Paris 2024 Olympics: What Will its Impact be on Hospitality?
Spiking room prices during the Paris 2024 Olympic Games reflect the prevailing enthusiasm within the hotel industry, while doubts linger about the sustainability of this strong pricing trend. The points of apprehension for us are mainly the already-heavy inflationary effect factored into 2023 pricing and the unsecured occupancy given the pending rise in lodging capacity. Our forecasts reflect a favourable outlook but no significant new positives are expected.
Fact
France is expected to welcome 15-20m tourists during the 2024 Summer Olympics Games, scheduled to take place from 26 July to 11 August in several large cities and mainly the capital. This upcoming international multi-sport event has fuelled widespread optimism among hotel operators, leading to exorbitant room prices in the Paris metropolitan area for the Olympics period.
A report from the Paris Tourist Office indicated that the average per-night room rates posted last September soared by 314% yoy to €699, while two-thirds of hotels have yet to open the related bookings. Breaking down the data, two- and three-star hotels experienced yoy spikes of 366% and 475%, respectively, surpassing the growth of 234% for one-star and 247% for four-star and above hotels. The surveys conducted in late December by UFC-Que Choisir, a French consumer association, affirmed the trend of escalating prices across all hotel categories, both chains and independents. 30% of the panel studied imposed additional conditions, mandating bookings for a minimum of two or more nights. The association estimated that overall prices could probably be twice as expensive as for the Champions League final in May 2022.
Analysis
Hotel operators have complete discretion in determining their pricing, as the French government neither possesses the authority nor the intention to impose caps or control over prices. Instead, the government is urging more rational and reasonable pricing practices. Despite a similar extent of yoy price multiplication (3x) as for past Summer Olympics Games, we doubt the persistence of the current pricing in the Paris metropolitan area. Our scepticism takes into consideration the already-substantial inflationary impact on average room rates in the previous summer and the to-be-released additional accommodation capacity, including both hotels and individual rentals.
Most hotels remain unavailable for the related bookings, probably until the spring. Despite the cheerfulness displayed by hotel operators, there appears to be insufficient support from the current overall occupancy rates, as indicated by both the broad media commentary and our small-scale survey. Nevertheless, statistics gleaned from the 2012 Olympics experience in London (occupancy -12% for entry- and mid-range hotels and +23% for luxury ones) have somewhat allayed our concerns.
Individual rentals seem more competitive in terms of winning traveller business. Airbnb projects average price growth of (only?) 85% compared to summer 2023, acknowledging the uncertainties arising from observed price increases during the 2012 Summer Olympics in London (when Airbnb was much less developed) and the last-minute discounts due to disappointing occupancy rates at that time. Uncertainty also stems from the potential increase in supply, with one in five residents in the Paris metropolitan area expressing a willingness to rent their accommodation during the Summer Olympics period, according to a survey carried out by Deloitte.
In spite of everything, the four hotel groups under our coverage are expected to benefit from the Paris Olympics buoyancy. Please find below our summary of and thoughts arising recent IR feedback.
AccorHotels
The French-based hotel group commands a c.29% market share in France in terms of room count, with France contributing c.19% to its Management & Franchise turnover. Among Accor’s diverse portfolio of hotels, c.650 (constituting 10% of its total) are situated in cities hosting the Olympic Games. In its role as the Official Partner of the Paris 2024 Olympic Games, roughly one-third of these 650 hotels have engaged in direct agreements with the Paris 2024 Organising Committee, the majority of which involve negotiated prices (i.e. acting with an adjustment mechanism for inflation). The remaining room capacity of these c.250 hotels, along with the rooms in the other 400 hotels, remains accessible to the general public. Reservations have been open since July on Accor’s official website. Although the hotel owners retain the right to set their prices, Accor has offered price suggestions with a cap tailored to major events, helping hotel owners to establish more marketable prices. While the group has not provided precise guidance on this topic, drawing parallels with the impact of the London 2012 Olympic Games suggests a moderate fractional percentage impact on Accor’s annual RevPAR following the three-week Olympic positives.
Intercontinental Hotels Group
The UK-based and US-oriented hotel group has an insignificant presence in France with only 8.2k room of its total 929k, i.e. less than 1% of its global room count. Visibility remains low as around half of its bookings are usually made within a week of the stay, while on-the-books occupancy looks strong in game-hosting cities for the Olympic period and a meaningful uplift to summer pricing has been observed, despite a strong comparison base in 2023. Regardless of this encouraging outlook, no major impact is expected on the group’s reported results due to its minor exposure.
Melia
The Spain-based hotel group has seven hotels in Paris (of c.350 in its global hotel count), of which four have signed direct reservations with the Paris 2024 Organising Committee, marking around 40% of its local turnover based on July and August 2023. Bookings from individuals remain at a low level as it has restricted sales ahead of establishing more control over inventory as part of the strategy (organization reservations). The group confirms its upbeat stance on the outlook for the Olympic period and expects to have clearer visibility in the coming Q1, while we believe the favourable impact might be limited due to its minor exposure.
NH Hotel
The Spain-based hotel group does not currently have any hotels in Paris but will start operating three hotels (of c.350 in its global hotel count) in 2024 under management contracts (signed very recently). Similarly, we expect the favourable impact to be limited due to its minor exposure.
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