Terror Attacks And Airbnb Chip Away At Paris ‘Palace’ Hotels

Luxury hotels in Paris have taken a beating this year, with the Charlie Hebdo attacks scaring off visitors and websites like Airbnb stealing away clients, but analysts say the lure of the “palaces” has not yet faded.

“The shock of Charlie (attacks) affected us enormously in the first quarter, our occupancy rate was easily down by 20 percent and it took us time to get back up to speed,” says Michel Jauslin, director of the Park Hyatt Paris Vendome.

Islamist gunmen carried out a string of attacks in Paris in January that left 17 dead, including much of the editorial team of the satirical magazine Charlie Hebdo.

“It’s been a dreary year, we’re going to finish with a 65 percent occupation rate,” Didier Le Calvez, chief executive at the Bristol, and head of the luxury branch of the Umih French hotel association, told AFP.

Created in 2010, the “palace” label is awarded only to exceptional five-star hotels, and Paris has eight of the 16 prestigious establishments.

In addition to the Bristol and Park Hyatt Paris Vendome, the Paris palaces are Le Meurice, Royal Monceau, George V, Plaza Athenee, Shangri-La and Mandarin Oriental.

– Airbnb effect –

 

While the summer smiled palace hotels in the French capital, it wasn’t enough to save the year.

“We are still being affected by the arrival of new networks for renting among individuals, such as the Collectionist or Airbnb,” noted Francois Delahaye, managing director of the Plaza Athenee, which re-opened a year ago after 11 months of renovations.

He said they had noticed clients “who reserved an apartment on Airbnb and then came to dine at the Plaza”.

Delahaye estimated that such competition had eaten away 10 to 15 percent of business.

It is a trend that market experts readily acknowledge, even if they dispute the scale.

“I don’t see how such actors could substantially rival the palaces which have swimming pools, one or more fine restaurants, 24-hour concierge service, and ensure the security of their guests…” said Gwenola Donet, who heads up French operations at JLL Hotels & Hospitality real estate investment advisor.

 

She sees the main problem for the sector being too much of a good thing as investors piled into luxury hotel projects.

“The offer expanded much faster than the offer, with 60 percent growth in the number of rooms between 2007 and 2017 causing a 10 percent drop in occupancy rate for the segment,” said Donet.

The reopening of the Peninsula in July 2014, another historic Paris hotel that has not achieved palace status, followed by the renovated Plaza Athenee two months later, increased the number of luxury rooms available in Paris.

Next year the reopening of the Ritz in March and the Crillon in December, then the Lutetia in 2017 and the launch of the new Cheval Blanc in the old Samartaine department store building on the banks of the Seine, will further increase the luxury rooms on offer.

The growing number of luxury boutique hotels could also add to the problems.

French luxury food store and caterer Fauchon announced in September it plans to open a 50-room hotel at Place de la Madeleine by 2018.

“There aren’t enough of these boutique hotels yet to cause a disruption,” noted the Park Hyatt Paris-Vendome’s Jauslin, but the palaces were watching the trend closely as more of them were expected to open.

– Paris, the luxury reference –

 

But there is an enduring demand for luxury hotels in the world capital of fashion and style, analysts said.

“We can’t speak yet of saturation,” said Vanguelis Panayotis, development director at the MKG Group, a consultancy focused on the hospitality sector.

He said the sector was in the phase of absorbing the new offer, which could lead to the average price per night falling below 1,000 euros ($1,100).

And investors aren’t turned off.

“Many luxury chains are seeking to develop in Paris, even if their establishments won’t necessarily be palaces,” said Stephane Botz, who heads up the tourism and hotel advisory business at the French office of KPMG consultancy.

In the long term, the new actors may contribute to making Paris a reference in the luxury hotel business.

“There are a dozen properties which generate an average price of 1,000 euros per room, something which does not exist anywhere else in the world,” said Donet.

“For me, no other European city boasts a luxury hotel offer as extraordinary as Paris,” said Nicolas Beliard, the director of the Peninsula.