France is the most promising hotel market to invest in because of low availability and high demand, delegates heard at Real Asset Media’s European Hotels Investment Briefing, which was held in Paris in June.
‘If I had to invest my money now I would clearly invest in hotels in France,’ said Romain Gowhari, Executive Vice President, Head of Transactions France – Hotels & Hospitality Group, JLL. ‘I would think of decreasing my office and my retail allocation and try to increase my hotel allocation because, looking at macro trends, it definitely makes sense’.
The reason is demand. There are more and more people who have money to travel and ‘the first place they want to go to is Paris, the second place they want to go to is the French Riviera or Provence to enjoy the French lifestyle,’ he said. ‘This is not going to change, because France will always be France, whatever happens’.
The hotel sector is already vibrant and there have already been many new developments in Paris and in Bordeaux. The share of developments out of total transactions went up to 24% last year from 16% in 2017 and it is substantially higher than in Spain (10%), the UK (9%) and Germany (1%).
‘The share of developments is much higher in France than in the other three big markets partly because we have strong developers, but mainly because there is a clear lack of supply, especially in Paris,’ Gowhari said. ‘Our institutional community, especially the asset managers and life insurance companies, also play a role because they are very active and like to invest in forward funding’.
Looking at RevPAR, or revenue per available room, the most crucial ratio used in the hotel industry, in Paris it has gone up to €140, which is ‘even higher than in 2014, which shows that the capital has recovered from the terrorist attacks and the crisis is behind us,’ Gowhari said. The luxury five-star segment of the market, which has the highest RevPAR, was ‘pretty resilient’ even during the crisis.
As for the regions, there was very little volatility during the crisis but the best is yet to come, according to JLL. ‘We believe there is room for an increase in RevPAR in key regional cities in France and we believe that the investment community should focus more on these cities, because the supply is limited and the quality of the hotels is very poor,’ he said. ‘There are a lot of investments and capex to be done in most of these properties, so there is room for a substantial capital gain’.
Prospects for Nice are very positive because the municipality did a lot to increase the attractiveness of the city and improve the infrastructure with the objective to persuade the many wealthy people who land at Nice airport to stay there, instead of going on to Cannes or Monaco. The strategy is working and there are several new developments being done already.
‘We strongly believe there is room for RevPAR increase, especially in the luxury segment, and the number of passengers arriving in Nice will keep increasing so we think it is a market really worth focusing on in the next few years,’ Gowhari said.
Other regional cities that have positive prospects are Lyon, Nantes and Toulouse, where demand is high and prices are increasing, although the upscale segment has limited potential. Lille is a less attractive market, according to JLL, because RevPAR is flattening and there is a strong pipeline.
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