After Olympic surge, secondary French markets still golden

FRANCE — “The French hospitality industry is experiencing record growth, massive investments and post-2024 Olympics prospects,” according to Luc Espaillard, associate director at French hotel consultancy Christie & Co.

Luc Espaillard

Espaillard led an October study of hotel performance in seven Olympic organizing cities — Paris, Nice, Lyon, Marseille, Lille, Nantes, and Bordeaux. While Paris is still the epicenter of investments, he found the dynamics are changing, a lot of the pipeline activity is happening in secondary cities. He attributes this to a rise in bleisure travel and the swell of remote work, which is bringing diversification and dynamism to those markets.

“In addition, the resilience demonstrated by secondary markets after the COVID period reinforces their attractiveness,” Espaillard said. “This means cities with a mixed clientele, both leisure and business, such as Marseille and Nice, have maintained a high occupancy rate even in low season, thanks to their robust MICE markets.”

In the French Riviera capital of Nice, he said, RevPAR rose almost as sharply as in Paris between 2019 and 2023 — +32.9% compared to +33.6% — driven by hikes in room rates.

In Lyon, France’s third biggest city, famed for its history and gastronomy, “the hotel market is showing good momentum,” Espaillard added, partly due to Paris’ increasing unaffordability.

Castellet Hospitality bought the Novotel Confluence Lyon in 2023.

“While the Parisian market remains expensive, Lyon benefits from more attractive prices. This dynamic is mainly underpinned by operator investors such as Paris-based Sohoma, which acquired around 20 hotels in just four years in the Lyon metropolitan area, as well as Marseille, France-based Castellet Hospitality, which bought the Novotel Confluence Lyon .”

Sohoma manages about 70 hotels in France, including Accor, Louvre Hotels, Marriott, IHG and Hilton franchise brands.

Stéphane Botz, partner and national director at KPMG France, agrees that the regions are booming.

“The drivers of this development are linked to recent social changes which have accelerated post-COVID, coupled with increased accessibility and better transport links — notably, the TGV (high-speed rail). This has strengthened the attractiveness of these secondary cities in terms of business and leisure tourism, which makes these secondary cities destinations in their own right.”

French investments pick up pace

While the Olympics might have seemed like a hard act to follow, French hotels are still “a hotly sought-after asset class,” according to Botz.

“Hotel groups including Hilton, Marriott, IHG and Radisson are targeting the secondary cities,” he said. “These hotel groups operate mainly through franchising or with management agreements with owners-investors.”

Marriott plans to add 10 new hotels — some 1,000 rooms — to its existing portfolio of over 70 hotels in France by the end of 2025, said Alexandra Goguet, vice president of development France & Benelux (Belgium, the Netherlands and Luxembourg) at Marriott International.

The Luxury Collection Hôtel du Couvent, Nice in France opened earlier this year and was a heritage makeover.

She added that this was part of a strategy “of strengthening Marriott’s presence in primary and secondary markets in France” as it pursues “robust growth opportunities with owners and franchisees.”

For Goguet, Marriott is responding to strong demand for leisure, resort experiences, and business travel by moving its focus “beyond Paris and the French Riviera.”

Marriott’s pipeline projects include Moxy Nice, a Courtyard by Marriott, Lyon East and Residence Inn by Marriott Lille. This follows the mid-year opening of the Aloft Dijon in a repurposed post office building and Luxury Collection Hôtel du Couvent, Nice, a heritage makeover. Moxy Annecy has also just opened its doors.

We are targeting major French cities that attract an international clientele – and these projects allow us to add hotels in key locations in city centers. Conversion and adaptive reuse projects represent nearly half of those properties.

Alexandra Goguet

Share this quote

“We are targeting major French cities that attract an international clientele – and these projects allow us to add hotels in key locations in city centers. Conversion and adaptive reuse projects represent nearly half of those properties,” Goguet said. 

All this interest from global brands is making France “one of the most attractive and resilient markets in Europe,” Botz said. “Despite a slowdown in the last quarter, investments reached approximately €2.1 billion ($2.22 billion), again placing France in the top three European countries for transaction volumes.”

That investment activity and growth is echoed in surveys by Cushman & Wakefield and HVS, with Deloitte’s European Hotel Industry & Investment Survey 2024 putting Paris after London in Europe’s leading hotel investment markets.

The acceleration of hotel investments and record transactions in France in 2023 was led by the Greater Paris Île-de-France region, Christie & Co. found, with the sale of the prestigious Westin Paris Vendôme, for €650 million ($686.15 million), contributing to that.

“Paris stands out with an increase of 36.8%, well above the national average, contributing to an excellent market performance,” the study found. Despite moderate growth in RevPAR and stabilization of prices since the Olympics and Rugby World Cup, average room prices in the seven secondary cities rose by 26.7% on average in 2023 compared to 2019.

Regional growth tipped

But Espaiallard predicts the secondary destinations will continue to grow, along with investments in hotel upgrades and forecast openings.

“We expect that most of these markets will end 2024 with performances similar to those of the record year of 2023, or even with an outperformance.”

Christie & Co. found the share of 3- and 4-star hotels in those cities continues to grow, while that of unbranded or unclassed hotels is decreasing. “This move upmarket reflects the investments being made to improve the quality of hotel assets in France.”  

Cities like Bordeaux have already seen the hotel supply increase by 8.8% rooms since 2019, “which favors a continued price increase, " Espaillard said. 

According to KPMG’s “French Hotel Industry in 2024” study, 80 hotels and more than 9,000 rooms are in the pipeline in France for 2027.

Stéphane Botz

“Most developments are new builds or conversions of office real estate,” Botz said, “but also the transformation and repositioning of existing hotels, with an upgrade of these urban hotel assets.”

Lyon, Lille, Marseille, Nice, and Bordeaux are among the top 10 cities in terms of new supply, along with Strasbourg and Toulouse.

“The investors are mainly families and French investment funds,” Botz said. “The choice of brands is often linked to a development strategy and specific positioning adopted by investors, as well as existing competition. In recent years, we have noticed that Anglo-Saxon brands are making inroads in these cities, creating stronger pan-European and international appeal.”

The pre-Paris 2024 prophecy of Jean-Claude Wietzel, GM of the Four Seasons Hotel George V, Paris, and the group’s regional vice president, seems to be coming true for many hotel investors in France.

“If the Olympic Games go well,” he quipped, “the influence of France, particularly of Paris, will be strengthened in 2025-26, allowing us to consider new growth prospects.”