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  • Meet Minneapolis: Travel to the Twin Cities this Summer for HITEC 2019

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  • A Series of Must-Read Articles on Cybersecurity Produced by the HFTP Research Centers

    Data security remains a pressing concern and top priority for the hospitality industry. The HFTP Research Centers are dedicated to producing findings that can significantly aid hospitality businesses in their efforts to protect their guests’ privacy and personal information against potential cyber threats and attacks.

  • HITEC Special: Does EU GDPR Affect U.S. Hospitality Companies?

    By Alvaro Hidalgo. The EU General Data Protection Regulation has set a path towards protecting personal data which many other countries will follow. In a global industry such as hospitality, it should be a primary objective to take the steps towards compliance.

Article by Christopher Boinet

The Practice Of Key Money In Hotel Management Agreements In France

In Extenso Avocats, a subsidiary of the DELOITTE Group ·31 July 2018
In hotel management agreements, hotel chains and owners regularly negotiate what is referred to in the industry as key money. This is the case when competing hotel chains invited to tender by owners are prepared to invest significantly in the long-term management of high-end properties considered strategic for their development. Often considered as proof of a hotel operator's genuine interest in managing a specific property, key money can be a valuable resource enabling a hotel chain to expand on new markets and in strategic locations, without having to allocate significant costs to such development. The brand is thus able to invest in a selected hotel, transforming it into a flagship property.For properties already in operation, key money can be offered by the hotel chain at the time of signing the contract, or even after investments (as recommended by the operator - renovation works, for example) have been carried out by the owner. For assets under development, key money is most often negotiated as the last available financing for the owner, and is paid by the operator when the hotel opens. In the case of bank debt financing, the procurement of key money enables better control of the loan-to-cost (or loan-to-value) ratio, as well as the obtainment of more favourable financial conditions.Yet can key money - a form of financial contribution by the operator - create ambiguity surrounding the lawful nature of the owner-operator relationship? Indeed, it could be argued that this relationship, a priori contractual only, could in this way morph into an affiliation between associates, depending on the type of assistance or financial advance negotiated. It should be remembered that operators primarily want to manage hotels (as we hear so often from international brands) - indeed this is their core business. When negotiating, operators generally prefer to make concessions on their fees by granting exemptions or reductions rather than offer any form of loan or advance, key money in particular. On the other hand, the operator's obligations with regard to key money, the minimum guarantee or the performance test can be perceived by owners as evidence of the operator's additional involvement and willingness to take a risk on the management of the property in question -factors which tend to reassure owners.In negotiations, owners will question how committed operators are: what are they ready to accept and just how far will they go? In practice this can be clearly seen: as with all clauses up for discussion in a hotel management agreement, key money is negotiated at the expense of or in return for something else - higher fees and/ or a longer contract term, for instance. There is, notably, almost always a trade-off between key money and the minimum guarantee that must be established before entering into negotiations with a hotel chain, and it is very rare for an owner to obtain both (in satisfactory proportions).From the owner's point of view, key money and the minimum guarantee both meet the requirement to align interests. While key money can provide financing to secure an initial investment, it is usually less sought after in the case of an existing hotel with an established track record and that is seeking a new operator. Compared to the minimum guarantee, key money does not ensure the secure return that owners particularly require if they are institutional investors, or if their investment is backed by bank financing, for example.Furthermore, the greater the amount of key money contributed by the operator, the higher their management fees (as a percentage of Total revenues or GOP, etc.) and/ or the longer the contract term, since the operator will seek to offset the initial cash injected (NPV calculation).Owners must determine whether they would prefer a secure return with a minimum guarantee. Indeed, in the event the property is put up for sale, a secure return will constitute a strong point for negotiating with a prospective buyer who will regard such as a valuable guarantee for financing the acquisition. Consequently, it is necessary to understand the personal strategy of the initial owner, and in particular, to find out before negotiating with the operator, whether the owner intends withdrawing from the contract in the more or less short term.On the owner's side, the impact of key money on the balance sheet/ amortisation (straight line) over the term of the contract must be taken into account, and the accounting nature of key money could be questioned: is it debt or quasi-equity?.... key money will be treated as a benefit that may be immediately taxable when recorded in the P&L as income.Additionally, almost all operators require the owner to commit to reimbursing on a pro rata basis any outstanding key money due or an agreed proportion of such (with or without interest) if the agreement is terminated early.

