Originally posted on Hotel News Now (09/07/2011)
LONDON—Hoteliers in this legendary hotel city are undoubtedly excited about the prospects of the 2012 Olympics being held in their backyards, but they’re not looking at the single event as an end-all-be-all proposition.
After all, London has operated at nearly 90% occupancy for most of this summer. And besides the Olympics in late July and early August, it will host The Queen’s Diamond Jubilee in early June 2012 and the Paralympics in late August and early September 2012.
Danny Bowerin of Deloitte and London 2012 said during a STR Global client event Tuesday that preparations for the Olympics have been a tremendous success story thus far, but there’s no doubt next summer will be “business as unusual.”
“There is going to be significant disruption, but we’ll all think post-Games that it will be all worthwhile,” Bowerin said.
“London hotels must be asking themselves, ‘How much more business can we take in during summer season,’” said Nick Pattie of Whitebridge Hospitality. “We’ll see something close to 100% occupancy during the 17 days of Olympics.”
But that doesn’t mean there will be a rate boom in the city during the Games.
“It’s only 17 days—let’s keep it in perspective,” said Ciaran Fahy, GM of the independent Cavendish Hotel.
Fahy said his top priority is protecting the hotel’s inventory during the special events.
“I’m here to say I’m optimizing my inventory. I’m not gouging my customer on price,” he said. “I’m looking for a full length of stay, and I don’t make any apologies about that.”
“Of the 17 days it really is the front end that will be really strong demand, then it will taper off,” said Duncan Bramwell of Revenue-Performance.com. “The first thing we’ve been working on with our independent clients is getting them to look at summer in totality. There is going to be this extraordinary summer, and making sure we are ready for the entire spread of events rather than just getting greedy and jumping on the bandwagon for those couple of days is what we should be thinking.”
Tracy Halliwell of London & Partners said the 13,500 hotel rooms under construction will bring the city’s inventory to about 120,000 by the time the Olympics begin.
Halliwell said despite rumors, there will be little in the way of temporary guest accommodations supply added in London by cruise ships.
“We don’t have berthing space for a lot of big ships. What berths there are will be full,” she said.
A focus on meeting space
Gower Tan of InterContinental Hotels Group said a large number of his company’s inventory in the London area has been committed to Olympics organizers.
“We’ve been focusing on non-rooms revenue streams and demands for non-rooms business,” he said. “We’re planning our business mix and looking at what we can do to drive meeting business (during the Games).”
As for the inventory that is available to the public, he said IHG’s priority is meeting the needs of its tops corporate clients and its Priority Club guest-loyalty club members.
Beyond that, the company is placing restrictions about prepayment and minimum length of stays during the Olympics, he said.
IHG has some concerns about post-Olympic demand for its large concentration of rooms in London, according to Tan.
“We’re working on business that has legacy business afterwards,” he said.
Fahy said no hotel should lose sight of the opportunity brought upon by a strong hotel environment regardless of the 2012 events.
“We are in the best position to get corporate increases to get rates back up to 2001 and to educate our sales staff to not be embarrassed about that,” he said, stressing that hotel salespeople need to focus on attaining best-available-rates regardless of the source.
The panelists showed some concern over how the Olympics and other events will affect regular customers who are displaced by the once-in-a-lifetime events.
“Will London damage some of its regular customers?” Pattie asked.
“Olympic host cities experience leisure visitor displacement in the year prior to the start of the Games,” London & Partners’ Halliwell said, citing fear of higher prices and the inconvenience of preparations for the Games as major reasons those travelers don’t make visits.
There’s also some concern about how the number of people descending upon London will affect the infrastructure and complicate the lives of hotel employees.
For instance, Halliwell said an extra 250,000 a day will use public transportation.
The other concern among hoteliers is the possibility that some of the rooms committed to the London Olympics organizing group will be released and whether hotels have time to react to having more inventory available. The London Organising Committee of the Olympic and Paralympic Games has options to release rooms in three phases leading up the Olympics but doesn’t think it will need to do so, Halliwell said.
“We have to think about, as hoteliers, what is our plan B, what is our plan C and what is our plan D, and when do you make decisions to implement them in the months ahead,” Bramwell said. “If you have a problem and one of your block releases, what are you going to do? Where are the markets you are going to pursue? Are we brave enough to overbook?”
He said during major global events in the past, hoteliers panicked when faced with rooms released from organizing committees. Having backup plans will allow hotels to optimize their inventories in the event of such occurrences in London.
Learning from the past
Konstanze Auernheimer, director of marketing and analysis for STR Global (a sister company of HotelNewsNow.com), provided background during the session of the past four Summer Olympics cities. Some general observations included:
• Atlanta (1996) and Beijing (2008) had a lot of new supply coming into the market while Sydney (2000) and Athens (2004) didn’t have as much. “Beijing was an emerging market with about 140,000 rooms,” Auernheimer said. “The additional supply in the market actually hurt the market.”
• The number of hotels in the London pipeline is on par with Athens and Sydney.
• The Games generated little additional demand in Atlanta because they displaced much of the meetings, incentives, conference and exhibitions business the city usually attracts during the summer. Sydney saw a limited occupancy spike during the Games. Athens experienced a huge spike in demand because August generally is a slow month for the city’s hotel industry. Beijing had a decrease in demand, thanks in large part to the additional supply, tight control of visas and political protests. “Obviously, a lot of people come into the market, but a lot of times it’s displacement,” she said. “If you are lucky, it is displacement into another month.”
• Average daily rate in Atlanta and Sydney jumped nearly 80% and 90%, respectively, during the Olympics. Athens and Beijing had ADR increases in the 250% range. Auernheimer said one of the challenges for London is to avoid the negativity that comes with such large ADR increases.