Paris Je T’aime (Paris DMO)
Paris, France
February, 2022
Assessing Investment Feasibility in Hospitality Segments in Paris During the Pandemic Aftermath
Context
In the aftermath of the pandemic, the hotel investment market in Europe experienced a strong rebound after the pandemic, with 2022 marking a significant recovery in transaction volumes and investor confidence. As the travel industry bounced back, demand for leisure travel surged (less so in the case of business travel), prompting investors to refocus on key destinations. Major cities and resort areas saw substantial growth in hotel prices and occupancy rates, fueled by pent-up demand and the reopening of international borders. At that point, investment preferences leaned towards high-quality assets in prime locations, with a particular emphasis on luxury and upper-upscale segments.
Still, uncertainty remained among key players, as investors faced a more challenging financial landscape and the uneven demand recovery from many source markets around the world, in a continent, Europe, that kept its position as top destination for global hospitality investors, pushing strong competition among key destinations. In this scenario, Paris aimed at establishing a timeline for tourism recovery, updating and forecasting demand behaviour and motivations to provide valuable information to hospitality companies and investors on the high-yield opportunities the French capital had to offer, in particular in the high-end and luxury hotel market.
Key goals
Market insights are essential for hotel investors to make informed, strategic decisions, to identify lucrative opportunities, assess risks, to support strategic planning or tailor guests’ experience, and to understand key metrics like occupancy rates, ADRs, and RevPAR, crucial for evaluating a hotel’s potential profitability. By providing detailed market intelligence to potential investors, Paris DMO wanted to reassure hospitality industry players on the potential of the destination and the road to recovery, particularly for 5-star and luxury hotels, helping in reducing risks associated with any hotel investment operation.
Approach
The study dived both the current scenario by early 2022 and coming months, and forecasted 2023 performance, based on a multilevel, cross-analysis that included air capacity, seasonality trends, hotel market performance, satisfaction indexes, and spending behaviour, comparing with other competitors and assessing key source markets for Paris. This comprehensive analysis helped to establish key demand segments to both boost arrivals, stays and spending, orienting Paris DMO strategic planning; and also to determine high-yield hotel investment opportunities, particularly among higher hotel categories.
Results
The report provided a horizon for Paris tourism recovery to pre-pandemic levels, set by 2023, dealing with a slower flight connectivity rebound, but harnessing a less seasonal demand drawn by family, outdoors, wellness, and gastro experiences, all highly regarded by travellers. The study also detected that hotel satisfaction was an area of improvement, a significant issue to be addressed as 5-star hotels prices and demand were increasing from all key source markets (France, Spain, US, Italy, Germany, and the UK), and also to laid the foundations to attract high-spenders as well as high-impact inbound markets, and opportunity niche markets, such as digital nomads or late Millennials interested in wellness and high-end experiences, as spending patterns data showed.
This investment feasibility assessment proved to be accurate and helped the Paris’ DMO to make more efcicient forecasting and developement. Paris DMO experienced an outstanding performance in 2023 when compared to full year 2019, increasing total arrivals up to +95%, and international visitation up to +97%. Hotel prices for the 5-star category and average spending in hotel accommodation increased +7% and +10% respectively, with respect to 2022, turning operations in high-end accommodation into a very lucrative investment. Target source markets also performed well year over year, as stays in Paris 5-star hotels grew in 2023 up to +17% among Americans, +29% among British, and 10% among Germans.