Personal data protection and the hospitality industry in France

In Extenso Avocats, a subsidiary of the DELOITTE Group · 3 July 2018
France has just adopted the modifications to the Data Protection Act ndeg78-17, integrating the new General Data Protection Regulation (GDPR) measures. As a reminder, the GDPR - ndeg2016/679 of the European Parliament and of the Council, voted the 27 April 2016 - is a regulation in EU law on the protection of individuals with regard to the processing of personal data and on the free movement of such data. The act came into effect in all EU member states on the 25 May 2018.The CNIL has already indicated that it will take into account the "efforts undertaken" by companies in their compliance process, and that no sanctions will be applied until the end of 2018 regarding provisions directly resulting from the regulation. This does not, however, exclude the pronouncement of sanctions in case of breach of the provisions already in force under the Data Protection Act (far from being complied with everywhere).It is clearly not too late to look at how the regulation can be applied in your own company.There are a number of ways of implementing GDPR in hotels and restaurants, and the regulation can be viewed as yet another administrative constraint or as an inevitability and an opportunity. Indeed, it should be remembered that its very name embraces personal data protection issues, yet it also covers the free movement of such data. Given this, the regulation not only seeks to protect the personal data of businesses and their clients, prospects or employees, it also allows for the free movement of these data. This free movement merely has to be controlled and regulated to avoid misuse, errors or accidents in data processing - the like of which has been seen several times over the past few years (Google, Facebook, Darty, Hertz, Direct Energie and so many others)[i].Top of the list of the sectors concerned is the hospitality industry...The regulation provides for thresholds to take into account the situation and business activity of SMEs or intermediate-size companies. Not all hotel and restaurant businesses are necessarily affected, but if they automatically store and conserve customer data - on preferences, for example (in order to send promotional offers or improve satisfaction during a later visit) - then they are directly concerned. Likewise, if customers can make a reservation through the company website, then the regulation also applies, since the question of the use and compliance of booking platforms (e.g. La Fourchette, evidently arises, as does that of holding records for inspection by the police or maintaining Cardex files.In the same way, the processing, use and safeguarding of payment methods must be carefully examined. In addition, if hotels and restaurants use video surveillance, they must also examine how such systems could impact on the privacy of their customers and employees.What measures can hotel operators - and to a lesser extent, restaurant operators - take to serenely anticipate these regulatory obligations after the 25 May 2018?Beyond implementing a unified legal framework at the European level, the objectives of the GDPR include:A strengthening of the individual rights of natural persons, already instigated by a number of decisions such as the Google Spain judgment sanctifying the right to erasure, or Darty's recent fine further to a security breach in the confidentiality of customer loyalty card data[ii]Compliance based on transparency and accountability;Shared and specified responsibilities (the outsourced service provider becomes accountable, just as the contracting party);The strict supervision of data transmission outside the European Union;Regulated, incremental and stricter financial penalties.Hotel and restaurant operators should take particular note, since they will move from a reporting regime with an a posteriori penalty to a new regime based on anticipation and accountability. The consequences are multitude, as we will see later. Although this change means fewer reporting obligations, it also reflects the strengthening, or even the creation, of a number of obligations for all hospitality operators (and companies, in general) that process their customers' personal data.These obligations mainly focus on anticipation, information, transparency and security and documentation. HOTEL AND RESTAURANT OPERATORS MUST ANTICIPATE: In case of complaints, security breaches or CNIL controls, business must generally be able to justify their having applied the universal "privacy by design" principle, meaning that they have integrated respect for the privacy of natural persons into data processing right from the start. This principle requires considering the lawfulness of the data processing, conducting preliminary impact studies when necessary, and potentially obtaining the consent of individuals whose data have been collected and informing them of their rights.HOTEL AND RESTAURANT OPERATORS MUST INFORM: Henceforth, an obligation of transparency is imposed on hospitality operators who manage, store, host, process or sell personal data. Take, for example, hotel and restaurant customers who are natural persons, and whose data are collected - these individuals must be notified as to the purpose of the data processing and informed of their rights in terms of data access, rectification, erasure and portability.HOTEL AND RESTAURANT OPERATORS MUST PROTECT:Everything must be done to protect the data held by a company, in accordance with the "security by default" principle. Going beyond the required and optimal protection, businesses must allow data to be traced, and any security breach has to be declared to the CNIL within a very short time frame (72 hours, as stipulated by the regulation). Penalties for breach of these obligations will be reinforced (up to either 4% of annual global turnover or 20 million euro), although there is an emphasis on making the sanction proportional.AND LASTLY, HOTEL AND RESTAURANT OPERATORS MUST DOCUMENT: In certain cases, maintaining a Record of Data Processing Activities is obligatory.Hotel and restaurant operators are directly concerned by GDPR if:They employ 250 employees or more.And/ or they processes personal data en masse or automatically.And/ or this processing concerns sensitive data and/ or could infringe individual rights and freedoms. Each of these criteria must be assessed separately, and in certain cases, hospitality operators are required to maintain a Record of Data Processing Activities. Indeed, the sector is especially impacted by GDPR, given its various business activities: organisation and information systems, HR management, sales and marketing (prospection, promotion, customer record management, etc.), supplier management and, of course, hospitality IT management.The hospitality sector is specifically targeted, whether or not data are conserved in the company's computer server and/ or stored and/ or hosted and/or reprocessed by a subcontracting party. Hotel and restaurant customer records can no longer contain any old data and must respect certain conditions. These personal data, already considered by some as the new "black gold", can be coveted by malevolent competitors or by hackers for resale or ransom (WannaCry ransomware, for instance). At a time when cyberattacks are on the rise, the sector must ensure the protection of its customers' personal data, as well as those of its employees (who are also covered by the new directive). There is no doubt that a hotel or restaurant's e-reputation also depends on whether or not it complies with the regulations.In concrete terms, an audit is necessary to evaluate a business's practices and to pinpoint the risks. Further to the audit, an action plan must be instigated to potentially maintain a Record of Data Processing Activities that groups and describes the business's personal data processing practices, or if the maintenance of such a record is not mandatory, to implement minimal GDPR compliance procedures. This requires the assistance of a multidisciplinary technical and legal advisory structure - one that is well-established and specialised in the hospitality sector - so that the process can be correctly handled at the best possible cost.It is, of course, never too late to comply.[i] CJUE, gde ch., 13 May 2014, aff. C-131/12, Google Spain SL and Google Inc./ Agencia Espanola de Proteccion de Datos and Gonzales,CNIL Resolution ndegSAN - 2017-006 of the 27 April 2017 imposing a fine on FACEBOOK INC. and FACEBOOK IRELANDCNIL Resolution ndegSAN-2018-001 of the 8 January 2018 imposing a fine on ETABLISSEMENTS DARTY ET FILSCNIL Resolution ndegSAN-2017-010 of the 18 July 2017- HERTZCNIL Decision MED ndeg 2018- 007 of the 5 March 2018 serving notice on DIRECT ENERGIE and CNIL Resolution ndeg 2018-082 of the 22 March 2018 and decision issued to make public the formal notice to DIRECT ENERGIE[ii] CJUE, gde ch., 13 May 2014, aff. C-131/12, aforementioned Google SpainCNIL Resolution ndegSAN-2018-001 of the 8 January 2018, aforementioned DARTY ET FILS

European CFO Survey: Business confidence brightens

In Extenso Avocats, a subsidiary of the DELOITTE Group ·20 November 2017
Confidence strengthens among Europe's business leaders, with uncertainty decreasing.Outlook improves for revenue growth, hiring and capital spending.Euro area CFOs bolder than non-euro area counterparts.Business leaders across Europe are more optimistic than they were six months ago and the outlook for revenue growth, hiring and capital spending is improving, according to Deloitte's latest European CFO Survey.Deloitte has collated the results of surveys run by its member firms in 19 European countries for the Q3 2017 European CFO Survey, giving the views of 1,546 CFOs.Optimism and revenue expectations brighten43% of Europe's CFOs say they are more optimistic about the prospects for their company than they were three months ago, up from 38% in Q1's survey. Just 11% say they are less optimistic, down from 13%. Optimism is highest in France, with 78% of CFOs more positive, and lowest in the Netherlands with 23% more optimistic.46% of CFOs in euro area economies say they are more optimistic, compared to 38% in non-euro countries.69% of CFOs are confident that their firm will increase revenues over the next 12 months. 73% of CFOs in euro area countries predict revenue growth, compared to 63% in non-euro countries. CFOs in Belgium are the most optimistic about revenues, with 95% predicting growth, while CFOs in Denmark are the least positive, with just 47% expecting growth.Uncertainties ease52% of European CFOs say there is a high level of financial and economic uncertainty, down from 61% in Q1. The level of overall uncertainty is its lowest since the launch of the European CFO Survey in Q1 2015.CFOs in the UK have the highest reading on perceptions of uncertainty, with 85%, while CFOs in Austria had the lowest.Perceptions of uncertainty are higher in non-euro counties, with 57% reporting high uncertainty, versus 49% in the euro area.Risk appetite unchanged33% of European CFOs say now is a good time to take greater risks onto their balance sheets, unchanged from Q1's survey. Just 14% of CFOs in Turkey are willing to take on greater risk, the lowest across the 19 countries, compared to 63% in Finland, the highest. 36% of CFOs in euro area countries say now is a good time to take on risk, compared to 28% in non-euro countries.Improving outlook for capex and hiring42% forecast an increase in capital spending in the next 12 months, up from 40% in Q1. 49% of the CFOs in euro area countries plan to increase spending, versus 31% in non-euro countries. 58% of CFOs in Ireland say they plan to increase capex, the highest, compared to just 22% in the UK.38% of CFOs say they plan to increase employee numbers in the next 12 months, up from 34% in Q1. 74% of CFOs in Belgium plan to increase job numbers, the highest across the 19 countries, with just 12% of CFOs in the UK set to increase hiring, the lowest. 38% of CFOs in euro area countries plan to increase hiring, compared to 27% in non-euro countries.CFOs focusing on expansionEurope's CFOs are shifting to more expansionary business strategies. Expansionary strategies outnumber defensive measures in 11 of the 19 countries surveyed, compared to eight of 19 in Q1. Similarly a defensive measure is the top corporate priority in only eight countries, down from 11.CFOs see risks closer to homeCFOs are less concerned about external risks, and are increasingly focused on local factors affecting their operations. A shortage of skilled labour is cited as a top three risk by CFOs in seven countries, up from four in Q1, and labour costs feature for the first time as a top three risk in two countries. Meanwhile, geopolitical uncertainty features among the top three risks in seven countries, down from ten in Q1.Interest rate rises expected but minimal impact on strategy57% of Europe's CFOs say they expect interest rates to rise in their countries over the next 12 months. However, 50% say that any change in interest rates would not lead them to alter their corporate strategies with only small proportions planning measures such as reducing leverage (9%), re-evaluating investment plans (8%) or reducing debt (8%).Ian Stewart, chief economist at Deloitte, said:"Buoyed by stronger growth and improving consumer confidence, CFOs across Europe are more optimistic about the outlook for their companies and preparing to increase hiring and spending. This is particularly prominent in euro area countries, with higher levels of optimism, risk appetite and willingness to invest than their counterparts outside the currency bloc."David Sproul, senior partner and chief executive, Deloitte North West Europe, said:"Europe's CFOs sense a lower level of uncertainty and perceptions of markets are normalising. This is helping CFOs plan for more expansionary strategies and refocus on addressing longer term challenges, with issues such as skills and digitisation moving back up the agenda."

