France hotel profitability in context: comparing performance against other key markets

Profitability data for France’s hotels highlights notable differences from other key European markets. On the surface, high total revenue per available room (TRevPAR) indicates that France was a top performer in 2018, but digging deeper shows that this isn’t necessarily the case.

Paris, meanwhile, continued its recovery from 2015’s terror attacks, and hoteliers benefited from increased gross operating profit per available room (GOPPAR). Were those increases enough to return to 2015 levels? We analyzed all of the above and more in this quick look at profitability for hotels in France.

GOP margin lags behind key European markets

TRevPAR reached EUR188.83 for France’s hotels in 2018, higher than the likes of Germany, Belgium and the U.K. However, these fellow European markets were all more effective at converting their revenue into profit, and France posted the lowest gross operating profit (GOP) margin among five major European nations. What reasons were behind the more muted profitability in France?

Higher labor costs

In a nutshell, the cost of labor per available room (LPAR) hamstrung hoteliers in 2018—with levels in France noticeably higher than other countries. France reported LPAR of EUR72.96, higher than its nearest rival the U.K. (EUR42.45) and considerably greater than the other markets analyzed here. Cause for concern, that LPAR level represented a year-over-year increase of 9.0%, which also significantly outpaced other European countries.  

Paris performance picked up

The French capital produced a double-digit TRevPAR increase in 2018, as hotels reported a 10.8% lift in the metric. However, Paris is yet to return the pre-terror levels experienced in 2015. From a hotel performance perspective, the year was an overwhelming success. Occupancy grew 3.1% as demand returned to the capital, enabling hoteliers to increase average daily rate (ADR) 9.4%. This led to a jump in revenue per available room (RevPAR) of 12.8% to an actual level of EUR157.15.

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