French President Emmanuel Macron's policies are proving a boost to France's hotels

Photo credit: AlxeyPnferov//Getty Images

The French economy is now on the rise following several years of stagnation as the country recovered slowly from the impact of the global financial crisis. During the really tough years, growth in real GDP was limited in 2014/15 and 16 to 0.9 percent, 1.1 percent and 1.2 percent, respectively—a pace not sustained enough to reduce the endemic French unemployment rate, sitting at around 10 percent. However, French President Emmanuel Macron, only 39 years old, is paving the way for a new boost for the country, including loosening labor rules and cutting corporate taxes.

Prospects for the country are not only a matter of numbers but also confidence. The OECD’s Business Confidence Index (BCI) for France reached 101 in August a level last seen in 2011. Likewise, the Consumer Confidence Index (CCI) bounced back to its pre-crisis record of 2007. France also reached the top of the Soft Power Index, described as the ability to harness international alliances and shape the preferences of others through a country’s appeal and attraction, ahead of the UK, U.S. and Germany. Which begs the question: Is there a Macron effect? 

Development on the Horizon

On the development side, some major projects are underway. The Greater Paris regional council has engaged a budget envelope of €24.7 billion to create a circular metro system, known as the “Grand Paris Express,” and aimed at connecting more efficiently the Parisian airports to the city center and to suburban business hubs, such as La Defense, St Denis and Saclay. And now, only a day or so ago, the International Olympic Committee has nominated Paris as host city for the 2024 games, one century after the city hosted the Olympics for the last time. By then, France will also have hosted the Ryder Cup (September 2018). Undoubtedly, improved infrastructure and the events planned already are a catalyst for tourist demand and hotel investment.

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But where are we today in terms of hotel performances? According to the French hotel professional organization UMIH, occupancy of hotels as of July 31 year to date reached 67 percent, a gain of 3 percentage points over the previous year. Growth in RevPAR reached 2.3 percent over the same period, the jump in volume partly offset by a drop in average daily rates, as French hotels cut their rates after the attacks of the Bataclan and Nice.

The fact remains that international tourists are back in 2017. As expected, Paris and its surroundings will get most of the benefits of this uplift, while the provincial market remains stable. In the same vein midscale and upper categories are on the rise while economy and budget hotels are sluggish.

Another factor of importance for hotels will be the impact of reforms currently conducted or in preparation by the Macron administration. A first set of five laws will deeply modernize the French labour regulation, including increased flexibility, improved parameters for casual contracts and social negotiation within sectors. As the most important professional organization of the sector, UMIH welcomes the set of reforms as far as the hotel industry is concerned.

As stated by the USC Center on Public Diplomacy, “This result may come as a shock given the French landscape just a year ago,” but it seems like France is back!

Philippe Doizelet is a managing partner at Horwath HTL and based in Paris. started his career as a consultant with Horwath & Horwath then KPMG before joining Europcar as Project Director.