After a year marked by historically high interest rates and a general economic slowdown, the recent reduction in key interest rates has opened up new prospects. Banks, more open to financing, are breathing new life into the real estate sector, and hotel investment in particular.
Joachim Savigny, founding president of Cheval Blanc Patrimoine, shares his vision of the market in an exclusive interview for this issue of Check-in! This autumn’s edition also looks back at the sector’s September figures and the rarity of the constrained-day phenomenon in Paris in 2024.
Enjoy your reading,
HONOTEL TEAM
📜GRAND FORMAT : INTERVIEW JOACHIM SAVIGNY – PANORAMA OF INVESTMENT IN FRANCE
© Joachim Savigny © D.R
Founded a decade ago, Cheval Blanc Patrimoine helps investors structure, protect and grow their assets. Interview with Joachim Savigny, its founding president.
Check-in: What is the investment climate like at the end of the 2024 vintage?
Joachim Savigny: We’re in a rather peculiar context: financial markets are at record highs, while the economy has been slowing down for several months. Against this backdrop, central banks have decided to lower their key interest rates. In the United States, the Fed decided to cut interest rates by 50 basis points in September (and a further 25 basis points in November), while the European Central Bank (ECB) also lowered its main key rate by 0.25 basis points to 3.5% – a rate which is set to fall to around 3% in the coming months.
De facto, tensions are gradually easing on the debt access front! Banks are more inclined to reopen the financing tap for both private residential and professional real estate clients. In recent weeks, we’ve seen a slight upturn in the commercial real estate investment market, which is good news for the economy, as this sector had been slowing down since last year.
What about the hotel segment?
Unlike the office, logistics and retail sectors, this real estate market is doing very well. The Olympic Games, held in Paris last summer, contributed to investors’ strong appetite for this alternative segment!
At Cheval Blanc Patrimoine, we have good reason to believe that the French hotel industry has at least another four good years ahead of it! Although France attracts 90 million tourists a year, it nevertheless suffers from a structural shortage of hotel rooms.
Against this backdrop – particularly in attractive cities – the hotel market offers significant opportunities.
In turn, if a hotel opens its doors at the right price, its owner is in a position to recoup his investment. However, in France, a large number of hotel assets have not been sold at the right price, with ratios sometimes 20 times higher than EBITDA, leading to a certain imbalance in the market! However, if you invest wisely in the right product, with a competent hotel operator at your side, the outlook is very positive.
A final major issue is the shortage of hotel workers. Many industry professionals report difficulties in attracting and retaining talent, with between 100,000 and 300,000 unfilled positions. This situation can have an impact on service quality and, consequently
customer experience.
How does Honotel’s Cap Hospitality V fund appeal to investors?
At Cheval Blanc Patrimoine, we particularly like funds like Cap Hospitality V, because it’s a vehicle with a strong real estate underpinning! What’s more, Honotel has always had a reputation for acquiring and managing quality hotels, with some 120 private equity deals to its credit.
This strategy is essential: not only does it guarantee the long-term value of our hotels, it also enables us to stand out in a competitive market.
In this case, the FPCI has a target size of 20 million euros and a lifespan of five to seven years, and targets independent off-market assets. With a minimum investment of €100,000, Cap Hospitality V is also eligible for the 150-0 B TER scheme, when it targets an annual performance of 12%. As a result, this fund appeals to our customers for its short-term performance.
© Theater Hotel Anvers / Acquis par le fond CAP HOSPITALITY IV en Juillet 2024
🔎THE QUARTER UNDER THE MICROSCOPE
A BACK-TO-SCHOOL PERIOD AND A YEAR WITHOUT RESTRICTED DAYS
Despite the Paralympic Games, business in the French hotel sector declined overall during the 2024 back-to-school period: – 3.8% in revenue per room compared to September 2023.
How can these figures be explained? Mainly because, twelve months ago, France hosted the Rugby World Cup. This global event was a great success for the hotel industry, particularly in major cities. Some of the cities hosting the Rugby World Cup saw spectacular year-on-year comparisons.
(Lille -27%, Marseille -20%, Nantes -20% etc).
In 2024, there were no “constrained days” in Paris. A constrained day is a period when demand exceeds hotel supply. For Philippe Guimard, CEO of E-axess and Spotpilot, “it’s possible to capitalize on a peak in demand by selling a room at an excessively high price, but this also means neglecting the impact of a negative comment”. Nevertheless, on these dates, the last rooms available for sale are often snapped up at a premium.
Parisian hoteliers were able to capitalize on twelve constrained days in 2022 and eleven in 2023, against zero in 2024. This is one of the few disciplines where France will not be on the podium this summer.
Source : MKG
💬OUR CONVICTION
In small hotel markets, the event alone is enough to fill the city and drive up prices. This is the case, for example, in Cannes (7,500 hotel rooms) during MIPIM, which attracts over 20,000 participants, or the Cannes Film Festival (115,000 visitors).
On the Paris market, with 85,000 rooms, the constrained days are systematically the superposition of one or more major events during the high season. Paris has always had “hot” dates, but with the advent and professionalization of Revenue Management, these are largely anticipated with high price positioning well in advance, encouraging regular customers to reschedule their stays. This is what happened with the Olympic Games.
In 2022 and 2023, reading the market was complex in a post-covid recovery. This “unknown” created major opportunities for Honotel, where the ten or so dates generated 4% growth in annual sales for our Paris hotels. The absence of constrained dates in 2024 demonstrates once again that we are back in a normalized business cycle.
Hélène GAUTHIER, General Manager, Honotel
© Hôtel 10 Opéra by HappyCulture – Paris
OUR KEY FIGURES FOR QUARTER 3 2024
Source for figures: MKG