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Hospitality and the Olympics

Hospitality and the Olympics - Grabbing Gold or Losing Track

With one of the biggest sporting shows on earth coming to Paris this summer, we inspect the impact such events have on the local hospitality industry. Is it all golden, or are there hidden pitfalls?

"Paris 2024 will be the first Olympic and Paralympic Games Organising Committee to propose a worldwide hospitality offer. This represents a fantastic opportunity – for us and the entire Paris 2024 ecosystem."
Tony Estanguet, President of Paris 2024

Since their modern inception in 1896, The Olympic Games have evolved into a global phenomenon, transcending mere sporting competitions to become symbols of unity, culture, and economic prosperity.

Hosted every four years, and moving to a new location each time, competition to bring the games to a chosen city can be fierce between countries.

Cities launch their host bids years in advance and invest millions of dollars with no guarantee of eventual success. (It is estimated that Tokyo spent up to $150 million on its failed bid in 2016.)

However, behind the grandeur of the Olympic spectacle lies a complex interplay of opportunities and challenges, particularly for local businesses and the hospitality industry.

Clearly, there are huge potential upsides to winning an Olympic bid.

Bringing such a globally popular event to your city provides a mass tourist market for hospitality providers. In addition, a successful Olympic bid tends to see an upturn in investment in local infrastructure - from transport links to recreational facilities.

While these short-term boosts can be welcome, what becomes more problematic is creating a positive 'Olympic legacy' - ensuring that investment is well thought out so that it continues to benefit the local population long after the sporting festival has moved on.

As Paris gears up to host the 2024 Games, it faces a delicate balancing act: leveraging the event's potential to boost the economy while mitigating its adverse effects on the local community and environment.


The Olympic legacy - victories for local populations?

The Olympic Impact

Throughout history, cities hosting the Olympics have experienced a mix of economic benefits and social disruptions.

The financial windfall from increased tourism and infrastructure investments is often touted as a primary incentive for hosting the Games. For instance, the 2016 Rio Olympics generated an estimated $9.7 billion in revenue, according to data from Statista.

However, the longer-term legacy of such events is not always as rosy, with many host cities grappling with issues of debt, unused venues, and displacement of residents long after the Olympic flame has been extinguished.

In their 2022 article 'The structural deficit of the Olympics and the World Cup: Comparing costs against revenues over time', faculty members from the University of Lausanne attempted to calculate the true financial outcome for Olympic host cities.

imi_switzerland_paris_olympics_hospitality_02Surplus or Deficit in Billions of USD

Source: Martin Müller, David Gogishvili and Sven Daniel Wolfe, "The structural deficit of the Olympics and the World Cup:
Comparing costs against revenues over time", 2022.

If the above figures are to be trusted, it seems pretty tough to make a longer-term profit on Olympic investment.

So, why do cities still bother?

Is it the cultural prestige alone or are bidders finding new methods for ensuring a brighter Olympic legacy both culturally and economically?


Hospitality hot spots

With just under three month to go until the Olympic flame reaches its final resting point of the year at Paris' Stade de France stadium, local hospitality businesses are gearing up for a tourism influx.

The city anticipates significant economic gains this year with over 10 million visitors expected to be attracted by the Games.

From a financial perspective, the Paris Convention and Visitors Bureau anticipates an injection of approximately €10.7 billion into the local economy, with hospitality businesses, including hotels, restaurants, and transportation services, standing to benefit immensely.

Hotel occupancy rates are projected to surge during the Games, with some estimates suggesting a 30% increase compared to non-Olympic years.

Additionally, the construction and renovation of Olympic facilities and infrastructure are expected to create thousands of jobs and stimulate economic growth in various sectors.


Parisian hotels are expecting increased demand this August.

Data insights agency Lighthouse has looked at top-of-the-funnel data on hotel and flight searches for Paris to build a projected model of demand for the upcoming year.

As the below graph shows, anticipation for the Games is clearly extremely high with projected demand for August almost twice that of other popular times of year.

imi_switzerland_paris_olympics_hospitality_04Paris' 2024 Demand Index based on upper-funnel data points including flight and hotel searches.

And, entirely unsurprisingly, when demand is expected to increase, so too do prices.

According to the same Lighthouse report, 3-star hotels are seeing a 96% average price increase in August compared to 2024 averages, while 4-star property prices are on average 90% higher and 5-star properties 52% up.

Increased demand and profits for hospitality vendors and others is clearly welcome in times of high inflation; however, there is a sense that the Olympic lens can be fairly short-sighted and that any short-term economic boost has limited impact on the majority of a host city's population.

Previous Olympics have suffered from over-investment in specialised or temporary infrastructure projects that have little benefit to the city and its inhabitants once the Olympics have moved on.

And, in the most extreme cases, planning decisions made to welcome an Olympic audience can actually end up alienating or displacing a city's permanent residents.


Disruptions and decay 

Despite the promise of economic prosperity, hosting an Olympics brings significant challenges and disruptions, particularly for local residents.

One of the most pressing concerns is the potential for gentrification and displacement of communities.

Research from the International Olympic Committee (IOC) suggests that host cities often experience a surge in real estate prices in the lead-up to the Games, leading to the pricing-out of many residents and changes in neighbourhood demographics.

Additionally, strains on public services, such as transportation and healthcare, can further exacerbate inequalities and inconvenience local populations.

To take one example, the price of a Paris metro ticket will temporarily be raised to €4 (from €2.15) during the Games. Not such an issue for the affluent tourist, but more of a problem for the daily commuter who still needs to get to work each day and have seen their journey costs almost double.

Another issue in this age of internationalism, is where any increased profits actually end up.

The hospitality sector provides a good window to this problem. With most hotels these days belonging to larger, global parent companies, increased profits in one location are not necessarily re-invested at point of source.

A local front desk agent or F&B supervisor working at a Paris hotel this summer is unlikely to see any dramatic change in their salary, regardless of any increased overall revenues and profits from the anticipated tourism boost.

It may be that most residents would accept these temporary disruptions for the promise of longer-term improvements in services and infrastructure.

And this is where a carefully planned out legacy plan becomes essential. Otherwise, short-term chaos is compounded by longer-term decay of once shiny new toys that no longer have any purpose or relevance for those left holding them.


What happens when the Olympic flame leaves town?

A victorious legacy?

To ensure a positive and sustainable legacy from the 2024 Olympics, Paris must prioritise responsible and inclusive planning strategies. This involves not only minimising environmental impacts but also addressing social and economic inequalities.

The city has pledged to prioritise sustainability in its Olympic preparations, with initiatives such as the Paris 2024 Olympic and Paralympic Games' Carbon Neutrality Plan.

This plan aims to reduce carbon emissions associated with the Games by implementing energy-efficient technologies, promoting sustainable transportation options, and compensating for unavoidable emissions through carbon offset projects. (Projects which always require much scrutiny given the often unclear and vague metrics applied.)

One interesting iniative which could boost Paris' longer-term Olympic legacy, is its commitment to convert the Olympic and Paralympic Villages into affordable housing after the Games, in order to benefit urban regeneration and lower-income residents.

Additionally, the Paris 2024 Legacy Program aims to promote social inclusion and youth engagement through sports and education initiatives, ensuring that the benefits of the Olympics extend beyond the sporting arena.

While such projects make for great press releases, history has shown that they can all-too-often be forgotten, down-scaled or lost sight of once the eyes of the world have moved on.

It is to be hoped that Paris has a steelier focus on creating a more positive legacy for this year's Games.


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