The French Hotel Industry

In Extenso Avocats, a subsidiary of the DELOITTE Group ·27 September 2017
With around 1 560 establishments and a further 80 projects in the pipeline, the City of Light is a veritable breeding ground for hotels. Paris' successful bid to host the 2024 Olympic Games will undoubtedly provide an excellent excuse for many properties to treat themselves to a makeover. All well and good, but heavy construction or renovation work can have significant repercussions in densely-populated areas, and be intensely irritating for neighbors. The law makes provisions for such work, which should, in theory, go without a hitch. Yet in our experience, this is not always the case, and one way of attempting to stave off problems and save money is to undertake a preventive referral process.Before embarking on a hotel construction or renovation project, it is recommended that the developer or owner instigate so-called preventive summary proceedings, since such work could affect other buildings in the neighborhood and lead to significant financial losses. The purpose of these proceedings is to have an independent court-appointed expert assess the condition of the buildings surrounding the project in question. This expert is appointed by the president of the civil court of the area in which project is located. To kick off the proceedings, the hotel developer or owner must request that a bailiff serve its neighbors with a summons.The interest of the preventive summary proceedings for the hotel developer or owner is to ward off, as far as possible, any disputes surrounding the condition of neighboring buildings that might arise prior to or during the construction or renovation. The interest of the proceedings for the hotel's neighbors is to have their property's condition validated by an independent expert and to be able to report any disorders that may arise during the demolition or construction phase.Noise is an important factor to be taken into account here. With this in mind, our firm advised a hotel client, located in an area home to manifold hotels, to undertake a preventive referral process to assess the noise disturbance of its construction site by extending the standard expertise to include acoustic expertise, too. The objective here was to avoid any excessive claim on the part of neighboring hotels in response to complaints from their own guests.Before undertaking any construction or renovation work, hotel developers or owners are advised to instruct, at their own expense, a specialized lawyer to initiate the summary proceedings. The course of action to be followed by the lawyer in charge of the case is summarized below:Prior meeting with the hotel developer or owner and the hotel's management to obtain a clear understanding of the work planned and any anticipated disturbances for neighbors and hotel tenants (e.g. hotel shops and the evaluation of acoustic repercussions during the work).Review of documents and exhibits pertaining to the preventive procedure.Drafting of the writ of summons to be served by the hotel developer or owner.Proceedings before the competent civil court, with the hotel's neighbors represented by their own lawyers (note that it is important to largely anticipate the date of the hearing in order not to push back the work's start date).Drafting of submissions, pleadings with a hearing before the civil court.Attendance at meetings set up by the court-appointed expert on the site where the work will take place and on the premises of those neighbors likely to be impacted.Review of the court-appointed expert's preliminary report and comments sent to the client (after the initial site expertise) and the final report, further to completion of the work.During the site visit, the expert will request access to all the buildings and premises involved, paying careful attention to the condition of each. He or she may return to the site during the work, should any disorders be reported. This is a lengthy process, familiar to lawyers specialized in construction operations. Indeed, the process entails these lawyers accompanying the expert in scrupulously examining each building from top to bottom for any holes, cracks or fissures.The expert will then summon all the parties involved, even those who were not present at the hearing, in order to present his or her conclusions. Here, it is important to include all the neighbors affected by the work in order to avoid further hearings, court decisions or site visits.The applicant (the hotel developer or owner) is responsible for the expert's fees, which usually range from 4 000 EUR to 7 000 EUR, depending on the scale of the work. In addition, the applicant must pay the bailiff's fees (around 10% of the afore-mentioned fees). The lawyers involved will generally invoice an additional flat fee to the applicant for each additional site visit and resulting report.A costly and time-consuming process indeed.... Yet by intervening in the preventive summary proceedings from the off, the lawyers acting for hotel developers or owners gain a global perspective of the operation from start to finish. Indeed, these lawyers can be considered the "common thread" that runs through such operations, and are consequently best placed to efficiently assist developers or owners should any conflict arise, saving them time and money in the long run.1 Source: In Extenso TCH database 2017, Paris city centre (intra-muros)2 Procedure de refere preventif3 Tribunal de Grande Instance4 Individual owners of buildings, individual land owners or syndicates of co-owners

The power of employee engagement |

In Extenso Avocats, a subsidiary of the DELOITTE Group ·22 August 2017
Cultivating employee engagement can help restaurants create positive customer experiences and reduce costly turnover. By focusing on the five core elements of employee engagement, restaurants can create a motivated workforce of brand ambassadors that take ownership of the customer experience.
Article by Christopher Boinet and Anne Epinat

