Here is the second issue of the Macrospitality Brief, written jointly with Vanguélis Panayotis, CEO of MKG Consulting. By relying on a unique database and by combining a macroeconomic and sectoral (hotel industry) vision, our objective is to decipher and try to forecast the economic dynamics in France but also abroad. It will also be published on the Hospitality ON website.
In our previous note, we emphasized that French growth would rebound significantly in the third quarter following the end of the lockdown. This is essentially due to an increase in household spending, which benefited the tourism sector especially during the summer vacations. Nevertheless, as we also pointed out, the economic recovery showed signs of running out of breath from mid- August onwards following renewed concern about the health situation and the sluggish demand observed by many companies operating in the service sector. The latest figures for September confirmed our fears of a downturn in activity for the end of the year. France has been subject to new restrictions (such as a mandatory quarantine when returning home) imposed by various European countries such as the United Kingdom, Belgium and Germany, but has also been forced to tighten the rules in several key urban areas such as Marseille and Paris. These measures have already led INSEE to adjust downwards (from +1% to 0%) its growth prospects for the 4th quarter. However, further downward revisions are likely to occur in a context where companies do not seem to be able to become the new engines of the recovery phase, due to growing uncertainty about the short- and medium-term outlooks (new epidemic wave, wave of bankruptcies, Hard Brexit, US elections…).
I-THE TREND REVERSAL HAS ALREADY BEEN CONFIRMED IN SEPTEMBER
FRANCE: CONSUMPTION IN THE RESTAURANT AND LEISURE SECTORS
Source: Conseil d’Analyse Economique Report (10/12/2020) – Based on data from Crédit Mutuel Alliance Fédérale
This phenomenon has also been observed through the figures we have for the hospitality sector, with a relapse of the RevPAR in September in all European countries. France, whose recovery had been particularly strong over the summer, was no exception: it lost its lead and aligned itself with Germany.
MONTHLY EVOLUTION OF THE REVENUE PER ROOM (REVPAR) IN HOTELS BY COUNTRY
(Evolution in % compared to the same month in 2019, expressed in built rooms)
Sources: MKG Consulting, christophe-barraud.com
At the French and European level, the hotel industry therefore experienced a very poor September, which is quite an issue considering this month usually represents 11.3% of hotels’ annual turnover. The combined presence of business customers mobilizing for the back-to-business season and leisure customers prolonging the pleasure of summer normally makes it the second most important month of the year for the sector. The economic impact of the slowdown was thus significant as early as September.
This trend is set to continue, as individual business customers logically limit their travel in accordance to health regulations, while events are at a standstill and will remain so for a long time, as highlighted in Paris by the cancellation of the Agriculture Show (February-March 2021) and in Lyon by the postponement of the SIRHA from January to June 2021.
II-THE DOWNTURN IN ACTIVITY WILL CONTINUE IN THE 4TH QUARTER
MARSEILLE: DAILY CHANGE IN HOTELS’ OCCUPANCY RATES (OR), AVERAGE DAILY RATES (ADR) AND REVENUE PER ROOM (REVPAR)
(Evolution in % compared to the same weekday in 2019)
Sources: christophe-barraud.com, MKG Consulting
DAILY CHANGE IN HOTELS’ REVENUE PER ROOM IN MARSEILLE AND OTHER REGIONS (EXCLUDING ILE-DE-FRANCE), FROM JULY TO MID-OCTOBER 2020
(Evolution in % compared to the same day of the week in 2019)
Sources: christophe-barraud.com, MKG Consulting
More recently, the announced curfew, involving the closing of bars and restaurants from 9pm in the Ile-de-France region and in 8 major cities, should also weigh on tourist activity. The case of Marseilles, where the restrictions applied to bars and restaurants have been fluctuating in recent weeks, offers some insight into prospects in the areas concerned: The recovery of summer activity, which had been strong in Marseille, was thus very quickly stopped by announcements of restrictions affecting bars and restaurants, making the city an unintentional textbook case. The observation is that after a few weeks, the gap between the trend in Marseilles and the national standards in the regions shows a specific RevPAR loss peaking at -17% during the early closing period (then defined as 11pm), and at -23% during full shutdown of restaurants. The specific impact of the curfew in the cities concerned can therefore be estimated as an additional cut (relative to standards in other Province areas) by around 20 percentage points of 2019 RevPAR5.
Consequently, the new restriction measures, applicable for at least 6 weeks, imply a relapse of activity in the concerned areas (more than 54 departments) and, given their importance, at the national level. Likewise, other areas are likely to suffer from a similar fate in coming weeks, as the All Saints’ Day vacations are pushing tourists to move to areas that have been spared so far, favoring the circulation of the virus. It should also be noted that the flash estimate of the PMI for the month of October6 showed a sharper contraction than in September (47.5 against 48.5 previously).
DIRECT IMPACT OF POLICY ANNOUNCEMENTS ON HOTEL BOOKINGS
(Net change in reservations for November and December 2020 between 10/12 and 10/19/2020)
Sources: christophe-barraud.com, MKG Consulting
Disclaimer : http://www.market-securities.com/disclaimer-2
1https://www.markiteconomics.com/Public/Home/PressRelease/98ca782905fb44bebe1e06568e4daa87
2http://www.cae-eco.fr/dynamiques-de-consommation-dans-la-crise-les-enseignements-en-temps-reel-des-donnees-bancaires : Chart 7
3https://insee.fr/fr/statistiques/4796792?sommaire=4473296
4https://www.lesechos.fr/economie-france/conjoncture/coronavirus-une-vague-de-faillites-menace-la-france-cet-automne-1237957
5 This is a “specific” impact that must be added to the general trend in other areas; for example, if Income per available room dropped by 50% in the
provinces in cities not affected by curfew, then it would drop by about 20% + 50% = 70% in the concerned cities.
6https://www.markiteconomics.com/Public/Home/PressRelease/4859649a359646b1b0e9598aea3b7d92
7https://www.lefigaro.fr/politique/bruno-le-maire-contre-l-islamisme-le-combat-culturel-est-le-combat-essentiel-20201022
Vanguélis Panayotis
