Modernization of the hotel industry: consequences of a low-profile revolution

Modernization of the hotel industry: consequences of a low-profile revolution

2013 October

Over a year has gone by since new regulations to rank hotels have implemented in France. The consequences of these new regulations have led to the first Vatel Group economic reflections.

Alain Sebban, CEO and founder of the Group, will analyze this sector for you.


This summer, Bouygues Batiment Ile-de-France was awarded a contract of over one hundred million euros for the renovation of the Paris based Hotel Crillon, to completely redecorate the facility and enlarge rooms in this 14,000m2 building, classified as a French historical monument.

A century after it was opened in 1909, this prestigious hotel, located on the Place de la Concorde, is firmly committed to the future.

Like the Crillon and the Plaza Athenee this month, quite a few other luxury hotels are undergoing very ambitious renovations, a testimonial to the sound economic health of this sector. This is an example of “upward equalizing” effects of the European harmonization which led the French hospitality industry to rethink the classification of its hotels, with a new label, the five-star hotel (very luxurious accommodations) in the official New Standards, and there are even hotels classified as “Palaces” in the 2010 by-law for some exceptional hotels.

The main goal of this new classification was to improve the quality of the French hotel park, or in other words, to strengthen the attractiveness of our country in a highly competitive international environment while “helping out” our hotel park in its modernization approach. Back in 2010, Francois Delahaye and Pierre Ferchaud had already predicted this in their report: “Reforming the hotel classification method was lauded by professionals, who easily understood why modernization was required to meet international standards.” 1

When ranked as a five-star hotel, besides being open 24/7, customized services are required, personnel must speak several foreign languages and there are other specific requirements (and even, as an anecdote - Internet access in every room, which of course was not in the 1986 specifications!). Quite a few optional services such as a pool, a massage service, tennis courts, a hairdresser, a spa and a gym instructor in the fitness room, complete this qualitative offer while responding to new lifestyles.

At the same time, many shackles have been lifted. For example, the obligation to separate the room from the bathroom has been revoked, thus liberating creative talents of interior decorators and audacious architects and opening many a door to new lifestyles.


Palace: an exceptional signature

Currently, there are thirteen hotels in France that are ranked as a “Palace.” This highlights the fact that these are exceptional hotels. This exceptional position depends not only on their location (Paris, the French Riviera and now the most upmarket ski resorts in the Alps) and their history, but also the services that their demanding clients are seeking in their quest for a “unique experience.”

The French Art of Hospitality is thus valued and full recognized. This value is an integral part of our history and our culture, and quite legitimately contributes to growing our economy. In Paris, the “virtual” renovation of standards as well as the “real” renovation of upscale hotel investments remains a driving force in our economy, as many benchmarks in the industry such as KPMG and MKG Hospitality, have noted. Georges Panayotis, the president of this organization, stated at the end of August that “higher occupation rates in upscale hotels, which had undergone an intensive renovation approach both of the product and services, prove that these investments were justified and generated a profit. Generally speaking, renovated hotels have much better results when the market demands quality.” KPMG stated at the beginning of this year: Combining a higher room occupancy rate with increased average prices, the RevPARrecorded a strong growth in 2011. Luxury goods and upscale products recorded the highest progressions with respectively + 24% and + 21% as compared with 2010, because of the way in which hotels repositioned themselves: more services, more “Suite” products and more luxury.”3

Increased quality has spread into each category. Over 30,000 new rooms were ranked as four or five-star rooms in 2011. Many hotels, which had been classified in the two-star category, allocated resources to be ranked as three-star hotels. The General Directorate for Competitiveness, Industry and Services (DGCIS) noted that hotels that had requested a new classification enjoyed, as a whole, better resistance to a lower room occupancy rate (-1.1%) than non-classified hotels (-3.5%).

It’s true that the days when “tourist hotels” referred to those types of hotels that didn’t even have one star! This low-profile revolution has raised France to equal its worldwide reputation and I’m betting that, in the long-term, this will strengthen the entire industry.

Alain Sebban

 1.Rapport sur la création d’une catégorie “Palaces”  parmi les établissements cinq étoiles du nouveau classement  hôtelier, [Report on the Creation of a ‘Palace’ Category in the new Five-Star Hotel Classification] François Delahaye and Pierre Ferchaud, assisted by Alain Simon, September, 2010.

Available income per room

3. L’industrie hôtelière française en 2012, [The French Hotel Industry in 2012] KPMG, Tourisme-Hôtellerie-Loisirs, 35th edition