A panoramic view of the Eiffel Tower, the Olympic rings and the national flags of participating countries at Trocadero Square before the 2024 Paris Olympic Games on July 21, 2024 in Paris, France.
Kevin Voight | Getty Images Sports | Getty Images
The Olympics are causing prices to soar, but French consumers are unlikely to feel the pinch.
Large-scale events such as the Olympics, or even large-scale concerts such as Taylor Swift’s Eras tour, lead to increased demand for hotels, guest rooms and flights, as well as other goods and services required by the influx of tourists. Even so, most consumers likely won’t feel the impact, UBS said.
However, the data may suggest otherwise. That’s because the method of calculating consumer price changes can affect cost spikes in travel-related industries such as hotels and give a distorted impression.
“The Olympics or a Taylor Swift concert would create a sudden demand shock,” Paul Donovan, chief economist at UBS Global Wealth Management, wrote in a recent analyst note. “These price measures The approach is more likely to capture unusual and transient demand patterns, where increases in consumer price inflation occur.”
Taylor Swift performs on stage during The Eras tour at Wembley Stadium in London on June 21, 2024.
Kevin Mazur | Getty Images
This is already evident with the Eras Tour, as it boosts hotel revenue in the U.S. cities where Swift has performed.
This year, UK hotel prices have risen in June, but Donovan said the higher costs were “probably borne by a select group of Swift music fans” given the Eras tour came to Wembley Stadium that month. .
Meanwhile, the Summer Olympics sparked a similar phenomenon in Paris. “The tourists who flock to Paris to watch the Olympics and pay to do so do not represent French consumers,” he wrote.
Parisian hotel craze?
While hotels in the City of Lights were struggling in early July, Occupancy rates were expected to drop by 60%, prompting hotel discounts, but the trend reversed during the Olympics. According to global real estate data company CoStar, Paris hotel occupancy rates increased during the Olympics period, which began July 26 and runs through Sunday, compared with last year. But in the days following the closing ceremony, Paris hotel bookings are expected to be down from a year ago.
Prices in the city’s hotel industry have also increased significantly compared with the same period last year. CoStar found that weekly revenue per available room increased 206% annually on each day of the first week of this year’s Olympics, from July 28 to August 3. This growth was driven by a 17.4 percentage point increase in occupancy to 85.4% and a 143% increase in average daily room rate (ADR).
The Paris Tourist Office expects an occupancy rate of 86% from August 5 to Sunday.
Other regions in France also saw significant price increases. CoStar found that in the surrounding Ile-de-France region, ADRs increased by 83.4% in the week ending July 27 compared with the same period last year. At the same time, Paris occupancy rate fell by 5.7 percentage points year-on-year, while ADR jumped by 90.8%.
“Does the average French person want to stay in Paris right now? No, they absolutely don’t, unless they’re crazy or going to the Olympics,” he told CNBC. “Most of them haven’t been affected by the price spike. ”
Olympic harvest
That said, the Olympics attract a lot of tourists. Paris Tourism reported 1.73 million visitors to the greater Paris area in the first week alone, an increase of 18.9% compared to 2023.
Among them, 924,000 were international tourists, an increase of about 14% over last year, and the largest number were French tourists from the United States, which increased by 25.1% over last year to 803,000.
Overall, the tourism board estimates the total number of visitors to the Olympics and Paralympics at 15.3 million, with 11.3 million for the former and 4 million for the latter.
On July 7, 2023, in Paris, France, tourists took selfies in front of the Arc de Triomphe. Paris will host the Summer Olympics from July 26 to August 11, 2024.
Matthias Hanst | Getty Images Sports | Getty Images
It comes amid record Olympic ticket sales. The Paris 2024 Organizing Committee has recorded that a total of 10.6 million tickets for the Olympic and Paralympic Games have been sold or distributed so far, including at least 9.4 million for the Olympics and at least 1.2 million for the Paralympics. The previous record was held by the 1996 Atlanta Olympics, with 8.3 million copies sold or distributed.
“You often see non-Olympic tourism falling off a cliff,” Donovan told CNBC, adding that’s what sets it apart from the ETA Tour and other major events. “It’s a demand shock, but it’s a narrow demand shock, and that’s the problem with inflation because you’re creating a concentrated period of absolutely extraordinary demand. The pricing mechanism basically goes crazy.”
Fluctuations in demand have also been seen in other related sectors of the Paris economy, such as the aviation industry. While some airlines are forecasting lower third-quarter revenue due to reduced passenger traffic to Paris this summer, Visa’s recent data Data show that flight bookings to the city on the eve of the Olympics increased by 39% compared with the same period last year.
Tourists pass a banner bearing the Paris 2024 logo before the opening of the Paris 2024 Olympic and Paralympic Games on June 17, 2024 in Paris, France.
Chesnot |
Small businesses across the city are also seeing growth. Visa found that cardholder sales at these businesses increased 26% year over year during the first weekend of the Olympics.
While the long-term economic impact of the Paris Games remains uncertain, Donovan predicted that “overall, it’s probably going to be positive,” citing previous Olympics such as the 1992 Barcelona Games where tourism has boomed. role,” he said, noting that the Summer Olympics tend to be more attractive than the Winter Games.
The long-term economic impact of the 2024 Paris Olympics could be as high as $12 billion (€11.1 billion) recent research Estimates from the Center for Sports Law and Economics. The IOC said the next two Summer Olympics are likely to create even more value.
“We’re seeing the economic impact of the Games be huge,” said Christophe Dubi, executive director of the Games. “It’s an injection of resources into the local economy that will have a profound impact now and into the future. “
Victor Matheson, an economist and professor at the College of the Holy Cross, said the International Olympic Committee’s Agenda 2020 reforms have helped the event become more economically sustainable.
This will be the first Summer Olympics expected to cost Below US$10 billion Since 2000 Sydney. 95% of venues are pre-existing or temporary Matheson said the strategy could mark a “turning point” for the Olympic movement.
“The IOC is allowing Paris to host an Olympics, but it’s not going to build these billion-dollar monuments at the Olympics and it’s not going to gild everything there,” he said. “Things like this could be pushed back very quickly. High costs, but they don’t seem to be driving costs up.”
Revealed: CNBC parent company NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. rights holder for all summer and winter Olympics through 2032.
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