Will the reconfinement have a significant impact on the hotel industry or, with occupancy already at an all-time low, will it ultimately be limited?
Olivier Petit – Le reconfinementThe economic crisis, and above all the restrictions on inter-regional and international travel, particularly outside the Schengen area, will structurally limit the flow of travellers, and therefore the need for accommodation. This can only have a negative impact on the hotel industry, which is already experiencing a very low attendance. In the heart of the city, apart from a few hotels which opened during the summer and which, without working miracles, saved the furniture overall, everyone was waiting for September and the return of the business clientele to reopen. But a sluggish recovery. International flights have not really picked up, and companies are limiting travel and participation in business events out of economic necessity and/or as a precaution against the spread of the virus. Put all this together, and between a supply shock with many hotels reopening, fewer individual travellers and a downturn in the MICE market, the hotel industry in major cities is going through a difficult time.
Should we expect a new wave of closures?
O. P. - A few hotels will remain in business and capture the little market that remains, but we should see an acceleration in temporary closuresThis is all the more true in a context where farm support systems are robust.
How do you see things developing in the medium term?
O. P. - Business travel will be heavily impacted for some time to come. Let's be a little optimistic and assume that a vaccine can be found early next year. It will probably take a year for production to ramp up and for the population to be massively vaccinated. However, we can hope that the most susceptible people will benefit from vaccination first. This would limit mortality and ease the pressure on hospitals. But, in the best-case scenario, this horizon lies in the next few years. second half of 2021. I don't see any good signs for the hotel industry in France before 2022. The Rugby World Cup in France in 2023, followed by the Paris Olympics in 2024, will then act as catalysts that could add a year to the recovery.
I don't see any good signs for the hotel industry in France before 2022.
Will hoteliers be able to hold out until then, despite the government's support measures?
O. P. - If the current crisis lasts longer than 24 months, we'll be in a complete limbo. But I dare to hope that, if it lasts between 18 and 24 months, the support measures, which are quite spectacular, will enable the bulk of the French hotel industry to getting through this difficult period. The owners of the premises and the business can remain sheltered with, on the one hand, the support of the state through short-time working and guaranteed loans and, on the other, the support of their banks to defer the repayment of investments. These banks should be fairly accommodating when it comes to granting these grace periods, otherwise they will be forced to recover the assets, which they certainly don't want to do. Where things are going to get a lot rockier is for everyone else who doesn't own their premises.
In what way?
O. P. - While government measures protect them in terms of operations, landlords can be more or less accommodating when it comes to rents, for good or bad reasons. The financial structure of the establishment is one factor that will play a role. We are already seeing difficulties A number of hotels have been poorly set up, with excessive rents and debt. Another example is AccorInvest (editor's note: former property arm of Accor and owner of more than 900 of the hotel group's hotels), which owns a large volume of goodwill without owning the premises. In this case, an aggravating factor is that they own hotels on an international scale, in countries where the support mechanisms are not the same as in France, whether in the UK, the US or Asia. AccorInvest's solution was to open an ad hoc mandate in order to organise this area of turbulence and have calm discussions with the banks.
Should we expect many hotels to be put up for sale as a result of these difficulties?
O. P. - At present, it is difficult to assess the impact that the crisis may have on the hotel property market. However, observations of previous crises, such as those of 2008 and 2015, do not show any massive sales of distressed assets at knock-down prices in France. The government has always provided support to get through these difficult times, and most owners have chosen to keep their assets. until the cycle turns. As a result, the transaction market freezes and the market remains stable, because when the market picks up again, if there have been no disposals in the meantime, the sale prices are based on old fundamentals. On the other hand, in the United States, every time there is a major crisis, you see a lot of private equity funds using their cash to buy hotels at the scrap heap, at -30 % or -50%. In those markets, things are going to be much more turbulent.
