• London count down courts controversy

As the London 2012 Olympic organisers gave a hefty kick to the countdown clock when it stopped 499 days ahead of schedule, the city's Mayor, Boris Johnson, put his own boot in to the hotel sector amid reports of profiteering from the capital's properties.

The sector has had a mixed relationship with the event since 2005, when London beat Paris to the right to host. The global profile that the coverage will give the capital has been welcomed, but there have been concerns that non-sporting guests will be deterred and that the increase in hotel supply will have an impact on rates.

Liz Hall, head of hotels research at PricewaterhouseCoopers, said: "Q3 2012 could make many hoteliers' dreams come true with Farnborough Airshow, the Olympics and Paralympic Games all in the same quarter. But outside this crucial quarter, we remain concerned that reduced demand and above average room supply will take its toll on London trading. Hotels planning a bout of price gouging during the Olympics will only worsen any Olympic hangover.

"But it is what happens once the Games are over that really matters, particularly for London with its significant amounts of new supply coming on in 2011 and the first half of 2012."

The comments were made shortly before the European Tour Operators Association complained that high hotel rates and issues getting visas were leading to a decline in tourists to the UK in the run-up to next year's London Olympics. The group said London 2012 organisers had secured 40% of hotel rooms at below market rates and now hotels were seeking to recoup their losses by increasing rates and tightening terms for the remainder of their rooms, with executive director Tom Jenkins commenting: "An industry stands in jeopardy through overhyped fantasies of bonanza".

The ETOA was joined by UKinbound, which accused some London hotels of being "gripped by a frenzy of greed" ahead of the 2012 Olympics, all of which led to Johnson commenting: "We mustn't be seen as sharks through the actions of the short-sighted Arthur Daleys out there who want to cash in on the Games. Their actions could ruin the excellent work put in by the rest of the tourist sector, with repercussions for decades to come.

With every hotel currently being developed in London seemingly due to open just in time for the Games, the luxury segment is a key focus – PwC estimates that there could be a 27% increase in luxury rooms in London by 2012 with around 2,400 rooms in 18 hotels reported under construction or planned in London.

Fears over hotels profiteering, triggered by the events in Athens in 2004 which saw many rooms left empty, caused the organising committee to block-book 40,000 hotel rooms for Olympic officials, international federations, foreign media and others at rates agreed before London won the bid.

For the other rooms, Visit Britain has said it hoped that hoteliers and other hospitality businesses would sign up to an industry-led "fair pricing and practice charter" under which they would voluntarily agree to offer fair and reasonable prices between 1 June and 30 September next year.

Visit Britain has not set down what it believes to be "fair" or set a ceiling, and, with so many new hotels coming on stream, eager to recoup development costs using the Games as a boost, there is no great incentive to hotels to take one for the team, as such. One of London's current attractions is its comparative cheapness, which, as long as the government maintains its policy of keeping the pound low, will continue.

For those for whom the pound is their home currency, there are other options available: camping is set to be set up at sites in and around the capital which will also come with bars, big screens and other festive paraphernalia.

 

HA Perspective: Building hotels for events has always been a recipe for losing money. Luckily for those foolish enough to do it in London, the combination of the UK capital's size and resilient demand means most of the extra supply will be fairly easily absorbed without the bumps seen in cities like Barcelona, Sydney and most recently Beijing.

The one possible exception is luxury hotels. In this segment, the weaker players are going to have to trade down to find enough custom, potentially doing long-term damage to their status as luxury hotels as high paying guests suffer tour groups and similar traipsing past.

Meanwhile, the hotel industry has a potential media storm on its hands unless it yield manages carefully. It was willing to sign-up to a formula that effectively restricted its ability to maximise profits in order to win the bid. It now needs to apply a similar moderating approach to those 60% of rooms which fall outside of the reasonable pricing policy struck with London's Olympic organisers Locog.

If it does not, the public relations damage will far outweigh the relatively modest profit uplift to be extracted during the few weeks of the Games.

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