London 2012: A hotel first

July 21, 2011

How gingerly should travel managers and business travellers approach London’s hotels during next summer’s Olympic Games?

The UK capital at the end of July and the beginning of August 2012 is going to be a busier place than normal in a city where hotel occupancy rates of 90 percent are common in summer.

No matter how many locals flee the capital for calmer climes (Oxford Economics forecasts that the UK will lose £91 million from Londoners heading overseas due to overcrowding fears), hundreds of thousands of Olympics ticket-holders and ticketless hangers-on are expected in town. They’ll all need somewhere to stay.

Though many business travellers will be making a point to avoid London, with travel bans being implemented by many employers, there will for some be important meetings to attend over the period.

Get a room
According to corporate travel services firm Hogg Robinson Group (HRG), of the 42,000 of London’s 120,000 rooms available (the other 65 percent are allocated to the London Organising Committee of the Olympic Games (LOCOG)), only 12,000 to 18,000 rooms will be sold into the general marketplace.

This is a first. As Rakesh Popat of American Express Business Travel’s advisory services says, “A decade ago [in a stronger economy], you can remember people trying to find rooms beyond Heathrow and towards Oxford because of [zero] availability in London. But this is unique: there hasn’t been any significant event involving such a blanket pre-blocking that I recall.”

It’s not too late to block-book rooms. AMEX’s Popat explains that, “Each hotel works slightly differently, but on the whole they’re holding out for their top corporate clients – so if you’ve got a huge volume going into a particularly property, we’re recommending you should be talking to hoteliers now if you haven’t already. It’s not too late as the hotels are just getting their act together as well.”

Accor Hotels’ Rushton bears this out, telling me that in his chain’s 32 Greater London properties, major corporate clients will still enjoy special rates and he’s having one-to-one negotiations with all of them. Release dates have even been extended, but, he asks, “If you don’t want to use the rooms at weekends, tell us and we’ll resell them!”

This will not be the case with all hotels. Watch out for high, non-negotiable special-events rates, advises Popat, and expect to pre-pay. Wait too long to book and “the response is going to be black-out dates or minimum stays.” However, as a British Hospitality Association (BHA) spokesperson pointed out, it is not yet clear whether LOCOG will need their full room allocation: “I believe that they will start releasing them back to the hotels (if they are not needed) in January next year.”

For those who miss the hotel boat, HRG recommends that clients consider renting medium to long-stay apartments within London, and to consider towns outside of London with good rail links into the capital. The BHA calculates that there are 75,000 rooms in the south east and within easy commuting distance of the capital. Accor are aggressively promoting their out-of-the-way properties in places like Stevenage, Milton Keynes and Gatwick, confirmed David Rushton, the chain’s Director of Sales 2012.

Once you have a hotel lined up, operations are likely to be slightly out of whack to cope with visitors’ unique needs. Accor’s Rushton took me through some of the changes planned during the 17-day Olympics proper: With athletics meets ending at 11pm, food & beverage must be on hand 24-7 and housekeeping will need to know which rooms not to clean first thing. Another headache for London hotels is that lorry deliveries will be impossible during the day, so linen, for example, will have to be stockpiled.

How much?
With the LOCOG room allocation being a London first, the process has not been without its teething troubles. London hoteliers were very supportive of the Olympic Games and were therefore far from thrilled when it became clear that LOCOG had been releasing some of their room stock, sold at fair-priced rates, to third-party travel agents like Thomas Cook for resale at extravagant mark-ups – up to ten times the price, according to MeetPie. The issue is fairly contentious, as the sizeable room allocation was one of the factors that tipped the 2012 bid in London’s favour. 

Premier Inn was the first hotel group to remove its rooms from the LOCOG agreement, with Starwood following suit. A spokeswoman from the latter company informed me that they are working with LOCOG to reallocate the rooms, adding: “As hoteliers, we take a long-term view and we certainly will not alienate future customers by over-pricing rooms during the Olympic period.” Other hotels, including the Accor chain, are seeking clarification.

A 2012 spokesperson confirmed that, “We are currently clarifying contracts and room allocations with a couple of hotels and we are confident that any issues will be resolved shortly… London has one of the best hotel industries in the world – and they came together in a fantastic way to support the bid which we are obviously very grateful for.”

In a PwC report in February, London’s hotels were forecast to enjoy revenue per available room growth (the industry’s favoured economic indicator) of between 2.3 percent (based upon 450,000 extra visitors to the city) and 9.7 percent (based upon 908,440 extra visitors) in 2012.

London 2012 global sponsor Visa also carried out a deep-dive study* into the impact of consumer expenditure during the Games, basing their logarithms on the fact that more than £1 in every £4 spent in the UK goes on a Visa card. Their report projects a £750m total spending injection, which, according to Visa, is the biggest ever expected at an Olympic Games. Due to the large-scale international visitor spend the hotel sector will be greatly impacted, forecast to receive a £122.6 million spending uplift.

*According to Visa, expected consumer expenditure during London 2012 was calculated by analysing actual consumer spending data showing four different types of spending patterns both in the UK and internationally, including international visitor and domestic spend during previous Olympic Games and other mega sporting events, typical spending of visitors to London and UK consumers’ patterns of expenditure during big sporting events. This data was broken down across 20 expenditure categories, including hotel bookings and airline tickets, creating a detailed picture of the likely scale and pattern of consumer spending during London 2012.

(Main image: A man walks past the Houses of Parliament in London May 10, 2011. REUTERS/Suzanne Plunkett)

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