French hotel, tourist residence and apart-hotel leases are evolving

In Extenso Avocats, a subsidiary of the DELOITTE Group ·22 August 2017
French commercial leases and contract law governing hotels, hotel residences, tourist residences and restaurants constitute essential legal and economic stakes. In this sense, the 2014 Pinel Law represents a major legislative change for landlords and tenants.France counts over 17 000 hotels, 2 400 tourist residences and thousands of apart-hotels and restaurants, many of which are operated under commercial leases. The legal and economic stakes are crucial for landlords and tenants, particularly when these properties constitute their main asset.Over the last three years, major reforms have taken place that change the status of commercial leases and contract law, untouched for decades. Lawmakers took inspiration from residential lease interactions, seeking to frame and rebalance the relationship between commercial landlords and tenantsThe Pinel Law ndeg 2014-626 dated 18 June 2014 and its decree of application dated 3 November 2014 revolutionised the commercial lease relationship in favour of the tenant. This constituted the most important legislative change in the commercial lease field in over 60 years - since the 30 September 1953 decree which laid down the applicable regulations in the area.Further, the Macron Law (ndeg 2015-990 dated 6 August 2015) notably relaxed the formalities for giving notice. In addition, Decree ndeg 15-282 dated 11 March 2015 requires seeking an amicable settlement before taking judicial action, and has a specific application for commercial leases and consequently for hotel leases.Lastly, Ordinance ndeg 2016-131 dated 10 February 2016 has, since the 1 October 2016, modified contract law and obligations, with consequences for commercial and hotel leases.A number of lessons can be drawn from the consideration of commercial leases concluded in the context of hotels, apart-hotels, tourist residences and restaurants.Highlight 1: Different lease rules for each type of propertyThe three different lodging types are not, in fact, necessarily subject to the same lease regulations.Commercial leases: reinforced obligations in contract conclusion and executionThe 10 February 2016 Ordinance (applicable from 1 October 2016) introduced in the French Civil Code the obligation to negotiate in good faith (new article 1104 of the French Civil Code) compensation for the breakdown in discussions and the protection of confidential information exchanged during negotiations. Much more, the Ordinance introduced a general right to information (new article 1112-1 of the French Civil Code).This is a sensitive point when delivering premises to the tenant of an establishment such as a hotel, a tourist residence, an apart-hotel or a restaurant. These amendments, which are public policy (i.e. they cannot be waived), reinforce the practice already established by case law.The major reform is now related to the admission of 'unpredictability', allowing judges to amend a contract in the event of a change in circumstances - unforeseeable at the time the agreement was concluded, and which render its execution excessively onerous for one party. In general, the Court of Appeal considers that it is not the 'unexpected' that must be taken into account, but the 'unpredictable', i.e. 'that which could not be reasonably foreseen by the obligor when contracting an agreement.'Here, cases spring to mind where rent may be overvalued at the beginning of the lease agreement and where the economic balance of the contract is thus rendered fragile. Rent levels may become excessive due to economic or technical circumstances beyond the control of the tenant.Lesson ndeg 1 The revision of a commercial lease by judges for reasons of unpredictability must take into account the rental value of the premises. Public policy, rental value is the key reference for commercial leases where it is difficult to determine the rent.Unpredictability, which supposedly enables judges to re-establish an economic balance in the parties' relationship, will come up against a rental value condition. This may remain excessive when compared to the 'unforeseeable' economic constraints encountered by the tenant who can no longer cover their costs.The new legal innovation of unpredictability - a veritable revolution compared to the applicable regulations thus far - here runs into a first hurdle for commercial leases (relating to hotels, apart-hotels, tourist residences and restaurants).The three-year termination option offered to the tenantPrior to the 2014 Pinel Law, it was possible to provide for a fixed-term rental period (e.g. nine years) in the lease, during which the tenant may not leave the premises.The Pinel Law, article L 145-4 of the French Commercial Code, amended, imposes a three-year termination option to be offered to the tenant, except in four cases, including:leases with an initial term exceeding nine years, leases for premises exclusively for office use and storage;leases for premises built for a single specific use.Consequently, nothing has changed for hotel leases relating to premises considered 'single use'.Neither has the Pinel Law amended the framework for tourist residences, which occupy a special place since the lease term is subject to specific provisions (article L.145-7-1 of the French Commercial Code and article L.321-1 of the French Tourism Code) that provide for a fixed-term lease of at least nine years.Lesson ndeg 2 Tourist residence leases are always fixed-term leases (nine years).Apart-hotel and restaurant leases can never be fixed-term leases and must give the tenant the option to terminate the lease agreement every three years.Hotel leases - for premises generally considered as 'single use' - can be fixed-term or not, depending on the agreement of parties. One could, however, question the 'single use' nature of certain hotels that are governed by co-ownership regulations and that offer studios which could be converted into an apart-hotel or a residential apartment block, thereby subjecting them to common law.For these three types of lodging, three regimes for the duration of commercial leases thus exist.The Pinel Law and the limitation on rent caps in the case of revised and renewed lease agreementsIn theory, commercial rents under common law are capped when the lease is revised or renewed. In the event of a rent review, and pursuant to article L.145-38 of the French Commercial Code (triennial review) and article L.145-39 (the increase in rent exceeds 25%, compared to the initial rent), resulting changes in rent can lead to steep rises for the tenant and an application of the entire increase from the first year onwards.The Pinel Law stipulates that the variation in the rent resulting from the exclusion of rent capping (nothing is specified when rents are revised downwards) cannot lead to an increase in the rent, for a year, of more than 10% of the rent paid during the previous year. With regard to lease renewal, this levelling also applies to leases entered into for a term of over nine years.This mechanism means that the rent resulting from the exclusion of rent caps is not actually limited, but is 'spread over' the first years of the renewed lease by limiting any increase in rent to 10% per year (compared to the last rent paid) until the fixed rent is reached.Lesson ndeg 3 This flagship measure of the Pinel Law does not apply to 'single use' premises. In principal, hotels are considered 'single use'.With regard to the renewal or revision of leases, rent levels are uncapped. The resulting change in rent can sometimes lead to a steep increase in rent for the tenant and a full application of such from the first year onwards, as before.The terms and conditions relating to increases resulting from the exclusion of rent caps are consequently different for apart-hotels, tourist residences and restaurants, on the one hand (spread in increments of 10%) and hotels, on the other (immediate application of the new rent). Again, the question surrounding the single use nature of hotels that are subject to co-ownership rules arises. In all cases, it is recommended that the lease rental value be thoroughly evaluated before any negotiations are undertaken.The Pinel Law and commercial leases: relaxation of the formalities for giving noticePrior to the Pinel reform, termination notice had to be given by writ. Lawmakers have since relaxed the formalities for giving notice. Consequently, pursuant to article L.145-9 of the French Commercial Code, termination notice can now be given by registered letter with acknowledgement of receipt, or by writ. The date of the termination is the date of the first presentation of the registered letter (article R.145-1 of the French Commercial Code).However, nothing has changed for a tenant who intends requesting a lease renewal. Only the writ remains valid.Lesson ndeg 4 Regardless of the type of operation (hotel, apart-hotel, tourist residence or restaurant), the continued use of writs is recommended, both for giving notice and for renewal requests, so as to avoid any unnecessary risk of litigation associated with the legal notices referred to in article L.145-9 of the French Commercial Code, and in particular dates of receipt of the registered letter.Highlight 2: The 2014 Pinel Law introduces new distributions of chargesThe Pinel Law and the suppression of any reference to the construction cost index published by INSEE (ICC) in the provisions relating to rent renewalsThe commercial rent index (ILC, including shopping centres) and the index of tertiary activities (ILAT, the benchmark for tertiary, business and logistics activities) have become the legal reference for framing commercial lease rent evolutions.Lesson ndeg 5 The ILC index was already widely used in commercial leases; consequently no real change has taken place. However, the cost of construction index (ICC) can still be used in sliding scale clauses. This may, however, pose a number of difficulties for reconciling calculation methods in the case of triennial rent reviews, requested in addition to annual indexation. The Pinel reform and the new distribution of charges between the landlord and tenantPrior to the Pinel reform, no legal provision on the distribution of charges between the landlord and tenant existed, and parties were free to split charges. Failing that, parties could refer to the French Civil Code regulations, which could prove to be a source of litigation.The decree dated 3 November 2014 changed the existing regulations by imposing a precise and limiting list of charges, taxes and fees to be annexed to the lease agreement. The landlord must provide the tenant with a summary of these expenses on an annual basis.Henceforth, article