By Erik Ransdell and Mike Annunziata
Strands Realty Group
August 27, 2024
With the 2024 Paris Olympics now behind us, the hospitality industry is reviewing the significant impacts of this global event. As Los Angeles prepares to host the 2028 Summer Olympics, hotel owners, operators, and investors can learn valuable lessons from Paris’s experience to strategically plan and capitalize on the opportunities ahead.
Paris 2024: A Major Success for Hotels
The 2024 Summer Olympics brought substantial gains to Paris’s hotel industry. Over the 16-day event, hotels saw significant increases in key performance metrics. Hotel occupancy in Paris rose by 25% compared to the previous year, while the average daily rate (ADR) surged by 141%, driving major revenue growth. Revenue per available room (RevPAR) grew by at least 75% each day, with some days seeing up to 311% growth.
One of the standout aspects of this success was Paris’s ability to achieve these results without a significant increase in hotel supply. Unlike other Olympic host cities like Beijing in 2008 and London in 2012, which added substantial hotel inventory, Paris maintained a flat supply. According to Tom Emanuel, Senior Director at STR, Parisian hotels managed their revenue strategies effectively, particularly in the luxury segment, where ADRs peaked at €2,022 on the night of the opening ceremony. This strategic management allowed hotels to maximize profits without the pressure of additional competition.
Comparisons with Past U.S. Olympics
The success of Paris 2024 offers valuable insights for the U.S. hotel market, especially as Los Angeles gears up for 2028.
For example, the 1996 Atlanta Olympics led to a significant expansion in hotel development, adding many new rooms to the market. However, the long-term impact on tourism was mixed. While the Olympics boosted Atlanta's profile, the anticipated sustained increase in tourism did not fully materialize, illustrating the risks of overestimating long-term demand.
In Salt Lake City, the 2002 Winter Olympics significantly boosted hotel occupancy and ADR during the event, but the long-term benefits were more focused on enhancing the city’s appeal as a winter sports destination. This highlights the importance of aligning the nature of the event with the host city’s tourism strengths.
The 1984 Los Angeles Olympics are particularly relevant as the city prepares for 2028. The 1984 Games were a financial success, largely due to the use of existing infrastructure and a lean approach to event management. The event had a lasting positive impact on Los Angeles, boosting tourism and leading to significant hotel developments in subsequent years. This shows that the benefits of hosting the Olympics can extend beyond the immediate event, influencing a city’s global image and long-term tourism strategy.
Projections for the 2028 Los Angeles Olympics
As Los Angeles prepares for the 2028 Olympics, the city’s hotel industry is expected to undergo significant changes. Drawing from the experiences of Paris 2024 and past U.S. Olympics, hotel owners and investors can make informed decisions to maximize their returns.
The 2028 Olympics are expected to drive substantial increases in hotel occupancy and ADR across Los Angeles. Currently, Los Angeles County has around 104,000 hotel rooms, with slight growth expected by 2026. However, demand during the Games might still exceed supply, particularly given Los Angeles's status as a major tourist destination. Events are planned across various locations, including Inglewood, Santa Monica, and Long Beach, with some extending to the San Fernando Valley and Temecula. Los Angeles Chief Tourism Officer Doane Liu pointed out that visitors will likely stay in hotels throughout Southern California, offering opportunities for hotel owners in secondary and tertiary markets.
The lead-up to the 2028 Olympics presents unique opportunities for hotel investments. Areas near key Olympic venues like the Los Angeles Memorial Coliseum, SoFi Stadium, and Crypto.com Arena are expected to see the highest demand. Investors should focus on these high-value zones for acquisitions or developments, targeting properties that can be upgraded to meet the surge in visitors. Major ongoing developments, such as the $1.3 billion Grand LA complex and the $2.5 billion Century Plaza redevelopment, are well-positioned to benefit from the Olympic influx.
