Business Travel Tech Talk London, 16 October,
Business Travel Awards Europe, 30 October, JW
3rd Annual Business Travel Intelligence Summit
WHAT HAVE PAPUA NEW GUINEA, Liverpool and London's hoteliers got in common? An apology from London Mayor Boris Johnson. Yes, Boris recently put his foot in it again, when he hinted that the London hotel industry was jacking up its 2012 Olympics prices.
Oops! The world and his friend know that the London Organising Committee of the Olympic and Paralympic Games (LOCOG) bought its accommodation allocation at a flat, pre-determined, and frankly derisory rate.
Olympic packages, however, turned out to be pretty expensive, and hoteliers were accused of profiteering. And, boy, did that ruffle feathers at the British Hospitality Association (BHA).
UfiIbrahim, BHA's chief executive, says: "Recent press comment concerning the prices that agents, appointed by LOCOG, are charging for Olympic ticket and hotel packages has suggested that London hotels are profiteering.
This is certainly not the case. London hoteliers have no control over the prices that agents are charging."
She added: "Without exception, the prices charged by the hotels, that are part of the LOCOG agreement, are at a rate which is fair and reasonable."
The way it works is thus. The agreements stipulate that all participating hotels will charge room rates calculated on an agreed formula, which restricts hotel operators from increasing prices beyond CPI [consumer price index] increases and ensures fair pricing. That rate broadly represents the average of a hotel's room rates between 2007 and 2010.
Ibrahim emphasises: "There is no question that hotels are profiteering - indeed the opposite. London hotels have agreed to let these rooms at below the current market rate in order to support the Games. Accusations that they [hoteliers] are profiteering are totally unfounded."
LOCOG chief executive Paul Deighton is quick to agree that London hoteliers had offered Olympic Games rooms at below market rates. "This was a core factor in the success of the London 2012 bid," he explained.
All that said, there is still a big question as to what happens to the "market rates" for the rooms that are not part of the LOCOG allocation. Depending on who you ask, the Organising Committee has effectively commandeered somewhere between half and three-quarters of London's room stock.
What's left, pitifully small though it may be, is up for grabs. The sun is shining, hotel people, so surely there's hay to be made - or perhaps not. It seems a major spat between buyer and supplier is unlikely as intermediaries insist that, in order to protect future business, hoteliers aren't about to hike rates on their few remaining rooms.
"Prices tend not to rise because of an event," says Jon West, managing director of hotel booking agency HRS. "They rise on the basis of occupancy." And with occupancy levels last year topping 84 per cent, room rates are already pretty high and unlikely to go much higher.
West also argues that, in hotel capacity terms, the Olympics aren't that big a deal. With 10,000 participants and two million spectators, the Games aren't that much bigger than the Notting Hill Carnival, with 10,000 participants and 1.4m spectators. The London International Boat Show, World Travel Market and even the Chelsea Flower Show attract hordes of visitors, but the capital's capacity is scarcely stretched.
"Worldwide, during previous Olympics and other huge global events, HRS has had to deal with similar volumes of bookings, so we don't necessarily see that there is going to be any increase [in bookings] or any specific problems for hotels," says West.
"Over the year, the Olympics will represent just 3 per cent of the visits to London, and only 5 per cent of the overnights. The biggest issue that I see is not the hotels but the transport system."
But Ciarán Kelly, general manager at FCm Travel Solutions, takes a very different line. "The cost and availability of air travel to and from London, and accommodation within the capital, will be major concerns for corporates during the summer of 2012," he says.
"The rules of supply and demand mean that air fares and accommodation costs are expected to rise as availability closes out in the lead-up to the Olympic Games. Corporates need to start planning now in preparation for the peak period."
Warning of a shortage of accommodation and flights for regular business travellers, and a potential hike in hotel room rates and air fares, FCm is urging clients to reconsider all non-essential travel.