L.145-40-2 of the French Commercial Code stipulates that on conclusion of the lease agreement and every three years thereafter, the landlord must provide a provisional statement of repairs planned over the next three years, as well as a forecast budget and a summary of repairs carried out over the past three years, together with their cost.Furthermore, 'triple net' leases have come to an end (lease agreements net of all charges for the landlord, whatever these charges may be). Landlords are now prohibited from passing on to tenants the cost of heavy work required by article 606 of the French Civil Code, as well as any fees related to carrying out works 'intended to rectify obsolescence or bring into compliance', when such constitute major works relating to the structure of the building (article R.145-35 of the French Commercial Code). This is particularly the case for the installation of lifts or the widening of doors as part of compliance with the new accessibility standards for disabled persons.The landlord can allow the tenant to bear any charges relating to improvements, when the expense exceeds the cost of identically replacing these assets. The thorny topic of improvements (in hotels, apart-hotels, tourist residences or restaurants) and ensuing financial issues can result in a court battle and the intervention of experts to debate:the type and nature of the works in question, which is decisive in determining the party responsible;the cost of the works, which should be systematically assessed in order to obtain a comparison with the cost of the identical replacement of the assets in question.The burden of tax expenses and fees borne by the landlord can only be transferred to the tenant if they are directly or indirectly linked to the use of the premises, or to a service that benefits the tenant. In practice, this means that landlords are facing an increase in all types of costs and taxes for which they are responsible, as well as additional building management fees and annual administrative and accounting expenses.The regulations governing the distribution of charges covered by the new article L.145-40-2 of the French Commercial Code have become law.Parties cannot, therefore, derogate from the rules on the distribution of charges and taxes. Any clause contrary to these provisions would be deemed unwritten, in accordance with article L.145 - 15 of the French Commercial Code. Parties are recommended to remain vigilant when negotiating and drafting future leases and renewed leases to which the amendments will apply.Lesson ndeg 6 These new provisions are of paramount importance for hotel, apart-hotel, tourist residence and restaurant leases.Previously, the majority of leases traditionally transferred to the tenant the significant financial burden of renovation and compliance works. A priori, it is therefore the tenant who likely takes the initiative to amend the agreement in this respect when renewing a lease (see the following text, 'Hotel leases and works favourable to the tenant').Mandatory incoming and outgoing inventory of fixtures in commercial premisesHenceforth, the law requires a contradictory inventory of fixtures when:the tenant takes possession of the premises as the lease agreement is concluded;the leasehold rights are assigned;the leasehold rights are assigned;in the frame of the transfer of business " cession de fonds de commerce";the premises are handed back.The inventory of fixtures must thus be annexed in the lease agreement, or failing that, kept by each of the parties. In the event of disagreement, a court bailiff may intervene and draw up an inventory should this be requested by the most diligent party. Costs are then shared equally between the landlord and the tenant (article L.145-40-1 of the French Commercial Code).Lesson ndeg 7The inventory of fixtures (when properly done) is a key element for a lodging establishment open to the public. It makes it possible to verify that the landlord has correctly fulfilled the stricter obligation to deliver rented premises that conform to their intended use and that are properly maintained, in accordance with applicable case law (CA Rouen 17 mats 2016 - RG : 15/01605). This obligation is particularly important in the case of off-plan (BEFA) hotel, apart-hotel, tourist residence or restaurant leases at the time of delivery. Non-compliance regularly leads to litigation between landlords and tenants. The formalism of the inventory of fixtures is particularly important for each party. Indeed, it is recommended going even further and conducting a full technical audit of the premises.The Pinel Law and the pre-emption right in the event of a sale of the leased premisesUnder the Pinel Law, the tenant henceforth enjoys the benefit of a pre-emption right in the event of the sale of the premises in which their business operates (article L.145-46-1 of the French Commercial Code).Lesson ndeg 8 Since these provisions are not public policy, they can be circumvented in a lease clause. Nevertheless, and in addition to being legitimate, they could prove useful for tenants and would avoid certain issues of negotiation and tension.Extension of short-term leases The Pinel Law (article L.145-5 of the French Commercial Code) extended the period of derogating from the commercial lease status to a maximum of three years, compared to 24 months previously.Lesson ndeg 9This contribution is mentioned just for the record, since short-term leases are rarely, if ever, used for hotels, tourist residences and apart-hotels, all of which necessitate significant investment. They are also the exception in the restaurant world, since restaurant operators seek a stable location for their business in order to build customer loyalty.Highlight 3: Cases can be brought more easily before the Departmental Conciliation Commission The automatic transfer of leases in the event of a merger or split has become lawIn the event of a company merger or a partial transfer of assets, the lease is transferred, notwithstanding any provision to the contrary, to the newly amalgamated company or to the company benefiting from the transfer. This legal vehicle for transferring leases or businesses is relatively simple to put in place, and in this respect, the law has adopted the position of case law.Lesson ndeg 10Along with its favourable tax regime and its simplicity, this should encourage even more restructuring in the hotel industry (article L.145-16, al. 2 of the French Commercial Code).Lease assignment and vendor's guarantee limited to three yearsWhere a guarantee clause exists in connection with the lease assignment, the landlord must inform the assignor of any payment default within one month.Since the introduction of the Pinel Law, the duration of the assignor's guarantee to the assignee is set at three years after the lease is sold, which is very protective for all tenants.Lesson ndeg 11 This measure makes it possible to limit the joint liability of the assignor (article L.145-16, al.1 and article L.145-16, al.2 of the French Commercial Code). The law does not provide for penalties for failure to provide information within the prescribed period.Wider recourse to the Departmental Conciliation CommissionPrior to the introduction of the Pinel Law, the Departmental Conciliation Commission could only deal with disputes relating to the exclusion of rent capping in renewed leases. The law now has now extended the competence of the Commission to disputes relating to (French Commercial Code - article L.145-35):triennial rent reviews;charges and works.Reminder: The Departmental Conciliation Commission is one step prior to going before the courts in the location of the leased premises, if no amical agreement can be reached. Referral of a dossier to the Commission is voluntary.Lesson ndeg 12 This reform is a more general part of the development of ADR (Alternative Dispute Resolution) that aims to bring to the fore the amicable rapprochement of parties through mediation, conciliation and collaborative law... without recourse to litigation.Such methods are also intended as a means for parties to maintain communication, enabling them to reach agreement. These dispute resolution mechanisms undoubtedly constitute a 'plus' for the optimal operation of a lodging establishment (hotel, apart-hotel or tourist residence), where it is crucial that the operator maintain a lasting and constructive relationship with the landlord.Hotel leases and works favourable to tenantsIn the case of common law leases (apart-hotels and tourist residences), the tenant cannot undertake any works that alter the layout of the premises without first obtaining the express permission of the landlord.Hotel leases fall under a specific regime as they relate to establishments open to the public (ERP). The owner of a property in which a hotel operates cannot - notwithstanding any provision to the contrary - object to any works or improvements that the tenant - the owner of the business - undertakes at their own expense and under their own responsibility, when such works concern the eight cases listed in article L.311-1 of the French Tourism Code, even if such works entail changing the layout of the premises.A further particularity exists with regard to existing hotel safety regulations. Article R.123-3 of the French Building and Housing Code stipulates that 'builders, owners and operators of establishments open to the public are required both at the time of construction and during the building's operation to respect the preventative and security measures necessary to ensuring the safety of persons; these measures are determined in accordance with the nature of the operation, the size of the premises, the manner in which the building has been constructed, the authorised capacity and the ability of persons admitted to escape in case of a fire.'Joint and several responsibilityConstructors, owners and operators of buildings open to the public (ERP) are thus jointly and severally responsible for fire safety, which has far-reaching general and civil consequences for all involved.Lastly, within the context of a hotel lease, particularly with regard to emergencies or safety procedures, the hotel operator may do (almost) anything. When there is a particular urgency for works to be carried out, the two conditions of the landlord's formal notice and/ or judicial authorisation are abolished (judgment C. Cass 23 May 2013). An example would be the case of a hotel threatened with closure because the landlord - responsible for works ordered by the Security Commission - has not undertaken such works in the time allowed, under the terms of the lease. The tenant may immediately carry out these works without informing the landlord and without losing the right to reimbursement for the said works.

