Relationships Key in Paris, Brussels Rebuild

GLOBAL REPORT—Paris and Brussels are reeling from the 13 November terrorist attacks and subsequent police operations, but hoteliers and travelers are stoic in their resilience, sources say.
 
After the attacks in Paris, in which armed gunmen killed 130 people and wounded hundreds of others, the French Parliament voted for a months-long state of the emergency in France, Police raids throughout the country are ongoing. 
 
Brussels, Belgium, where authorities think the Paris attacks were planned, endured four days of a more restrictive lockdown as police hunted for suspects. 
 
Hoteliers with properties in both regions suggest a return to basic best practices. Now is the time to reach out to key clients to solidify and strengthen relationships, they say. 
 
Gaël Le Lay, deputy CEO and head of hotel investment of French real estate investment trust Foncière des Murs, said now was the time to make sure hotels’ offerings were in line with guests’ expectations.
 
“Firstly, it is time to make sure everybody is safe, but the business is cyclical, and we need to manage, retain our clients, further build relationships. The medium-term perspectives are good for our hotels. They have good locations,” Le Lay said, who added the REIT had “roughly 20 hotels in Paris, between 10 and 15 in Brussels.”
 
Saar Sharon, CEO of the United Kingdom for Leonardo Hotels, which has five properties in Belgium, agreed with this need for relationship building. That process always should be ongoing regardless of so-called “black swans,” or unexpected events that could have a negative impact on travel demand, he added. 
 
“Every hotel has its base business, be that corporate, airlines, tour-operator business, and some of that has to keep traveling. But this incident coming just before the holidays, yes, that will have an effect, and it could be March before things are back to normal,” Sharon said.
 
Philippe Doizelet, managing partner at business consultancy Horwath HTL and the former corporate head of research at AccorHotels, said upcoming events in Paris and unsatisfied demand for the city would both be beneficial to performance. However, he stressed that hoteliers need to be on the phone with key accounts.
 
“France is the No. 1 country for domestic business travel, and this is due to its heavily centralized configuration, which leads to a lot of domestic tourism,” Doizelet said.
 
Surveys suggest international business travelers would not change their travel habits. Nearly three-quarters of U.S. business travel buyers said their travel to Europe will remain largely unaffected by the recent attacks, according to the Global Business Travel Association.
 
Of the 169 U.S.-based travel buyers surveyed between 18-20 November, 57% reported “no change” to their travel plans, while 16% reported only “slight reductions.” Ninety-three percent said they believed it was “important that travel to Europe continue as usual despite the recent terrorist attacks on Paris,” according to the news release. 
 
“There always is a sense of unity after such incidents. Parisian hoteliers should be reaching out to guests, rethinking their strategy in source markets, looking at new demand opportunities and saying that the city is not defined by this one act,” said Elizabeth Winkle, managing director of STR Global, a sister company to Hotel News Now.
 
Historical trends
2015 has seen an uptick in terrorism activity in Paris—notably the Charlie Hebdo attack in January and the attack on a Paris-bound train in August that saw no deaths due to swift action by passengers.
 
There was no noticeable impact on hotel rates after these events, but there was on occupancy, according to STR Global data.

Demand decreases have been steep in both Paris and Brussels following the 13 November terrorist attacks and subsequent police operations and lockdown. (Courtesy: STR Global)

 
According to daily data reported to STR Global, occupancy on the dates before and after the 13 November attack, and compared to the same dates in 2014, are as follows:

Paris occupancy takes a dip

Source: STR Global
NOTE: Hotels reporting daily data represent 37.5% of STR Global’s monthly sample. While results are likely to be directional, they are not definitive of the month’s performance. 

“The situation in Paris is one where there has been for years a shortage in supply, with occupancies around 78%, the percentage at about which Paris is able to stand. That is more or less stable over the years, including the quieter months and periods of August, Christmas and Easter. There are not necessarily peak periods for tourism here,” Doizelet said.
 
He said hoteliers should allow cancellations and postponements amid these unusual circumstances. Coming at a down time of year, there would be lost revenue from the attacks that simply cannot be made up, Doizelet added. 
 
“Are hoteliers in a position to offset that by (average daily rate) increases? That’s a big question, and it depends on the quality of marketing by hoteliers,” he said. 
 
Raising rates could create a public-relations quagmire, Doizelet noted, adding he didn’t think hoteliers were in the position to do so anyway given a dip in demand. 
 
Demand in Paris has been decelerating for much of the year, with STR Global reporting decreases in seven of the first 10 months of 2015, Winkle said. 
 
Reasons for recovery
Event-based tourism should help the recovery, Doizelet said. The 2015 United Nations Climate Change Conference is being held in Paris from 30 November to 11 December, while next June Paris is the headquarters city of the UEFA European Championships.
 
“There is a clear relationship between big events and hotel occupancy. Yes, the venue (for the final of the football competition), the Stade de France, was impacted on 13 November, but personally I do not think the threat is strong enough to challenge that audience, and most of the demand has already been pre-marketed,” Doizelet said.
 
Other good news, according to Doizelet, is that there are positive signs of recovery in the French economy, “which is something new, as hotels were sustained by international and especially long-haul tourism.” 
 
“In the end, occupancy could be a concern, but I think it is a moderate concern, while ADR remains a wild card. … We might have room to increase it, but at this stage it is hard to say,” Doizelet said.
 
Adding more pressure on hoteliers, Doizelet said, was that Paris is the No. 1 global destination for paid alternative accommodations platform Airbnb, which has an overall inventory in the city of more than 50,000 units. That compares to 80,000 hotels rooms in the city center, he said.  
 
Airbnb cancelled the last day of its 12-14 November Airbnb Open conference, which was taking part in Paris with 6,000 of its hosts.