Domestic +6.4% International +14.9% US UK China Germany Japan Others 97 0 1 006 988 1 008 339 508 494 47 4 345 27 3 4 184 4 055 S1 2014 S1 2015 946 923 406 421 145 3 740 S1 2016 1 140 908 527 507 204 4 314 S1 2017 Var S1 16-17 +21% -2% +30% +20% +41% The decrease could be explained by a staycation effect due to a weaker pound following Brexit Sources: INSEE, DGE, CRT, Analysis 6
Demand Tourism in Paris has been driven by a jump in leisure tourism and a steady growth in business tourism Business vs. Leisure tourism in Paris (in millions of nights) +12.7% 16.9 15.0 +17.4% +8.3% 7.2 8.5 7.8 8.4 S1 2016 S1 2017 Business vs. Leisure tourism in Paris, S1 2016-17 (in % of nights spent) Leisure Business 15.0m 48% 52% +12.7% 16.9m 50% 50% Leisure Business Total S1 2016 S1 2017 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 140k Professionals visited the Paris Air Show in June 2017 (out of 300k visitors) 2 Vienna 186 1 Paris 196 3 Barcelona 181 International congress city ranking (ICCA* 2016) Notes: *) International Congress and Convention Association Sources: CRT, OTCP, ICCA, Analysis 196 # of international congresses hosted in 2016 7
Demand Performance in occupancy originates in a rise in Paris attractiveness and favourable economic conditions in S1 Safer Enhanced security measures 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) Attractive supply with reduced barriers to destination Cheaper Increased air capacity and lower air fares Easier Faster visa procedures 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 Engaging Through promotion campaign ~ 8m promotion campaign launched in 2017 (vs. 1.8m in 2016 for #MadeinParis campaign), primarily targeting leisure tourists from Western Europe, USA, Canada, France Thematic marketing (My romantic Paris before Valentine s Day) and solutions for lowbudget tourists (e.g. partnership with Voyage-SNCF to sell low priced tickets) and stronger demand driven by favourable economic conditions Sources: ADP, CRT, OTCP, News, Analysis Affordable with enhanced buying power of international tourists Favourable exchange rates in Japan (S2 2016, beginning of 2017) and in the US (T4 2016, T1 2017) Economic growth: in Japan, 6 th trimester of GDP growth in a row with +4% in T2 2017 vs T2 2016
Supply Disruptive concepts are improving customer experience to face Airbnb competition and address millennials Contemporary design boutique hotel Design and cooperative boutique hotel 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 Urban lodge designed for groups 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. The Hoxton, Opened in July 2017 4 th opening for the Hoxton group, this hotel is located in a 18 th century hotel particulier arranged with contemporary style Business hotel targeting millennials 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. COMING - Open house between private rental, hostel and hotel 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 - Business hotel targeting millennials MotelOne, Opening end of 2017 3 stars With ~50 hotels in Europe, the German design and low price business hotel chain will open its first hotel in Paris. Sources: Company websites, News, Analysis Opened Coming 9
Supply Confronted with intensified competition, luxury players enrich their offer through renovations COMING Starwood s Luxury Collection 2 nd hotel in Paris Hotel de Berri, Opening early 2018 COMING Fauchon 1 st hotel opening Hotel Fauchon, Opening early 2018 5 stars 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. 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 LVMH 1 st Parisian Cheval Blanc hotel Renovation of Barrière s flagship in Paris Le Fouquet s, Reopened in July 2017 5 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. Cheval Blanc, Opening end of 2018 5 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 Reopening of historic Lutetia Renovation of the iconic 5* Hotel de Crillon Le Crillon, Reopened in July 2017 5 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. Sources: INSEE, CRT, Company websites, Analysis Opened Coming Lutetia, Reopening likely to happen early 2018 5 stars After 3 years of restoration, the Lutetia will reopen with fewer rooms (190 vs. 231), a pool and a spa. 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) 10
Supply Paris hospitality transactions were limited in S1 2017. AccorHotels continues to diversify into travel & hotel services A very limited number of transactions in Paris hospitality segment in S1 2017 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 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 and an acquisition spree from AccorHotels to diversify into services Date Target Stake Deal description Feb-17 TRAVEL KEYS After the acquisition of 100% of onefinestay and 49% of Squarebreak in 2016, Accorhotel 100% consolidates its position in the luxury Private rental market by acquiring this US-based online platform. Mar-17 POTEL & CHABOT The acquisition of this French catering specialist brings a complementary expertise to AccorHotels 40% event organization strategy. Apr-17 VERYCHIC 75% Apr-17 AVAILPRO 100% 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. 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. Enterprise value ( m) c.10.0* Revenues FY16 ( m) n.a. n.a. 119.4 c.29* 7.8 n.a. 12.5 May-17 NOCTIS EVENTS 31% Oct-17 GEKKO 100% * Equity value 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). 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. n.a. 70.0 100.0 c.190.0 Sources: Zephyr, Company websites, News, Analysis 11
Opportunities Major cultural/business events and political measures should be a catalyst for tourist demand in S2 2017 July 28 th : 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 Oct.3 rd : Opening of Yves Saint- Laurent Museum Dec. 1 st : Landlords intending to rent their apartments on Airbnb will need a registration number from the Paris mayor s office July 17 Aug. 17 Sept. 17 Oct. 17 Nov. 17 Dec. 17 Cultural / business perspectives Political measures Oct. 11 th : Temporary exhibition Being Modern: MoMA in Paris opens at the Vuitton Foundation with ~200 masterpieces tracing MoMA s history 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 Perception of Paris tourism industry players for S2 2017 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 mediumterm (Aug. 2017, vs. 64% in Aug. 2016) Sources: CRT, News, Analysis 12
Opportunities Starting 2018, Paris can count on further opportunities to strengthen its position as top destination in the world Sept. 2018 Ryder Cup 250,000 visitors are expected to attend this prestigious golf competition 2021 Contemporary art at L Ile Seguin Creation of a large cultural and artistic hub in this former industrial site of Renault factories 2024 Olympic Games ~ 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 Sources: CRT, News, Analysis 2019 Pinault-Paris Museum Dedicated to contemporary art, Pinault-Paris Collection will open in 2019 in Paris Bourse de Commerce 2025 World Expo? Paris is candidate for 2025 World Expo, along with Osaka (Japan), Baku (Azerbaijan) and Yekaterinburg (Russia) 13
Further reading and contacts Further reading Contacts Arnaud THIBESART Partner Transactions arnaud.thibesart@pwc.com +33 156577334 Geoffroy SCHMITT Partner Transactions geoffroy.schmitt@pwc.com +33 156578452 Vladislava IOVKOVA Director Strategy& vladislava.iovkova@pwc.com +33 156577173 Jean-Baptiste DESCHRYVER Partner Audit jean-baptiste.deschryver@pwc.com +33 156575925 For further details, please refer to our European cities hotel forecast for 2017 and 2018 Visit our website: http://www.pwc.fr/fr/secteurs/mediaset-loisirs/tourisme.html Thomas ABIER Manager Strategy& thomas.abier@pwc.com +33 156578247 Diane TOUCHELAY Associate Strategy& diane.touchelay@pwc.com +33 156578822