How Owners And Operators Successfully Negotiate In France 'reverse' Hotel Management Agreements

In Extenso Avocats, a subsidiary of the DELOITTE Group ·16 August 2017
In principle, a hotel management agreement is a contract between a hotel management company (the operator) and a property owner, under which the operator assumes full responsibility for managing the property by providing all the necessary services (direction, supervision, expertise, etc.) using established methods and procedures.For the owner (investment funds / financial institutions, etc.) the main objectives are to:select the operator who will maximise profitability and consequently the value of the asset,secure, under the best possible conditions, the terms of the agreement signed with the operator whereby the owner is freed from all responsibility for the operation of the property, andat the same time, ensure that the fees paid to the operator correspond to them meeting or exceeding the agreed performance criteria.The operator agrees to provide the owner with his experience and know-how, particularly in terms of human resource management and organisation procedures, even though under traditional management agreements, the owner usually remains the legal employer of staff.A hotel's human resources are an essential key to its success and help validate the company image. However, from a purely financial point of view, payroll constitutes a high expense item, and if not properly structured can present a significant source of legal and social risks.Yet owners may find themselves accountable for human resource strategies, which in practice, have been exclusively developed by hotel operators, since they alone, are familiar with the hotel business. Given this, certain French financial owners will only enter into 'reverse' management agreements under which the operator is the sole employer of the hotel's staff.Quick comparison with hotel lease management contracts " contrats de location gerance " Under a lease management contract, the tenant - by law - rents the business at his own risk and is pursuant to the law, the sole employer of the personnel. A lease management contract thus appears to offer a more simple solution, so why aren't they used more often?In practice, the hotel operator agrees to employing staff, but subject to being able to pass the burden on to the property operated. The contractual management of staff thus constitutes the major challenge in negotiating a 'reverse' hotel management agreement. Given this, an owner will pay particular attention to negotiating the key terms of contracts relating to the supervision of staff, specifically examining the conditions and brand standards submitted by the operator, notably with regard to human resources.The owner must, in fact, control the operator in terms of the contract's execution, the key objective being to ensure the project's financial success. The owner then enters into negotiations with the brand by prioritising the essential clauses of the contract in this respect - from those that are non-negotiable to those that are up for discussion, and by setting out defined objectives and a clear vision of the owner's legal and financial interests.DESCRIPTION OF THE PROCESSES INVOLVED IN FRANCE IN DRAFTING A 'REVERSE' HOTEL MANAGEMENT AGREEMENTThe owner may launch a tender to select a hotel operator, often requesting - and in reality imposing in the term sheet - that the operator accept full responsibility for the hotel's staff. The selected operator will then propose an extremely detailed management contract to cover the risk of employing the personnel.A 'reverse' hotel management agreement often stipulates that the owner is the sole employer of the hotel's staff, including the General Manager. The operator will then be extremely vigilant in ensuring that all expenses related to personnel management are translated into operating costs for the hotel.For this reason, agreements generally specify that the operator alone may exercise authority over staff (management and disciplinary power). The operator is granted all rights/ prerogatives and obligations relating to their role as an employer with regard to individual and collective working relations in accordance with the applicable legislation in France. The operator is thus responsible notably and amongst others for:the selection, recruitment and training of staff, administrative management (monitoring of absences, holidays, etc.), career management (promotions) and contract terminations,the setting and monthly payment of staff salaries,the determination of working conditions,the drafting and updating of all legally required documents and notices, andthe organisation of professional elections and the maintenance of industrial relations (employee representative bodies, unions).However, these stipulations - useful as they are - need to be applied in practice. In fact, the owner must refrain from giving orders and instructions to staff, otherwise these contractual provisions have no value. Further, they cannot exonerate the owner from any possible liability.The parties contractually agree that the appointment of the General Manager (and sometimes other key positions, too) will be subject to the owner's prior written approval. However, the owner has no right of veto, and cannot unreasonably defer or refuse their agreement. For example, in order not to obstruct the management of the property, hotel management agreements often include a provision stipulating that the owner may not reject more than two candidates proposed by the operator for the position of General Manager. Similarly, management agreements generally require the operator to communicate the General Manager's salary to the owner at the time of hiring, and as part of the budgetary procedure thereafter throughout agreement's term.The operator's criteria with respect to salary levels, retirement and employee participation schemes are often established by taking into account habitually observed practices in hotels of a comparable category. These criteria are regularly benchmarked against competitor hotels, preselected by the operator and owner.Parties must also pay particular attention to clauses relating to 'hotel staffing costs' (covering, in particular, recruitment expenses, salaries, benefits and bonuses, employee participation schemes, contract terminations and other expenses, employer contributions and taxes - including the CVAE, a tax based on a company's added value). These expenses must be set out as comprehensively as possible, with particular consideration given to debts, claims, miscellaneous costs, reasonable legal fees and all costs and benefits associated with expatriate contracts and the application for work permits and visas. These expenses are re-invoiced down to the last euro by the operator and absorbed by the property under operating expenses.Foreign workers employed by the hotelTo the extent that the employment of overseas workers is authorised by the owner, the operator is often requested to bear any risk inherent in the recruitment of foreign staff. As the sole employer, the operator is required to undertake all the necessary formalities with regard to filing employee work permit or visa applications and obtaining these documents thereafter.Expenses related to these applications, along with any legal, tax or other advice required to obtain permits and visas or to negotiate and sign expatriate employment contracts, will be listed as hotel operating costs.The end of the hotel management agreement Upon termination of the hotel management agreement, whether it has expired or been terminated early for any reason whatsoever, hotel employees are automatically and fully transferred to the owner of the business (fonds de commerce) or to the new hotel operator. This situation is the result of the application of Article L. 1224-1 of the French Labour Code and is often emphasised in management agreements.Furthermore, the hotel management agreement may specify that if the conditions laid down in Article L.1224-1 of the Labour Code are not met, the owner must make every effort to ensure employees are transferred to a possible new hotel operator.The owner may officially request to be kept informed of the content of agreements and transactions concluded with staff and any resulting expenses. The owner may impose a contractual right of veto on possible agreements considered disproportionate, although care should be taken with regard to this. Indeed, by imposing such practices, the hotel owner runs the risk that their 'control' be considered as 'interference' in the management of the hotel's employees. If this intrusion becomes too great, the recognition of the owner as a co-employer of the hotel's staff cannot be ruled out. Similarly, the 'flat rate' remuneration of such transactions, where they exist, must be examined in connection with the legislation covering bargaining and the lending of for-profit labour.In the event that the hotel ceases trading, parties stipulate in the agreement that the operator is responsible for terminating employment contracts. The owner then contractually undertakes to reimburse the operator - in full and upon presentation of receipts - all expenses relating to staff termination, compensation of any kind, litigation costs and generally speaking, any monies due to hotel employees or social welfare organisations (unless, of course, the operator is liable for such).Hotel management agreements thus often specify that this contractual commitment be subject to the double condition that the operator has made every effort to:transfer or redeploy hotel staff, orproperly instigate the redundancy information and consultation procedure within a reasonable period of time (for example, no later than three months prior to the expiry or termination of the hotel management agreement).The legally and financially sensitive case of transferring or redeploying staff to other properties: the operator specifically requires that the owner reimburse all costs and monies due to employees or social welfare organisations in connection with such transfer or redeployment.The terms of payment of monies owed by the owner to the operator with regard to such: the operator necessarily imposes a system under which invoices are refunded without delay via a direct debit authorisation from the hotel's bank account.What is more, operators generally request a financial guarantee from owners in return for managing and assuming the responsibility for the hotel's staff.To conclude, in France,'reverse' hotel management agreements are not the most prevalent amongst hotel operators. However, operators do accept the constraints of these contracts, notably in return for their ease of implementation and the guarantees that can be obtained from owners. Each co-contracting party can therefore assess - from the time the agreement is signed - the extent and limits of their commitments.As Claude Lelouch the famous French director said, 'constraint solicits the imagination' (2016, Le dictionnaire de ma vie), and the fertile imagination of hoteliers will no doubt enable them to shape hotel agreements to take into account the constantly-evolving constraints of labour law regulations.1 Assuming an average of one employee per room, payroll can equal 40% of total turnover in luxury hotels and 30%, even, in 3 or 4 star hotels.2 Amounts mentioned in these contracts are also included in the accounts under operating costs.

