Impact of mega-events such as Olympic Games on hotel industry is immense that can be felt within the country before and after the Olympic Games event. The history of Olympic Games dates to many centuries in history with the impact being an area of study that has received the attention of many researchers. The impact of Olympic games on hotel industry especially of hosting country is an area of interest. Impacts of mega-events include positive and negative with most studies taking the center to investigate the positive impact and little negative impact of these mega-events. Analysis of the impact with the main focus on hotel industry is important since the hospitality framework determines the ability of the host country to Olympic Games. In addition, the positive impact of mega-events has resulted in more demand for the event with many countries not having a chance to host the event. These benefits make the analysis of impact within the hotel industry important for more understanding of Olympic Games as a major event (Kaspar, 2014).
The analysis of the impact of Olympic Games on hotel industry is important as this help identify areas that need improvement. Firstly, the impact of Olympic games in the hosting country hotel industry is linked to the overall growth that can be attributed to Olympic games in that country. The analysis of literature particularly on the impact of mega event helps evaluate the preparedness of the industry for mega-events in case of those events. Moreover, the impact of mega-events on the industry also is used to measure the change trend in the hotel industry of the past years. Secondly, metrics that determine the impact of mega event assist in planning for an event that can cope up with rising impact of events in the hotel industry (Li, 2014).
Overview of the impact of the mega event (Olympic Games) on the hotel industry
Mega-events especial sports events such as Olympic Games has a high impact on the hotel industry of the hosting country and the region. Mega-events can be described as those events that attract many participants that are from various countries regionally or globally. Mega-events include events such as world sporting activities, regional sporting activities or champion games that attract the attention of people from all over the world. Some of the common mega sporting events include Olympic Games, FIFA World Cups, European Championships, Commonwealth Games and Asian Games among other sporting mega-events.
Olympic Games is one of the mega sporting events that bring together people from all over the world. People attracted to Olympic Games are not normally athletes only but also other people that come touring the country (Li, 2014). Many Olympic Games has been conducted since the inception of modern games in the 17th century. As highlighted by Hu and Singh (2008), Olympic games that have been hosted by various countries throughout the world has attracted the attention of more than 800,000 people at the time of the event. The number varies with some countries having more than one million visitors coming to watch games. The cost of hosting these events has also been estimated as high as over $40 billion indicating that the need to host this event must be considered. For instance, during the Beijing 2008 Summer Olympic Games that occurred in China spend over $40 billion to prepare and host this mega event. Moreover, the Olympic Games has resulted in dramatic change in the various market factors within the host country with the latest being hotel industry (IOC, 2013a).
Preparation of the host country to host Olympic Games take more than nine years and during this period many preparations are made. Some of the preparation includes field preparation, infrastructure preparation, and hospitality preparations. This makes the hosting country to invest in terms of time, resources and skills for this world event. The impact of Olympic Games is felt in the political, environmental, social and economic level of the economy of the hosting country. The benefits of hosting Olympic Games can be felt in short time and in long time duration. The impact of the event is not only felt within the hosting country but also regionally as neighboring countries are not left with millions of visitors. These benefits make hosting of Olympic games very competitive and the highest score is on the economic benefits that are realized at all sector of the economy of hosting country. One such benefit is realized within hotel industry of the hosting country (Fourie & Santana-Gallego, 2011).
The hotel industry has been one of the growing industries worldwide with more boosts occurring during mega-events such as Olympic Games. Hotel industry plays an important role in the mega event within the country. Benefits of Olympic Games can be felt from the broad perspective and on the narrow perspective (Kasimati & Dawson, 2009). On the broad perspective, the image of the hotel industry is changed during the preparation and hosting of Olympic Games in a country. This also involves the attraction of investors into the country that particularly invests due to the upcoming mega event. The period of these investments is always estimated to be after the announcement of the event to occur in a country. The Olympic Games normally attracts many investors that invest thereby changing the image of the hotel industry in the country. The narrow perspective of the impact of Olympic Games in the hotel industry is felt through various factors changes. These include employment rate, revenue gained, and development of infrastructure and growth of hotel industry (IOC, 2013).
According to Feng and Humphreys (2012), hotel industry includes various services such event planning, lodging, transportation, theme parks, cruise line, and additional fields within the tourism industry. Change in the hotel industry especially in case an event is hosted in the country is normally measured using some metrics. Some of these metrics include occupancy rate (Occ), supply, demand, revenue, average daily rate (ADR), and revenue for per available room (RevPAR). Within the hotel industry, market demand can be described as the sum of demand for hotel services in the market, particularly during the mega event. Supply can be described as total estimated services that hotel industry can deliver to customers at a particular period of time. In hotel industry occupancy rate is one of the metrics that is used to measure the ratio of rooms occupied to the number of rooms available within a period of time. Average daily rate (ADR) is described as the average rental income per paid occupied room in a given time period. Revenue for per available room (RevPAR) is another metric used in lodging that represents the total revenues gained due occupancy of many rooms (Li, 2014). Some of the examples of Olympic games and the impacts on those countries can be analyzed based on the hotel metrics.
