REPORT FROM LONDON—Varying labels have been applied to London hotel performance thus far during the 2012 Olympics Games, from underwhelming to overachieving. According to three data trackers, the success of hotel performance during the games is based on London hoteliers’ expectations.
Leading up to the Olympics, London hotels already were performing at high rates relative to other cities in the world. From 1-26 July, London hotels reported 80% occupancy, £159.74 ($249.32) average daily rate and £146.53 ($228.70) revenue per available room, according to STR Global, sister company of HotelNewsNow.com.
While London hotels didn’t have much room to grow in terms of occupancy, hoteliers were able to take advantage of the strong demand during the games and yield accordingly. From 27-31 July—which includes the day of the opening ceremonies and the following opening weekend—London hotels reported 85.6% occupancy, £221.39 ($345.55) ADR and £189.54 ($295.83) RevPAR, according to STR Global.
Room rates were up 86.5% over the same weekend in 2011, and RevPAR increased 90.1%.
“We always thought about some of the previous games having a displacement effect. London is busy, and then you have Olympic demand coming on top of that. Occupancy is only slightly up on last year, and I would imagine that was pretty much to be expected,” said Konstanze Auernheimer, director of marketing for STR Global. “That rates go up also was expected.”
However, many London hoteliers weren’t as prepared for the displacement effect, according to Seamus MacCormaic, director of market management for Hotels.com in the U.K. and Ireland.
Performance “hasn’t met (hoteliers’) expectations, and many hotels may not meet budgets because of what they were anticipating,” MacCormaic said. “Hotels are not empty by any stretch of the imagination; they’re just not as full as expected. They’re in the high 80s, but hoteliers expected them to be in the 90s.”
“Even though they were promised an influx of visitors, they didn’t see it,” said Julio Bruno, global VP of sales, overseeing TripAdvisor for Business, who said hotel prices and the European economy in general are keeping European travelers at home. “A lot of people just aren’t traveling. It’s just not going as they expected.”
OTA discounting
MacCormaic pointed to falling room rates on Hotels.com as evidence that London hoteliers are underwhelmed by the demand push.
He said ADR at London hotels booked on Hotels.com from 24 July to 1 August actually was down 2% over that same time period in 2011. London hotel rooms for 24 July to 1 August sold at an average of £110 ($171.71) on Hotels.com, he said.
STR Global’s Auernheimer chalked any room discounting up to normal revenue-management strategies.
“You will always have hotels for the Olympics that think it’s going to be a massive amount of people coming,” she said. “A lot of the discounting is coming from a higher level back to a more normal level.”
But MacCormaic said there were a number of factors that led to downward pressure on London hotel rates.
The fact that the London Organising Committee of the Olympic and Paralympic Games held one-third of London’s room stock through the end of April was a main contributor, he said. “The pricing was predetermined to avoid price gouging,” he said. “That price was set two or three years ago during a downturn.”
As LOCOG released room blocks leading up to the games, many hotels restricted leisure travelers and attempted to book corporate business, MacCormaic said, pointing to strong restrictions on Hotels.com, such as advance payment, non-refundable rates with strict length-of-stay requirements.
“Hotels were trying to court group and corporate sales that had looser commitments,” he said. “It just didn’t materialize. With that falling away, then they began to release rooms (to leisure travelers), but it was too late by then.”
MacCormaic said normal business traffic fell in London as some companies actually banned travel to London during the Olympic period on the basis of price and security.
Auernheimer, whose office is in downtown London, said locals adjusted their commute to avoid rush hour and ended up finding that rush hour was the easiest time to travel as most normal commuters were staying away and even working from home.
Long-term effects
Typically, Olympic host cities hope for the long-term effects that come from being in such a spotlight. London, however, might not see the residual effects as it’s already a top-tier destination, sources said.
According to a TripAdvisor for Business study of 2,500 hoteliers in the city conducted in June, 58% of respondents said The Queen's Diamond Jubilee and the Olympics would have “no effect” on business moving forward. Just more than one-third of respondents said there would be “either a short-term or long-term positive effect.”
“My personal opinion is that London is always on everyone’s bucket list,” said Bruno of TripAdvisor for Business. “People are going to go to London regardless of any Olympics.”
MacCormaic said those travelers who have London on their bucket list will delay their travels. “If you don’t need to go to London this year, people will tend to avoid it and go another year,” he said.
STR Global’s Auernheimer was more optimistic.
“London is in such the spotlight already,” she said, “but some people may see it’s nice and friendly and maybe more people will finally decide they’re coming over to visit. (The Olympics) will have some of that impact.”
More importantly, she said, was the renovation of London’s East End to house the Olympic Village.
“East London has been rejuvenated, and that wouldn’t have been done without the Olympics,” she said. “In the long term you’ll have an impact from people coming back or finally saying, ‘I really want to go now and see this myself.’”
Coming Tuesday, two London hoteliers discuss the intricacies of operating amid the chaos of the Olympics Games.
