Paris is the most visited city in the world, with strong appeal to international visitors. Indeed, the French capital benefits from various source markets and a well-diversified client mix, allowing the market to perform well throughout the year, as Maria Coll, senior associate, and Sophie Perret, senior director of HVS, explain.

Tourism in Paris has been impacted by a number of challenging events in recent years, namely the terrorist attacks in 2015/16, the “Yellow Vests” movement in 2018/19, transport strikes in 2019, as well as the Covid-19 pandemic in 2020/21. The city has, however, proved to be highly resilient, experiencing a strong demand rebound from June 2021 onward.
During the pandemic and the early post pandemic period, a number of properties took the opportunity to implement renovation plans, which resulted in an overall improvement in the quality of stock, thus helping hotels benefit further from the current strong RevPAR dynamics.
There have also been some high-profile hotel openings, such as the Cheval Blanc Paris (September 2021) and the Bulgari Hotel Paris (November 2021). Future openings include the first SO/ by Sofitel property in France, which opened in September 2022, and the 56-room Maison Delano, slated for November 2022.
In addition, the hosting of the UEFA Champions League final (May 2022), the forthcoming Rugby World Cup (September and October 2023) and the Olympic Games (July, August and September 2024) should assist in marketing the destination and help it maintain momentum in terms of strong hotel performance.

Demand trends
Paris has experienced a strong demand rebound since June 2021, which intensified from March 2022 when all government restrictions were lifted and international and business travel resumed. Consequently, the market recorded robust performance in the year-to-May 2022, up on 2019 levels, despite weak demand in earlier months of the year, followed by above-average occupancies from April onward. In the year-to-May 2022, arrivals reached 84 percent of the volume achieved in the same period in 2019, and in May 2022, Paris recorded an all-time high in occupancy and average rate levels as a result of the UEFA Champions League final, which was hosted in the French capital.

The increase in hotel rates is the result of several dynamics, including pent-up demand and the so-called “travel revenge” phenomenon, as well as inflationary pressures and the strength of the dollar against the euro. Immediate concern lies in the capacity of the industry to solve staff shortage issues and in the economic outlook, including the cost-of-living crisis and the risk of a recession.

Hotel transactions
Paris has remained one of the most attractive destinations for hotel investors. It recorded the highest price per room in 2021, according to our 2022 European Hotel Valuation Index publication. Recent transactions include mostly upscale properties that have traded above EUR 500,000 per room. A notable transaction is the acquisition of the 75-room Hotel Pont Royal for EUR 70 million (EUR 933,000 per room) in February 2022 by Champagne Hospitality, a luxury hotel operator and investor. Investors’ appetite for the city is likely to remain strong in the coming years due to the scarcity of opportunities in the city and its exceptional fundamentals, albeit in the context of a higher cost of debt and an uncertain economic environment.

Bright outlook
Paris has proved to be less prone to performance volatility than other gateway cities in Europe, and it holds the fundamentals to continue to perform strongly in years to come. Despite the high degree of uncertainty that is currently influencing the market and the economy, Paris is likely to remain on track to hold its position as a prominent destination for both visitors and investors for the foreseeable future.

hvs.com