International tourism revenues in France down 49.9% in 1H20 - KPMG
The first half of 2020 was marked by a 49.4% drop in international tourism receipts in France, according to the 43rd edition of KPMG France's annual study, "L'Industrie Hôtelière Française", which analyzes the 2019 operating and management ratios of nearly 43% of the French approved hotel fleet (nearly 3,000 hotels with more than 230,000 rooms).
A 1st half of 2020 at several speeds
The Ile-de-France region, whose tourist activity represents nearly 8% GDP and about 500,000 jobs, recorded a shortfall of €6.4bn in the first half of 2020, with 14.3 million fewer tourists in the capital and its region. Nearly 80% of hotels have reopened for the summer season, although with disparities depending on the region. In Ile-de-France, for example, the reopening rate was less than 50%, while almost all establishments were open in the seaside areas.
According to the study, the fall looks set to be all the more difficult for the French hotel industry, as it will not benefit from a recovery in business tourism, which accounts for 55% of overnight stays (cancelled trade shows, limitation of business travel).
"Hotels targeting MICE or foreign clientele present slower prospects for a return to past performance than economy and mid-range hotels, which are positioned in a domestic, local market," said Stéphane Botz, Partner, Director of National Hospitality at KPMG France.
An uncertain short-term future
Difficulties will still mark 2020 and 2021. They are likely to show still significant losses for many players, affected by a decrease in equity capital and an increase in debt. "If the two-year vision (2022 - 2023) is positive, European leisure and business tourism will be essential to support the French hotel industry, which has demonstrated its resilience on several occasions in the past," analyses Stéphane Botz.
On the other hand, KPMG France anticipates a discount on sector values, linked to levels of revenue and operating performance (EBITDAR), missing in 2020 and irregular in 2021 as well as 2022. The timeframe for a return to pre-crisis values will vary and will depend on a certain number of criteria: location, brand, positioning, operating model and ownership structure. However, it will depend above all on the reopening of borders and the reduction of health risks. Assets benefiting from a prime location, naturally retain greater solidity and liquidity on the market. Businesses alone are more affected by the unprecedented economic effects of the crisis.
After a very active 2019 on the transaction market (€2.3bn in France), it is still difficult to assess the effects of the crisis on the continued consolidation of the sector, KPMG France suggests. Some players will no doubt prefer to wait for a return to better economic and financial conditions before triggering a sale. The real opportunities at "fair prices" are those that will be seized in the coming months, subject to the solidity of investors and the confidence of banks in this asset class. Nevertheless, hotel developers and investors seem to maintain their confidence in the future of this industry. They are pursuing their developments with delivery schedules maintained between 2022 and 2023.
As far as palaces are concerned, in 2020, the strong dependence on international clientele (which accounts for 90% of overnight stays in French palaces) has increased uncertainty. For Parisian palaces, which have been gradually reopening since September, losses over 2020 are estimated at more than 70% of annual revenues. North American customers are the main clientele of Parisian palaces (25% of overnight stays), followed closely by customers from the Middle East (23%), compared with 8% for French customers.
A return to pre-crisis levels is still hypothetical, with 2021 looking very difficult for these places, whose payroll accounts for 45% of total revenues on average over a standard year.
An industry in a state of renewal
According to KPMG France, the Covid-19 crisis could accelerate certain trends in tourism consumption, such as the renewal of the country hotel offer, the reinforcement of the practice of slow tourism, in opposition to mass tourism, and the taste for eco-designed and diffuse accommodation.