In addition to immediate gains, it’s crucial for hoteliers to consider the long-term legacy of their investments. Los Angeles, like Paris, is prioritizing sustainability as part of its Olympic strategy. Incorporating sustainable practices—such as energy-efficient designs and waste reduction programs—will attract environmentally conscious tourists and ensure the hotel remains competitive after the Olympics.
Strategic Planning for Hoteliers
To fully capitalize on the opportunities presented by the 2028 Olympics, hotel owners and operators need to start planning now. Strategic timing and execution are crucial to ensuring that investments yield the highest returns.
Hotel owners should begin planning for the 2028 Olympics now. Renovations or new developments should be completed by 2026 or 2027 to allow for potential delays. It’s important to focus capital expenditures on enhancing the guest experience, such as upgrading rooms, adding amenities, and improving digital infrastructure.
There is a risk of market saturation, especially if there is a significant increase in hotel supply leading up to the 2028 Los Angeles Olympics. To mitigate this, it's crucial for hoteliers to monitor supply and demand trends closely as the event approaches. This careful observation will help prevent overbuilding and ensure that investments remain sound even after the Games.
Hotels that differentiate themselves are more likely to thrive in a competitive market. One effective strategy for differentiation is through unique offerings, such as boutique experiences or exclusive partnerships with local businesses. For instance, creating themed stays or collaborating with local artists can create a memorable guest experience that stands out from standard accommodations.
In addition to unique experiences, leveraging robust loyalty programs like Hilton Honors, Marriott Bonvoy, or World of Hyatt can be a significant advantage. These programs not only drive repeat business by rewarding loyal guests but also offer an extensive network of properties, making them appealing to Olympic visitors who might be traveling across multiple locations. Marriott Bonvoy, for example, provides its members with exclusive benefits such as room upgrades, late check-outs, and access to special events, which can be particularly attractive during high-demand periods like the Olympics.
By focusing on both unique offerings and leveraging powerful reward programs, hotels can attract and retain guests, ensuring they remain competitive in the face of increased supply.
Potential Risks and Mitigation Strategies
While the 2028 Los Angeles Olympics offer significant opportunities, they also come with potential risks. Learning from previous Olympic host cities can help mitigate these risks and ensure a successful outcome.
One of the biggest risks is overestimating the long-term demand for hotel rooms after the Olympics. Although the event will bring a surge in visitors, this spike may not be sustained in the following years. Hotel owners should be cautious about overextending their investments and consider flexible financing options that allow for adjustments if demand does not meet expectations.
There is also the risk of market saturation, especially if there is a significant increase in hotel supply leading up to the Games. It will be crucial to monitor supply and demand closely in the years leading up to 2028. Hotels that differentiate themselves through unique offerings, such as boutique experiences or exclusive partnerships, are more likely to thrive. Additionally, leveraging strong loyalty programs like those offered by Hilton or Marriott can help hotels secure repeat business and maintain competitiveness in a crowded market.
The broader economic environment and local regulations will also play a significant role in determining the success of hotel investments. Los Angeles has recently introduced new regulations, such as the Hotel Worker Protection Ordinance and Measure ULA, which could increase operational costs. These regulations may require hoteliers to adjust their business models to maintain profitability.
Conclusion: Preparing for a Successful 2028 Olympics
The Paris 2024 Olympics have provided valuable lessons for the global hotel industry, showing the potential for significant revenue growth when supply is managed effectively. As Los Angeles prepares for the 2028 Olympics, hotel owners and operators have a unique opportunity to benefit from this global event. However, success will require careful planning, strategic investments, and a focus on long-term sustainability.
By understanding the lessons from Paris and past U.S. Olympics, and implementing strategic plans, hotel owners can position themselves to maximize returns during the Games and ensure their properties remain competitive in the following years.
At Strands Realty Group, we're dedicated to helping you navigate the complexities of the hotel industry. Whether you’re looking to invest in new properties, enhance your current portfolio, or seek expert advice on strategic decisions, our team is here to support you every step of the way. Contact us today to discover how we can help you achieve long-term success in the ever-evolving hospitality market.
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