"Tourists are paying more than $17,000 a week to stay in hotel rooms barely bigger than a prison cell during the Rugby World Cup - but Australian tour operators say other fans will be turned off because of exorbitant hotel prices."You can read a typical newspaper article HERE, however to paraphrase: the sensationalist revelation is that tariff in New Zealand commercial accommodation will rise during the Rugby World Cup - No kidding!
What amuses us is there is a consensus in the MSM that accommodation providers are the devil's spawn and are desecrating NZ's socialist fair-play image by taking advantage of hapless rugby fans.
The MSM have revealed some of the more extreme examples of RWC tariff and we must say that we admire those accommodation providers that are giving it a go this far out from kick-off.
Predictably, there will be some high tariffs offered by accommodation providers, however as we get closer to the event, tariffs will be pegged back as more room inventory is released and demand falls below the hype.
So should accommodation providers ramp-up tariff during expected high demand? - well of course! The market should be left to determine tariff.
So, will the RWC be the economic boom for accommodation providers?
Maybe. What is forgotten is the the opportunity cost of those visitors that will either cancel or put off travel due to not wishing to be part of the perceived ruckus caused by the RWC. Usual accommodation guest-night patterns will be severally disrupted.
Unfortunately the multipliers that are used to predict economic benefits of events are somewhat biased by only taking into account the business gained, not the business lost. Overall, we believe that the RWC will bring positive economic opportunities, however there are a few reality checks to keep in mind when hosting such a major event.
Hopefully Kiwi accommodation providers will not be following hotels in Beijing that were slashing room prices before the 2008 Olympics by as much as half due to lack-luster demand. While there will be high guest night demand during the RWC tournament, there will also be periods of low demand as the traveling roadshow of rugby games moves throughout the country.
Another lesson from the Beijing Olympics, is that hotels took a hit soon after the event as most visitors took the first plane out leaving hotels wallowing with an unprecedented low demand ebb. So how many new hotel projects have been signed off in Auckland due to the economic momentum that the RWC will be supposedly providing?
During the RWC, commercial accommodation providers will be competing amongst a scrum of overnight options for the predicted 85,000 visitors that will include cruse ships, camper vans and Kiwis hoping to cash-in by offering domestic accommodation.
Probably the biggest competition for bed nights will come from savvy rugby supporters that have a knack of sniffing out free digs from long lost relatives and friends of friends. And of course there will be those hard-core rugby supporters that will simply stay at home and watch detailed television coverage on large flat-screen televisions with the advantages of instant replays and slow motion analysis.
So maybe accommodation providers should be reanalysing their tariff structures over the RWC and raising the bar even further?
