We’re a little obsessed with the Winter Olympics here at Hotel News Now. Curling is our sport of choice, and we even went so far as to see if we could find a local club to learn how to do it (Update: We can’t, so if anyone wants to invite our whole team out to Minnesota or somewhere in Canada to learn, you can bet your brooms we’ll show up.)
So the games definitely created hype in our office, but thinking about Olympics- and Paralympics-related hotel demand creation is an entirely different story. Talk about a bizarre type of demand driver: It’s a relatively short, one-time event, but in order to win the bid, the host city has to have everything in place, from venues to infrastructure to air transport and, yes, hotels.
And they have to spend so much money to do it. The University of Oxford crunched the numbers, according to The Telegraph, and found that the last two Olympic Games had an average cost of $16.2 billion, and cities on average overspent their budgets by 167%.
The bid and selection process for an Olympics host city is a huge undertaking, and the burden has become so great that fewer and fewer cities are throwing their hats into the ring.
From a hotel perspective, it’s got to be extra daunting to see your city enter the bidding process. I remember a few years ago when Boston was considering a bid. I heard some local asset managers and hotel developers speak about the impact it would have on the city’s hotel landscape, and while they were trying to put a positive spin on it, you could tell they were all thinking, “Oh please, PLEASE don’t do this, Boston!”
You only need to look at the post-Olympics hotel data to know what a gamble it is to host the games—building up all that supply for one big event that has a very specific set of demand, and it isn’t really going to lead to repeat business.
So I looked up a 2015 version of the official International Olympic Committee Host City Contract Operational Requirements to take a look at the accommodations section.
OK, wow. So much to consider here. First off, locations: The IOC doesn’t care if the city’s hotels have already been built to be close to, say, tourist attractions or business centers. They need them close to the venues, which often are located pretty remotely. And they prefer if hotels are clustered together and not spread out, because that helps when considering transportation of athletes and officials and even guests (but mostly athletes and officials).
The Olympics organizing committee manages the room blocks (in this 2015 contract, it included 14 nights prior to the games, 17 nights during and two nights after the closing ceremony).
And there’s a huge list of accommodation type requirements for official attendees. Members of the IOC and their affiliates alone need more than 1,000 4- to 5-star rooms for the duration. In fact, of the 24,000 Winter Olympics rooms and 42,000 Summer Olympics rooms included in this document, most carry that “4- to 5-star” quality requirement. (In case you were wondering, technical staff and media are the only ones who only need 2-star hotels.)
One fun fact: The only category of attendee who gets a 5-star room (not “just” a 4- to 5-star designation)? “Top hospitality marketing partners.”
Of course, from the IOC’s perspective, this all makes sense. It’s a fine-tuned set of requirements, and it’s designed to be an efficient part of a hugely complicated logistical undertaking.
But considering the impact on hotels, I can’t imagine that hosting the Olympics is on any hotelier’s bucket list.
Maybe I’m wrong? If you’ve been there, done that when it comes to dealing with the Olympic Games as a hotelier, let me know. Comment below, email me at email@example.com or find me on Twitter @HNN_Steph.
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