Travel and Hospitality Industry Outlook 2017 |

In Extenso Avocats, a subsidiary of the DELOITTE Group ·11 August 2017
Will 2017 be a growth year for the travel and hospitality industry? Deloitte's recent industry analysis reports that forward thinking companies with an eye towards innovation could turn some of the challenges into opportunities in the coming year. Looking back to our 2016 travel and hospitality industry trends report, shifts in the global economy, game-changing innovation, geopolitical turmoil, natural disasters, pandemics, and rising consumer demands reshaped the travel landscape. Our 2017 travel and hospitality industry outlook points to more of the same.

French Hotel Industry Performance - September 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group · 3 November 2016
September saw a decline in occupancy and average rates for all categories, with all major areas in France affected. Ile-de-France, the Cote d'Azur, and even Regional France, recorded lower RevPAR in all segments, with the exception of Luxury. However, given the solid performances recorded since early 2016, year-to-date results for Regional France are still up on last year's performances. Yet given the underlying trend, certain hoteliers have been forced to scale down their Q4 forecasts.

French Hotel Industry Performance - August 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group ·11 October 2016
Hotel performances for August in Paris and, as feared, on the Cote d'Azur dragged down the results for the industry as a whole, in spite of the encouraging performances recorded in Regional France and in Coastal areas. Altogether, RevPAR fell in all categories, except in the Super-budget segment. The Upscale and Luxury categories were the most affected over the two summer months.

French Hotel Industry Performance - July 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group ·13 September 2016
The Euro championships organised in France and the daily hotel performances communicated by our partner, STR, signalled some hope for July. Paris and the Cote d'Azur finished July on a very negative note, with RevPAR significantly dropping in all categories, given the sharp decline in occupancy. However, Regional France withstood better, recording encouraging increases in RevPAR (+4% to +9%, depending on the category), boosted by growth in average rates.The Euro 2016 championships had little or no impact in Paris. Although the performances recorded over the first half of July appeared encouraging, the month ended along the same lines as those observed since the start of the year. All categories recorded a steep drop in Rooms revenue (down -13,4% for Upscale hotels and -18,3% for Luxury hotels). Can we conclude, then, that Euro 2016 had the opposite effect? A proportion of the traditional clientele in Paris's hotels chose not to stay in the city during the tournament, preferring calmer periods. Furthermore, football supporters would have likely preferred cheaper or shared accommodation, and it is not innocuous to suggest that AirBnB may have achieved record results in July.As feared, the image of Ile de France and the Cote d'Azur took a hit in July. Occupancy dropped steeply in all categories, particularly in more upscale segments. Luxury hotels recorded a 15% drop in RevPAR in July, but year-to-date results are still slightly better than last year (+2,1%), thanks to a solid performance over the first semester. All other categories recorded a decline in performance, both in July and year-to-date. The attacks in Nice obviously had a serious impact and August is unfortunately likely to be heavily affected, too. However, let's not forget that 2016's results are being compared to n-1, and 2015 was an excellent year: for example, the Luxury segment on the Cote d'Azur recorded a 69% increase in RevPAR in July 2015!There were a couple of positive points, however. Regional France confirmed the solid results recorded over the first semester 2016 - and the same period last year had also been encouraging. For Euro host cities, July was a good, or a very good, month. Bordeaux, Lille, Lyon, Marseille, Saint Etienne, etc., and more contrastingly, the coast (Brittany, the Loire) finished the month on a high note, with an overall increase in average rates. However, and somewhat exceptionally, looking at the whole of France, the Super-budget category was the only one to have recorded RevPAR growth (+4,3%), given the combined rise in occupancy and average rates. In a context where performances are generally dropping, this rebound is definitely good news.

French Hotel Industry Performance - June 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group · 2 August 2016
Regional France was able to capitalise on the Euro 2016 championship to build on the encouraging results posted at the start of the year, with all categories recording higher RevPAR at the end of the first semester. Conversely, and for too long now, there was yet more bad news for Paris in June, with hotels finishing the month and the first semester in the red - fairly significantly so, and a definite cause for concern!

French Hotel Industry Performance - May 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group · 4 July 2016
Following a month of April when all regions recorded losses, the contrast in May's performance from one zone to the next was striking. Unfortunately, Ile-de-France continued to pay the heavy price of the terrorist attacks of early 2015 and in Brussels. All client segments were affected and while recovery should be on the cards, it has yet to make itself known. The situation was noticeably different in regional France: somewhat mixed on the Cote d'Azur, but very encouraging in regional France.

French Hotel Industry Performance - April 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group · 1 June 2016
March's generally positive results led us to believe there was some hope for recovery. Unfortunately, April's performances dropped in the majority of categories and throughout most of France. The attacks in Brussels at the end of March reminded international visitors of the ongoing security threat in this part of Europe. The school holiday and events calendars were also somewhat unfavourable in April, which accentuated the weak trading activity during this period.

French Hotel Industry Performance - March 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group · 2 May 2016
No doubt we will have to wait to see what the real trend is, but March's results were generally positive.Regional France, and the Cote d'Azur in particular, showed a good start to the year, with the Luxurysegment leading the way. Even though Paris and Ile-de-France were still recording lower performances, thedeclines are lessening. Note that for the first time in a long time, Super-budget hotels saw simultaneousgrowth in occupancy and average rates.

French Hotel Industry Performance - February 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group · 4 April 2016
In a similar vein to 2015 and January 2016, the Cote d'Azur and Regional France confirmed or even improved on January's good results. Conversely, Paris and major Ile-de-France zones continued to record significantly lower performances, and the return to normality will have to wait.

French Hotel Industry Performance - January 2016

In Extenso Avocats, a subsidiary of the DELOITTE Group ·14 March 2016
Late 2015 was heavily impacted by November's tragic events, and Parisian hoteliers were hopeful that January would signal a return to normality. However, they will have to wait, since 2016 began in the same way as November and December 2015 ended.

French Hotel Industry Performance - December 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group · 2 February 2016
As unfortunately feared, the month of December failed to reverse the trend observed throughout 2015, which ended on a mixed note. Occupancy dropped sharply in all categories in Paris and the Ile-deFrance region as a whole, as the impacts of the terrorist attacks were strongly felt. The final month of the year was also challenging elsewhere in France. However, the relative weighting of December compared to the rest of the year meant that the overall good performances achieved up till then in regional France held.

