LONDON—For a recent presentation, I was asked to provide an outlook for the London. As the current market conditions make it quite difficult to predict 2010 performance, I decided it would be way more fun to look even further into the future—the 2012 Summer Olympics.
And whilst I don’t have a crystal ball, we at STR and STR Global do hold historic data on the past four Summer Olympics: 1996 in Atlanta, Georgia; 2000 in Sydney, Australia; 2004 in Athens, Greece; and 2008 in Beijing, China. This gives great insight on how world events like the Olympics affect a hotel market.
Olympic Stadium, London (credit: ODA)
I compared the hotel performance of the four cities for a four-year timeframe: Starting a year prior the Olympic year, the year of the Olympics and two years past the event. And though the comparison between the four events and cities come with the caveats that the periods of each event had their own special circumstances (e.g. 9/11 a year after Sydney; the worldwide economic downturn in 2008/2009 after Beijing) and covering four continents, the data does highlight a few points for thought for the organisers and hoteliers in London and for other world events:
- Atlanta and Beijing saw the highest increases in supply (more than 10 percent year-on-year increases in certain months), and many projects actually opened after the event.
- Athens and Sydney had the smallest supply increases. Athens, for example, organised cruise ships, which increased supply in the city on a temporary basis, therefore avoiding oversupply that would have needed to be filled post the Olympics.
- Demand isn’t showing any particular increases for the Olympic year. Athens saw the strongest demand increase (68-percent growth for August 2004). Beijing saw demand actually fall prior the games and during the games, possibly because of the tightened visa restrictions and the perceived expensiveness of a stay.
- Athens reported the highest increases in revenue per available room in the month of the Olympics. One aspect to remember is that Beijing and Athens received negative media coverage prior the games for charging high prices.
- The most striking result was that none of the cities achieved occupancy higher than 90 percent during the Olympics. Sydney and Athens are the one two who came close. As everyone seemed to assume hotels are fully booked during the games, the usual business during that time period got displaced. Whilst some hotels will be fully booked as they host the sponsors and other officials, everyone else should be keeping close contact to their regular customers and meeting bookers to avoid disappointment.
So if you keep close to your customers, be reasonable with your pricing during this high-demand period, and see where else in the hotel you can increase your revenues (e.g. offering special menus, longer opening hours, etc.), you can help to bring the Olympic spirit to your customers, staff and everyone else in London.