The history of the impact of Olympic on the hotel industry
The impact of Olympic Games on hotel industry can be traced to the history of the event itself. The history of modern Olympic games can be traced back to the period between 1796 to 1798, the Olympic Games was reformed from the ancient Olympic Games to a more modern event. During this period, the Olympic Games took shape with the first modern event held in Ramlösa (Sweden) in 1836. The event was attended by more than 25,000 people spectators that watched the event live. The international look Olympic was held in Athens in 1896 where modern features of a typical mega event were first seen (Smylie, 2013).
There are changes that have occurred in the nature of games held during Olympic games. For instance, since the inception of Olympic Games, women started participating in games in the 1900 Olympic Games held in Paris Exposition (Li, 2014). Moreover, four years later 650 athletes participated with 580 coming from the United States. During this time period, many different games were also instituted with some being Summer Olympic Games, Winter Olympic Games and Paralympic Games among others. The overall turnout has also increased at the time making the overall impact of Olympic Games tremendous within the host country. Economic benefits of the Olympic Games were thus felt at every level within the country and demand for hosting event thus rose. As cited by IOC (2012), Olympic games have taken shape with youth mega-events also taking the center of the events and this prompted the development of an international Olympic committee to overseeing and organizes the games. Members of this committee were selected from many nations across the world to represent those countries (IOC, 2013).
The 21st century Olympic Games has transformed initial 14 nations of 1896 to more than 88 nations with more than 10, 500 competitors in 2012. The number of competitors has been fluctuating in the recent event with more competitors realized in the 2012 event as compared to other 2014 (Li, 2014). This is based on the scope of the participation that has not been regulated in terms of political environment within a country willing to participate. In addition, the modern day Olympic games have increased in terms of attendance especially spectators and participants. The increase in the overall number of visitors coming into a host country is also related to country's response to this influx of a huge number of visitors. Moreover, the number is also felt particularly at the industry level with hotel industry is one of the beneficiary industries during the mega event within the country (Smylie, 2013).
The history of the impact of Olympic Games on hotel industry of the host country has been attributed to various specifications that form part of evaluation during preparation for Olympic games by the host country. According to Li (2014), during the Olympic games of 2014 at Sochi, most of the event guests were hosted within the Olympic village. At this time various houses that visitors stayed met specific considerations that include self-contained rooms fitted with all required accessories. This Olympic village reformed the hotel industry with facilities having cafeterias, religious facilities, and health clinic. Moreover, the 2014 Winter Olympics saw an increase in the number of visitors and these were 2,873 athletes from 88 nations competing in 98 events. Since this Olympic games of 2014, the hotel industry has changed a lot with more focus placed on the facilities meeting the international standard in terms of facilities and accessories. For instance, the preparations towards the Olympic Games to be held in Tokyo Japan in 2020 have seen many facilities coming up within the country that is particularly serving hotel purpose (Collinson, 2011).
The report attempts to explore the literature on the impact of the mega event especially Olympic games on the hotel industry. The area of the topic that has been studied gives an understanding of the effect of Olympic Games in the hotel industry of the hosting country and region as a whole. For instance, the study explores the theories behind the impact of Olympic Games citing various areas that have been analyzed. The scope of the literature review is to identify areas that have not been studied for the purpose of more research and possible improvement. For instance, some areas that shoe potential interest includes the negative impact of Olympic Games on hotel industry of the host country and to some expected result after the event. For instance, the social, cultural and environmental impact of Olympic games within the context of hotel industry has received little attention (Billings & Holladay, 2012).
The overall current state of the Olympic Games and its impact on the hotel industry indicates that the Olympic games play an important role in development of the industry. Reports indicate that the impact of mega sporting events is felt for many years in the country of host. In addition, the role played by the event in growth of Olympic games can be viewed from long term and short term perspective (Baade & Matheson, 2016). For instance, short term impact of mega event involves the increase price of goods, rising demand and supply of hotel services and increasing employment within the sector. Long terms impact of the event include the economic response of the hosting country resulting from the Olympic Games and can be both before and after the mega event. Currently, many property are developed in countries that are hosting the Olympic event as early as five years before the actual event and this has made the impact of the event more significant than before. Finally, some other changes that currently can be seen on the impact of the mega event include changing number participants, nations participating and number of visitors arriving in host country (Hyundai Research Institute, 2014).