French Hotel Industry Performance - November 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group · 4 January 2016
Paris and the Ile de France region were dramatically hit by two terrorist attacks in 2015. The impact on hotel activity is evidently substantial and hotels in this area will finish the year on a lower note. November saw a fall in occupancy in Parisian hotels of all categories compared to the same period 2014. Although the impact appears to have been less strong in regional France, intermediary categories nonetheless recorded lower performances in November 2015, particularly on the Cote d'Azur. Our fears were unfortunately confirmed as Paris suffered a significant drop in occupancy further to November's attacks (a fall of 10,9% to 14,6% depending on the category). Stable average rates limited the drop in RevPAR, although rooms revenue was still affected. Paradoxically, Luxury hotels managed to stabilise or grow RevPAR (+3,3%), although this was an illusion, since November 2014 was not a particularly good month (aggravating the findings for other categories). The rest of the region fared better, and inferior categories (Budget and Super Budget) in certain departments even managed to increase RevPAR. The rest of France suffered to a lesser extent. The Upscale and Midscale categories were the only ones to record fairly significant drops in RevPAR in November 2015: -9,8% for regional Upscale hotels given the combined fall in occupancy and average rates and -9,5% for Midscale hotels on the Cote d'Azur given the significant drop in occupancy. All other categories recorded stable or better performances, confirming the more encouraging pattern recorded over the past few months. Even though we should remain cautious when comparing results against November 2014, year-end performances show a marked increase, with December not likely to reverse the trend. For Super-budget hotels, the months go on and resemble each other. Maintaining a +1,5% increase in average rates since the start of the year has not been sufficient to offset declining occupancy: RevPAR is down by almost 1% and appears to have stabilised at this level. We are already well into the month of December, and the picture is not likely to change much. Yearend results will in all probability be encouraging for regional France, particularly for the Cote d'Azur. Conversely, the significant drop recorded since the start of the year in Paris will likely be aggravated by an uncertain month of December, as security fears continue to prevail. 2015 looks, then, to deliver mixed results.

French Hotel Industry Performance - October 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group · 2 December 2015
As the months go by, the pattern observed thus far is becoming stronger. Although year-to-date performances at the end of October were more or less balanced, October marked a strong decline in almost all categories, compared (true) to a good October 2014. The sharp drop in Ile-de-France hotel performances was decidedly the most striking feature and dragged down average performance in France as a whole.Further to a gloomy summer and early autumn, October marked a downward trend in all categories throughout Ile-de-France. Although a comparison with the same period 2014 should be put in perspective, October 2015 saw a sharp drop in monthly performance: upper-end categories were the only ones in Paris to maintain slight RevPAR growth (+1,3%). Pricing efforts undertaken by Parisian hoteliers (ARR down by -2,6% to -12%, depending on the category) did not manage to boost occupancy, itself generally in decline. In contrast, and as with previous months, regional France and the Cote d'Azur posted encouraging results.Yearto-date RevPAR growth at the end of October was relatively comfortable (+0,7% to +7% in regional France, and +4,7% to +12% on the Cote d'Azur). Indeed, the Indian summer helped boost demand in tourist areas, with coastal areas all recording respectable performances: Bayonne-Anglet-Biarritz, Bordeaux, Montpellier, Marseille, Nice and Le Havre. It is feared that certain damaging effects evoked last month (impact of the emergence of the collaborative economy) will be amplified in the weeks and months to come by the repercussions of November's tragic events in Paris. These are likely to manifest themselves in falling occupancy in both Paris' hotels, but also elsewhere. Although the Cote d'Azur and regional France, given the solid performances recorded thus far in 2015, are likely to finish the year on a high note, the end of the year will most certainly be more complex for Ile-de-France.

French Hotel Industry Performance - September 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group ·30 October 2015
September was encouraging for hotels on the Cote d'Azur and in regional France as they continued to post growth in occupancy and average rates. On the other hand, having stagnated, or even declined, in recent months, Parisian hotels struggled. Although year-to-date performances at the end of September are slightly higher than last year, the final trimester is important in determining 2015's end result.

French Hotel Industry Performance, August 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group ·29 September 2015
After two months of recovery, August showed mixed results depending on category and location. While "intermediary" categories (Midscale, Upscale) resisted well thanks to higher average rates, Superbudget hotels confirmed declines in RevPAR. For higher-end hotels, August's results varied from region to region, resulting in an overall drop in occupancy and rates. Despite all this, August's results must be put in perspective when compared with August 2014 - a particularly good month - and year-to-date growth, which remains positive.

French Hotel Industry Performance, July 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group · 8 September 2015
Looking at June's results, we had dare hope that the French hotel industry was on the road to recovery - July's performance helped confirm our hopes, particularly at the upper end of the scale. The clement weather in July was obviously one reason for this. However, depending on the region and the hotel category, the shift in Ramadan also had a positive effect. The only fly in the ointment was the Budget and Super-budget categories who failed to benefit from this bright spell.The Luxury and Upscale sectors have been marking time since the beginning of the year. Further to a hopefullooking June, July was a very good vintage for these categories. Growth was strong, both in terms of average rates and occupancy. RevPAR ultimately rose by 23,9% for Luxury hotels and 14,3% for Upscale hotels. These respectable monthly results enabled Luxury hotels to finally wipe out the decline in year-to-date RevPAR that persisted up until June (+1,2% at the end of July, compared to -4,5% at the end of June).The favourable context brought about by the good weather in July was further strengthened by Ramadan having taken place in June this year. Given this, the comparison with July 2014 was particularly flattering for those areas popular with this clientele (+69% growth in RevPAR in July on the Cote d'Azur!). Yet, upper-end hotels in other coastal areas and main cities also recorded RevPAR progressions.The picture was more disparate for the Midscale and Budget categories. Midscale hotels finished July on a slight positive note, thanks to higher demand (RevPAR growth of +2,2%). However, it should be noted that although the clement weather helped regional hotels in all categories to record good results in July, Midscale hotels in Ile de France ran into trouble (RevPAR declined by -1,7% in Paris and by -2% elsewhere in Ile de France).Super-budget hotels also confirmed the drop in occupancy (-3,6% in July; -2,1% since the start of the year) in the face of increasing prices. At the end of July, rate adjustments (ARR growth of +1,6%) failed to offset the decline in occupancy.

French Hotel Industry Performance - June 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group ·11 August 2015
Further to a lacklustre month of May with destinations posting conflicting results, June seemed to herald a recovery throughout France. Depending on the category and zone, this recovery amplified the positive results or helped make up for the negative performances recorded since the start of the year. The good weather and the announced beginning of economic recovery doubtless favoured this, although June 2015 is being compared to June 2014 which was particularly quiet given the lack of major events.

French Hotel Industry Performance - May 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group ·17 July 2015
A mixed bag in May: some regional destinations post real growth in RevPAR, with Paris, Lille, Marseille and others recording a drop. Does the explanation lie in the bank holidays or the timing of the school holidays? In May, the French hotel industry was laughing one day and crying the next. Results varied widely throughout France, with some destinations recording sharp drops in RevPAR and others strong growth.

French Hotel Industry Performance - April 2015

In Extenso Avocats, a subsidiary of the DELOITTE Group ·16 June 2015
April's results were generally somewhat gloomy. However, a closer look reveals a contrasting hotel landscape. After the brief lull in March, the Capital began to slide again. On the other hand, regional cities benefited from the school holidays, allowing them to record relatively good trading results in April.


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