FIFA World Cup 2014: Doís and Doníts for the Brazil Hotel Industry
By Michael McCartan Managing Director Europe, the Middle East, and Africa, Duetto | March 30, 2014
June 2014 is set to be the most exciting time for Brazil hotel industry as the country hosts the worldís biggest sporting event - the FIFA World Cup. The event which is expected to bring some 600,000 domestic and international tourists - will undoubtedly lead to major boom for the hospitality industry in the country.
According to a study conducted by Embratur, the Brazilian Tourism Board shows that the room rates in Brazil will rise up to five times higher than the normal rates during the World Cup tournament. The average cost for a hotel room in Rio during the football tournament is expected to be around $460, around 50% more than what it would be during Summer Olympics in 2016, as stated by Rio's Olympic bid document. An alarmed Brazil Tourist Board has already asked FIFA to help bring down the hotel room rates.
Has the governing body been right in raising the red flag? Or has the hotel industry justified in increasing the prices thinking itís time for the kill?
Typically, super high rates would be applied immediately with the expectation that people will be desperate enough to book at any rate. Ernst & Young estimates that International tourist arrivals may rise by up to 79% in 2014. The magnitude of having the World Cup in a country, where football is everything, also plays a role in difference in prices. Itís also the simple economics of supply and demand: more fans are expected during the World Cup than the Olympics, and more hotel rooms will be available during the 2016 games because of ongoing construction of new facilities.
Experience from past events suggest there needs to be more strategy behind these rates to better align them with customer expectations as this will help build better relationships with potential customers. A classic case study of how prices can fall dramatically after a major sports event is South Africa, which hosted the last FIFA World Cup in 2010. The country saw its average room rate tumble by 17%, with host cities Cape Town down by 20% and Johannesburg by 13% according to Hotel Price Index by Hotels.com.
How is it going to unfold for the Brazil hotel industry? Is it going to be like Barcelona, where the legacy effect of a mega event like Olympics has been positive? Or is it going to be a repeat show of South Africa? Only time will tell, but here are a few Dos and Doníts for the Brazilian hotel industry.
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