Demand for the Olympic Games by many countries has been on the rise as countries realize the impact of Olympic Games on the hosting countries. Some of the countries that have hosted the mega event many times include America and Britain. According to IOC (2011), America has hosted the Olympic Games eight times four summer and four winters. Britain and particularly London has hosted four summer’s Olympic Games. The overall result of these games on the hotel industry is still felt today. The impact of the mega event in these countries has made hotel industry within these countries change tremendously. For instance, studies show that the hotel industry within United States of America cities that have hosted the Olympic Games has a high growth rate that boosted income in nearly all hotels within the city (Australian Government, 2010).
Hospitality management has some theoretical framework that sets the basis for analyzing the impact of mega-events such as an Olympic game in the industry. The theoretical framework of the impact of Olympic Games on hotel industry offers the basic ground of undertaking response of the host country toward the event. This also includes models and principles that have been applied to study and understand the impacts of mega-events on hotel industry since this is an area that is always affected by the influx of a high number of customers within the country. Therefore, the theoretical framework also helps in identification of areas that still need to be explored and hence the potential for improvement (Henshera & Brewera, 2010).
A dramatic rise in the use of theory
A dramatic rise in the use of theory as an analogy rather than as a substantive term proposed by Kaspar (2014), shows the dramatic increase in customers that affect the demand and supply of the hostel and hospitality services upon that announcement of the Olympic Games. According to The Guardian (2008b), Olympic Games that occurred in both Beijing and London experienced a high dramatic rise in demand of hospitality demand. This was experience around seven years before the material year of the Olympic Games. This does not contradict another study in Japan following the announcement of Olympic Games to take place in 2020. In these studies, the metric that has received attention is the Revenue per Available Room (RevPAR) that is reported to increase dramatically before and after the Olympic games (TourMIS 2014).
Inter-dependent and inter-related elements
Inter-dependent and inter-related elements of hospitality management are other theory that brings a more understanding to the interrelationship between the mega event and the hostel industry. As highlighted by Blake and Li (2009), mega-events such as Olympic Games have both direct and indirect relationship with the hospitality industry. For instance, The Guardian (2008a) shows the correlation between hospitality industry development and mega event that occurred in the UK. According to Li (2014), another interrelated area within the hotel industry that is also influenced by the impact of the mega event is property development or investment that plays an important role in the development of hotel industry in case of a mega event. In a study on the impact of Olympic games on the hotel industry, the government of Japan has estimated that more than 8.5 million visitors are expected in the Olympic games to be held in the country in 2020. To help host these number of visitors the country has allowed massive property investment within the country. This will help achieve the estimated occupancy rate of more than 80% in hotels and lodging. To affirm this Hotels and Hospitality Group managing director indicated that the company has invested in property development also to contain the expected rise in demand (Ahlfeldt & Kavetsos, 2014).
Human resource management
Human resource management theories explain the impact of Olympic games in the employment within the hostel industry. Smith (2012) explains the impact of the mega event on the increasing employment that some are retained after the event. Some employees are employed for the temporary plan in the course of the event and thereby increase or gain their experience. Similarly, Li (2014), indicate that Olympic has a high impact on the building of employee capability to handle customers from other cultures often diversified cultures. For instance, the Olympic Games in the UK resulted in the rise of employment by 181,000 thereby reducing unemployment to 65,000 within the country. In contrast, the number of employment also reduced more than three years after the mega event in the country. In contrast, the employment rate may also reduce on the minimal side sometimes after the Olympic event (Branigan, 2008).
Satisfy Consumer Needs
Drive to satisfy the high rise in consumer need within the hotel industry during the course of Olympic games make the industry experience growth. Another area that has been explored under the impact of Olympic Games in the hotel industry is the satisfaction of consumer needs. Mega-events are associated with the high need for hotel services with the host country. The basis of motivation that results in serving a huge number of customers that is normally associated with the mega event is the need to offer the best customer service to visitors that flock the country during mega-events. In addition, the hotel industry normally experiences high demand for hospitality services. According to Li (2014), the hotel industry is among those that are ranked high in satisfaction of consumer need in case of mega-events in the country.
Study of the impact of the mega event on lodging
Theories have been advanced to understand the impact of Olympic Games on lodging within the country of the host. Some of the metrics that can be used to study the impact of mega-events on hotel industry include occupancy, daily rate, Revenue per Available Room (RevPAR), demand and supply.
According to Collinson (2011), studies show that the rate of occupancy of lodging within the hotel industry of the hosting country. The result of the Olympic Games indicates that the hotel lodging occupancy increased by more than 2% between the seven years period within the mega event. This is similar to the other countries that have also hosted the event in the past years. In another instance within the Chinese hosting Olympic Games where the metrics show a tremendous increase in the demand for rooms in hotels and lodges. As cited by BMCTD (2013), hotel and lodging occupancy increases in demand for many years before and after the mega event. This was also reported during the Turin 2006 Winter Olympic Games that saw a high increase in the room occupancy of 50% within the period of Olympic Games. Similarly, Australia Summer Olympic Games Occupancy (1996-2002) saw an increase of occupancy rate reaching 73.3% making the country one of the highest hotel industry boosts since time in memorial (Rosenblum, 2009).
