Supply and demand policy: the destination alone will decide

By Hotel Tech Report

Last updated January 26, 2022

2 min read

For a few years now, the profitability of our industry has been shrinking for a number of reasons including heavy taxation on a sector that, in 2015, represented more than 7.2% of French GDP (transport, accommodations, catering). The second is that the hotel business benefits from a speculative bubble linked to real estate and very high initial investment levels. If you respect the 1000th scale rule, the prices that ought to be set are much higher than what the client is willing to spend, and all the more so since the development of alternative accommodations offers that are priced much more competitively than traditional hotels. With more and more competitors in the starting blocks it is time to redouble our efforts to achieve consistently competitive performances and stay on the podium.

The decline in productivity combined with very high prices directly impacts occupancy rates and the competitiveness of our hotels. The rise of new destinations on the world stage increases the pressure on prices and encourages operators, owners and investors to postpone their capital expenditures. This renewal and repositioning of supply is vital for the sector, yet the absence of inflation and the lack of tax incentives are major obstacles. The sector lacks dynamism and only has its margins to carry out renovations and / or launch more attractive and competitive new concepts.

If the government and public authorities need to offer any incentive, it must be reasoned and coherent in order to level the playing field between investments in the hotel industry and those in industry which are currently being widely favored. It is important to encourage more new projects and to have a medium- and long-term vision of the French hotel market by focusing on destinations with real development potential and a real need for new accommodations to absorb demand that is truly destined to develop. It is no longer a question of satisfying the political ambitions of elected officials who wish to meet the expectations of their constituents but to check who is performing well and why, and where will growth really be in the future.

The destinations where investment is needed are currently undergoing major changes and benefit - or will soon benefit - from a coherent strategy in tune with customer expectations to maximize their appeal to potential tourists. Easy and competitive access, differentiating and comprehensive services and leisure offers, quality accommodations, well positioned communication in connection with the assets of the territory ... It is not renovating outdated properties that are unsuited to current service quality or environmental quality standards for the umpteenth time that will resolve the lack of competitiveness of destinations in France. Doping is not a viable solution for the French hotel industry. Some destinations were strong in the past but are no longer or will not be competitive, it will be necessary to redirect investments where there is real potential.

In order to truly reach the benchmark of 100 million tourists in 2020 and take full advantage of the opportunity offered by the Olympic Games in 2024, as London did with the Olympics in 2012, it is necessary to ask the right questions and adopt the right strategies. It is not through the work of operators that the competitiveness of accommodations will return but through promoting the development of intelligent destinations that will become the locomotives of France in terms of tourist activity. To ensure that this opportunity benefits France and its entrepreneurs as much as possible, we are working as a team now and are building a medium and long-term winning strategy that is also profitable to make France a destination worthy of the global competition it will host in 2024. It is by detecting the potential of our young athletes that we can bring them to victory.