"Inbound air travel to London could be significantly affected," says Kelly. "There may be discounts for outbound travel as airlines try to fill seats on flights out of London, and some carriers will probably release 'early bird' specials. But fares are likely to increase closer to the event so business travellers need to book as early as possible to avoid paying premium prices. "As far as domestic rail goes, advance tickets probably won't be available in peak travel times and we also expect train carriages to be declassified.
Advance Eurostar fares will be available, but could have a different set of terms and conditions attached to them." FCm says 65 per cent of the capital's room-stock has been handed over to LOCOG.
"Some properties have already told us that there has been very high demand for their non-LOCOG rooms and that minimum length of stay and rate/spend requirements will apply during the peak Games period." says Kelly.
Some hotel groups are definitely feeling the strain. At a client forum staged earlier this year by Co-operative Travel Management, one chain's corporate sales boss told Buying Business Travel that instead of the usual 1,000-plus rooms at his disposal each night, he will have barely 250 a night during the Games period.
By far the most comprehensive assessment of the impact of the Olympics comes from hotel booking agency BSI, now part of Capita, which has published a 40-page tome on the subject.
"Hotel operators seem determined to play their cards close to their chests," the report says, "no doubt trying to strike a balance between optimising the revenue opportunity... and avoiding a backlash from corporates, media and shareholders alike if they get those pricing strategies wrong.
"2012 will be a major test of the relationship between buyers and suppliers in London. Will the balance of power shift back to the hotelier as preferred rates are blocked out, or will the lessons of the recession still be fresh in their [hoteliers'] minds?
"Whether the supplier community takes a shortor long-term approach will have a significant bearing on future corporate customer relationships."
Rather less obviously, BSI says: "Supply will almost certainly outstrip demand during the Games; the only issues are by how much, and in what areas of London."
Unquestionably, there will be space available in the capital, but it rather depends on how one defines 'London' - after all, London Luton Airport is in darkest Bedfordshire. If a client needs to get to a meeting in Canary Wharf, the availability of rooms in Hatton Cross is of zero interest.
That said, London already has more accommodation than any previous Olympics host city, and by this time next year it will have even more - where they have been able to do so, developers have brought forward building projects to coincide with the Games. By the time the Olympics open on July 27, the capital will boast more than 120,000 rooms - over three times the number the International Olympic Committee (IOC) says are needed.
With the experiences of Athens and Beijing in mind, Boris Johnson may worry about an Olympian rip-off, but it may well be that the reverse turns out to be true. Occupancy levels are of prime importance to hoteliers, and with that kind of city-wide capacity only the foolhardy few will risk pricing themselves out of the market.
If the turn-out for the Games is lower than expected, rates may even come down.
The number and location of available rooms are clearly key issues, but HRS' Jon West adds a third element into the mix - the timing of LOCOG's release of any unwanted rooms from its allocation.
"Our attitude at HRS is that we know that we will pick up the last-minute business, but the crunch question is: when is that 'last minute'?" says West.
Business travellers are notoriously late bookers, but even they could be taken by surprise if the organisers get their timings wrong.
"History suggests that there will be a lot of last-minute availability, so we would advise corporates to talk to their hotels now, not sit back and wait for something else to happen," says West. "Doing that early is highly advisable."
FCm's Ciarán Kelly reiterates the point. "For companies travelling to or within London during this time," he says, "forward preparation is key, as last-minute plans will end up costing businesses significantly more time and money."
BSI says: "Effectively, London's hoteliers must decide whether they can afford to risk alienating those corporate clients on whose loyalty they have relied during the recession if they are to successfully navigate the Games."
West is confident. "Hotels respect long-term relationships," he says, "and most hoteliers will not burn their bridges for the sake of a very short-term gain."
Olympics-related building work appears to be progressing well - it's on schedule and within the (admittedly much-revised) budget. April's royal wedding provided a near-perfect rehearsal for the police and security services. Hotel prices aren't going through the roof. So just what are we journalists going to have to write about? Come on, Boris