Learn from Royal Wedding and avoid Olympics price hiking, hoteliers warned

Overall occupancy for April 2011 fell by almost 40 per cent compared to the same month in 2010, which itself saw a 7.6 per cent decline as a result of the Icelandic ash cloud furore.

Occupancy for the week of the Royal Wedding fell by 22.9 per cent on the previous year, and despite an average room rate hike of 7.5 per cent, revPAR for the month was down 17.1 per cent.

However the biggest disappointment came from the luxury sector, which despite raising average room rate by 22.9 per cent during the Royal Wedding week, saw a 24 per cent decline in occupancy and a 6.6 per cent decline in revPAR.

Sarah Duignan, director of account management at STR Global, told delegates at the Boutique Hotel Summit, held Tuesday at St Ermins Hotel in London, that if hoteliers wanted to avoid a similar outcome at the Olympic Games, they should control their pricing structure.

“We came to the Royal Wedding and we all thought we’d sit back and watch all those guests come through the door - and we fell flat on our faces,” she said. “Why was that? Part of the reason was because we priced ourselves out of the market, but at the expense of a huge portion of occupancy, which meant our revPAR was negative territory.

“Had we kept our rates more affordable, we may have actually been able to recoup some of that occupancy and ended up with a positive figure on revPAR.

“Don’t let this happen for the Olympics.”

Lack of demand​

However one reason for the lack of occupancy during the Royal Wedding could well have been because the demand just wasn’t there. Visitors may have chosen to stay with family and friends or avoid the ensuing London crowds altogether.

Whatever the reason, London hoteliers must prepare themselves for a similar result in 2012.

While Oxford Economics predicts 380,000 people will visit the Olympics in July next year, statistics from previous events have revealed actual numbers to be lower than first expected.

The Beijing Olympic Games in 2008 received 235,000 visitors, off an estimated figure of 400,000, while Athens’ event in 2004 brought 43,000 off a prediction of 105,000.

With the number of rooms in London expected to soar by the time the 2012 Olympic Games come around, competition to fill rooms is certain to be high.

“Competition is going to be very fierce,” said Lara Sarheim, associate director of consultancy firm HVS. “The impact of the Olympics is really not going to be as significant as it’s been hyped up and hotels’ success really depends on where they are located. Those in central London will certainly see more demand and more pressure than anywhere in the market, but the hotels that are further out towards Canary Wharf and the east side of London that would not usually be as busy in the summer will benefit by virtue of their close location to the Olympic events.

“However there is a risk that hotels can price themselves out of the market. What’s been seen in other cities, certainly in Beijing, is there wasn’t as much demand as anticipated. That means hotels need to be careful how they price themselves.”

Proceed with caution​

The British Hospitality Association (BHA) , which in the past has defended the hotel industry​ over claims of extortionate price hiking, believes operators are taking a cautious approach to their Olympics room rate strategy.

A spokesperson for the BHA, said: “The industry is well aware of the problems of over pricing and while certainly there are examples of hotels that do think demand will be extremely strong and have upped their prices considerably, I think the industry as a whole is taking a cautious view. They are aware of some of the examples elsewhere where the Olympic Games haven’t generated quite the demand they thought it was going to and will monitor how the demand will develop.”