06/16/09 - An update on the hotel industry in France and in Paris

The French hospitality industry is about to experience a new turn partly due to Government reforms which have not much to do with the current economic downturn. This note is an update on what is going on in the hotel classification in France and on the luxury segment in Paris.

By the end of this month, the hotel industry will get rid of the old norms that have been used for the past 23 years in order to evenly match the international standards and to have a more comprehensive ranking. The zero star and the 4* "Luxe", as they are in the old classification, will disappear while the new one has a scale from one to five star. However, because there is a big gap between a regular 5* and an outstanding property, an ultimate level will be created and probably called 5* "Palace". The criteria to reach this level is not based on objective or rational characteristics but on specific features that make the place unique such as its location, architecture, view or history. One may wander why officials haven't created a 6* category as it already exists in several countries?

Amazingly, up to now, the term Palace exists only in people's mouth, not in the official language. There are eight luxury hotels in Paris which belong to this segment: Four Seasons - George V, Plaza Athénée, Meurice, Bristol, Crillon, Ritz, Park Hyatt - Vendôme and the recent Fouquet's Barrière on the Champs-Elysées. Except for the latter, they all share the common criterion of being more or less from the same architectural period and most of them are or will be under heavy remodeling, extension or reconstruction: a new spa (Institut Dior) in the Plaza Athénée, an extension and a gastronomic restaurant for the Bristol (opens in september), a vast project of renewing the rooms and upgrading the spa for the Ritz... Because they all will have to cope soon with strong competitors.

Next year, the Raffles chains, in association with a Qatari sovereign fund, will reopen the Royal Monceau on avenue Hoche (149 rooms before the "Demolition Party" in 2008) after a 440 million Euros complete refurbishing: 42 suites, furniture by Philippe Starck, a 28 meter pool, a 1 500 sq. meter spa (!) with large hammams, a luxurious 100 seat cinema, a library, etc.

The same year Shangri-La will have its first address in Europe on avenue d'Iena in Prince Roland Bonaparte's former "hôtel particulier" with an outstanding view on the Eiffel Tower. An investment of 250 to 280 millions Euros for 109 rooms including 40 suites, a 1 000 sq. meter spa with a giant swimming pool, an «all day dining» under a magic glass roof...

In 2012, Mandarin Oriental (150 rooms) will open in an Art Deco building on Faubourg Saint Honoré street. Very little information on this one apart from the 40 million dollars investment.

The Peninsula, in partnership with the Qatari investment company Diar, will operate the Majestic Kleber in a 30.000 sq. meter building that was once the Majestic hotel before it became the International Conference Center (which held the talks for peace in Vietnam between Mr Kissinger and Mr Le Duc Tho in 1973) This will require huge works.

There are currently 27 000 hotels of all categories in France and, within the next three years, 150 of them are supposed to obtain the 5* status. Many properties will have to undertake significant refurbishing and upgrading in order to accede to the right category in the new classification, and the estimated global investment is 10 billion Euros. The French Government has created a specific fund in order to achieve this modernization. It's worth the challenge, because France remains the first country of destination on the planet (even though its market shares shrinks slightly), he hospitality business weights 6% of the GDP, twice as much as the car industry, and employs 2 million people, as much as the car industry.

My next article will be about an event that has never been seen before and could have a tremendous (positive) impact on the restaurant industry and on the consumers in France: as of July 1st the VAT rate will drop from 19,6 to 5.5%.