FIFA World Cup likely boosted hotel room revenue growth in Rio and Johannesburg more than in Moscow – expert

Achim Schmitt (Supplied)
Achim Schmitt (Supplied)

Moscow’s hotels are projected to have seen growth of between 20% and 30% in revenue per available room (RevPAR) during the FIFA World Cup tournament months of June and July 2018, according to the latest market forecast from STR and Tourism Economics.

However, such a RevPAR increase would be less than the growth seen in Rio de Janeiro (2014) and Johannesburg (2010), key markets for the previous two FIFA World Cup host countries, according to Dr Achim Schmitt, associate dean of graduate Programmes and professor of strategy, at the renowned Ecole hôtelière de Lausanne (EHL) in Switzerland.

Schmitt looked at how the FIFA World Cup in Moscow impacted hotels’ revenue per room, in comparison to other FIFA World Cup events, including the one held in Johannesburg in 2010.

“Big sporting events clearly bring positive economic benefits to the host region. During major sport competitions, many businesses take advantage of sports fans’ higher willingness to pay and increase their prices," commented Schmitt.

"However, these revenue benefits often face opportunity costs. Non-sports tourists tend to avoid the region due to the hidden price inflation and the mass of sports fans overrunning the malls, bars and streets.”
In the view of Schmitt, it is important to note that the benefits don’t stop when the event is over. The necessary investments into infrastructure to successfully host an event such as the FIFA World Cup or the Olympics - be it public transport, hospitality venues or safety - bring long-term benefits to the entire region.

"In addition, locations, which may not typically be considered a tourist destination, can raise their profile as one. Just think about Germany, Russia and Brazil which have all gained from reputation benefits as tourist destinations," added Schmitt.

"And if the event takes place during a low-peak tourist season, then businesses are realising revenue they would not normally achieve during that period. All of these impacts inevitably bring wider employment opportunities and boost gross domestic product (GDP)."

While occupancy in Moscow, for example, is likely to have grown between 8% and 10% in absolute levels to just under 80% during the FIFA World Cup months, Moscow’s average daily rate (ADR) is projected to increase between 15% and 20%. That trend would be consistent with previous World Cup tournaments as STR analysts note that room rates are more significantly boosted by the event, whereas demand remains fairly stable in year-on-year (y/y) comparisons.
STR analysts note that, while demand is helped by such a large event, y/y occupancy comparisons are typically hurt due to supply growth, as well as other regular hotel business avoiding the market during major event months. Supply growth leading up to such “mega events” creates more room inventory and pressure on occupancy levels.
In Rio de Janeiro in 2014, occupancy rose by double-digits from the previous June (+12.6% to 81.6%) and July (+18.3% to 80.0%) in the market. At the same time, ADR increased 72.8% and 64.4% during the two months, respectively, driving RevPAR increases of 94.5%.
In Johannesburg in 2010, occupancy jumped from the previous June (+27.7% to 78.5%) and grew to a lesser degree in July (+7.4% to 63.7%). ADR increased 56.3% and 44.5% during the two months, respectively, driving RevPAR increases of 99.6% and 55.1%.
Moscow’s room count is substantially higher than in Rio and Johannesburg. That also creates less opportunity for substantial uplift in performance in percentage terms, from a comparable number of additional visitors traveling for the tournament.
Through the first four months of 2018, Moscow saw occupancy grow 6.7% y/y to an absolute level of 65.8%. Using the same four-month y/y comparison, ADR was down 0.8% to RUB5 363.70 (about R1 124). Preliminary data for May showed occupancy at 74.8% (+11.5%) and ADR RUB5 451.5(+3.1%).

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