| The London Olympic Stadium under construction
LONDON—Tourism is “running away” from the U.K. rather than toward it, according to a stark warning from the European Tour Operators Association issued for the start of British Tourism Week. Of particular concern was the lack of availability of hotel space at “sensible market rates” in London during the Olympic period, the organization announced at a press conference Monday.
Tom Jenkins, ETOA’s executive director, said European tour operators are “most concerned that the U.K. in general is underperforming on the worldwide tourism market”, citing a 105% U.K. 10-year growth figure compared to 130% growth in European tourism and 195% worldwide.
In addition to problems with the taxation system and complications with getting a U.K. visa, Jenkins highlighted “a core assumption that London will have bonanza year for business in 2012” as leading to overpricing and a potential pre- and post-Olympics “crater” in the hotel market. He warned this Olympic effect could have much longer lasting implications.
Predicted vs. actual visitor numbers
Jenkins brought to attention the disparity between predicted and actual visitor numbers figures from past Olympic hosts, such as Sydney, where it was thought the games would bring in an additional 132,000 visitors staying for up to two weeks, with the actual figure closer to 18,000 visitors. For London 2012, Jenkins revealed an estimated figure of 379,000 expected additional visitors, equating to 125,000 hotel rooms.
The last two times the Olympic Games were held in Europe—in Barcelona in 1992 and in Athens in 2004—there were 12,000 and 15,000 total hotel rooms available, respectively, he said. London has 125,000 hotel rooms, plus all the additional capacity added between now and August 2012.
He added: “In Sydney they built several 4- and 5-star hotels especially for the Olympics and none of these hotels are hotels any more”.
In a survey of attendees at the British and Ireland Marketplace conference, of 100 companies representing about 2 million incoming visitors mainly from long-haul markets, Jenkins said “demand is about 20% down for U.K. for 2012 compared to this time last year”.
“Forward placements of business for London 2012 is currently running at 50% below 2011 levels”, he said. “As happens in nearly all Olympic destinations, demand is suppressed during the year of the event. Regular bookings are drying up and the volume of enquiries is down”.
Leisure business suffers
Jenkins maintained of greater concern still is capacity in regular markets. “At the moment there is simply no availability for leisure traffic during the London Olympic Games. There are one or two hotels honouring corporate traffic, but generally August 2012 is just about the Olympics”, he said. “Rooms are only available in 14-day blocks at a 100% premium. It essentially closes out the period around the games—visitors cannot start or end visits in early August, creating an extended crater effect”.
Adding to this, the London Organising Committee of the Olympic and Paralympic Games “has booked over 50% of 4- and 5-star hotel market at prices substantially below market rates in 2008/2009", Jenkins said. "Hotels are now actually looking at lower yield than would have got in 2010”. In order to make up the difference, hefty premiums and minimum stays are already being considered and “outside the immediate games period hotels are looking at roughly 40% increase either side”.
The potential impact is that there may be very little leisure business, or indeed none at all, in the two-week Olympic period. If that were the case, it would mean 200,000 fewer customers per day for London as a traditional tourist destination rather than an Olympic one.
It was acknowledged that respondents of the survey only represent part of the market—mainly long-haul that needs to place bookings with a lead time of 15-18 months, representing between 1-2 million visitors and a spending of £2 billion (US$3.2 billion). Despite the fact that the gap might be filled by shorter-haul and domestic visitors, Jenkins suggested caution: “The business might well be replaced by other guests as space opens up. But it’s a significant bellwether. At the moment, we are looking at the biggest fall in long-haul incoming business since 1986. Regular customers being asked to go elsewhere. There is no guarantee they will return”.
He said, “Several operators are effectively dropping London as a tourism destination for the bulk of 2012. There is not much that can be done to reverse this. The solutions that have been canvassed (such as the West Midlands, a viable alternative to London) do not work. As London is removed from the product offer, the rest of the U.K. goes with it”.
In London, hotels remain seemingly confident that 2012 is going to be a good year based on high rate demand in 2009 and 2010, with solid demand in the summer months. For the Olympics in particular they are seeing, on top of the 55,000 room reservations placed by LOCOG, additional requests for accommodation from foreign Olympic Operators.
However, with the consensus until now being that Olympics will be a boost for London and U.K. hospitality as a whole, Jenkins is adamant that “the assumptions, both in the market and in the supplier community, are wrong” and that a clearer picture needs to be found.
“What matters now is to gain an understanding of exactly how the demand for the games is manifesting itself”, he said. “The people who can most help this process are the organisers who are selling tickets to the games. How many tickets are actually being sold to foreign visitors? If we have this figure then demand can be assessed. At present, an industry stands in jeopardy through over-hyped fantasies of bonanza”.