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Hoteliers warned that Olympic overpricing will backfire

08 July 2011
Hoteliers warned that Olympic overpricing will backfire

Inbound tourism in 2012 is suffering due to overpriced rooms. JacTravel chief executive Mario Bodini says operators must price for the long term

As a Brit living close to London, I am incredibly excited by the prospect of the Olympics coming to the capital. However, as a tour operator who makes a living from bringing tourists to Europe, I'm concerned by the bubble in London's hotel market around the games in 2012, with hotels demanding inflated prices and punitive terms.

As a consequence of LOCOG booking almost half of London's 125,000 rooms and the inevitable hype surrounding the games, hoteliers believe they will be full and are demanding extraordinary terms. With this backdrop it is not possible to present London as a good-value tourist destination in 2012.

There is a general consumer perception in the majority of the UK's origin markets that London will be expensive and overcrowded in 2012, which is making prospective tourists less keen to come.

Since conventional tourists to London - a much bigger number than overseas Olympic visitors - are being deterred, we have a bizarre scenario where there is falling demand and inflated prices. This cannot last. The accommodation bubble is bound to burst and the only question is: when?

Currently rates are being lifted by 200-400% in the wholesale accommodation market and full prepayment is required three to six months before the games. As a result, inbound tourism to London in 2012 is suffering. Regular clients are reducing bookings or pulling out of the UK altogether.

The moment of truth will come early next year when LOCOG has to commit to a certain proportion of its bookings or give rooms back to hotels. If thousands of rooms come flooding back then, as many in the industry suspect, it will be too late in the long-haul business cycle for operators to negotiate terms and start marketing 2012 programmes.

Analysis by the European Tour Operators Association (ETOA) has found that hosting an Olympic Games tends to stall tourism growth rather than stimulate it. The best example of this is Sydney, where the local tourist board ran an advertising campaign soon after with the now infamous strap line "Where the bloody hell are you?"

ETOA recently released a report showing that Olympic host cities regularly overestimate the number of hotel rooms that will be required. It predicts that of the 125,000 or so rooms in London, less than a third will actually be filled by Olympic visitors.

It is a pity for the industry that the people likely to get the best from the Olympic accommodation market will be last-minute bargain hunters who will pick up great deals when hotels suddenly realise that the high-spending business they anticipated does not materialise.

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