Average daily rate (ADR) is another metric that can be used to study the impact of Olympic Games on the hotel industry in the country of the host. According to Li (2014), the average daily rate is used to determine the rate at which rooms are charged at a particular rate a day. As reported by Wells (2013), the daily rate in customer service within the hotel industry increase with increase periods approaching the event year. Average daily rate (ADR) when determined indicated that the there has been an increase of more than 30% from the normal average daily rate. For instance, the daily rate during the Olympic Games period in Vancouver, Canada rose by 34% from the previous ADR recorded in most hotels. In addition, the ADR is key performances indicate that determine the performance of hotel industry for the period of Olympic Games in the hosting country. Many issuances reported an increase in the average daily rate per room within the pick seasons of the mega event (TourMIS, 2014).
Revenue per Available Room (RevPAR) is the metric that is used to measure the revenue that is gained per room available. Studies show that the growth of Revenue per Available Room (RevPAR) resulting from the impact of mega event result in more investment in the hotel industry. The seven years period before the Olympic has been attracting many investors that come to invest in the hotel industry of hosting countries. When measuring the impact of the mega event on the hotel industry in terms of growth is measured using this revenue metrics per room. In addition, the increase in revenue per room available indicates the increase in revenue gained in the rooms that are available. The overall growth of the hotel is also increasing at the time of announcing the forthcoming event to after the event. Experts analyzing the case of Beijing project that the Revenue per Available Room (RevPAR) is mostly to be the case in the Olympic Games that is expected in Tokyo Japan in 2020 (BMCTD, 2013).
Demand and supply models
Demand and supply theory of market is another area of analyzing the impact of the mega event in the hotel industry. The demand for the hotel service increase as the year of event approaches and this has been the case in many different countries that have hosted the Olympic Games. According to NBSC (2011), demand and supply for hotel services sometimes increase more than the industry can offers. This implies that during the period of Olympic Games in the country, visitors number increases dramatically thereby superseding the supply of such services. This is also evident by the number of customers flocking the hotel within this period of time. As cited by NAO (2012), many different studies have shown that to cope up with the expected increase in demand of hotel services, many hotels are normally built within the period of five years before the Olympic games year. Many investors have mastered this demand and supply laws and scramble to build high-end hotels in the host country in a bid to reap from the increasing demand in the hotel industry. One example of changes in supply was Vancouver, Canada Winter Olympic Games Supply (2006-2012) that registered more than 7% increase in hotel rooms (DCMS, 2013).
Figure 1: Vancouver 2010 Olympic Games metrics
Total quality management
Theory of total quality management is another area that also plays an important in understanding the impact of the mega event in the hotel industry. It is understood that the quality of service within the hotel industry normally increase as a result of visitors coming into the country who requires high quality as compared to citizens of the country. When accessing the quality of service, Feng and Humphreys (2012), indicates that the quality of services offered in the majority of hotels and restaurants normally increase due to the interaction of people from different cultures. Many hotel management has been reported to improve quality of service to woo more customer during this time of the event. This makes the service better even after the end of Olympic since most of these services cannot decline once the event is over (NAO, 2012).
Service as Primary Delivery System
The hotel industry in mostly service industry and value of service delivery determine the impact of Olympic Games on the hotel industry. The service delivery system within the hotel industry is normally characterized by a number of factors (Sydney Olympic Park 2014). The quality of service delivery is one of the main factors that drive the hotel industry and this attracts more customer within the mega event period. Service delivery model connects the quality of service delivered to visitors and the total number of visitors coming to the company for particular service. Secondly, Jiang (2008) indicates that the overall nature of the service delivery system will determine the number of visitors coming for hotel service within a company. For instance, those hotels with modern lodging facilities normally have a high number of the customer during cultural diversity events. Other studies also show that customer relationship management as an aspect of service delivery system also plays an important role in the growth of hotel industry. For instance, during Beijing 2008 Summer Olympic Games, many small and medium hotel changed their service delivery system to match larger hotel as a competition strategy (Hyundai Research Institute 2014).
Need for Profit
Several hotels in hosting country are normally tied to the need to make huge profits during Olympic events. The need to increase revenue is correlated to the overall revenue that is realized within the mega event period. At the time visitors and tourist flock to the country hosting Olympic games, many hotels within the industry are driven to make more profit hence expansion of their facilities. These profit drive often result in expanding lodging facilities to increase the unit and other hotel facilities to accommodate more guests. Moreover, the hotel industry within those countries that have had a chance to host this prestigious sports event has all reported high profit that supersedes all the past profits. Though the profits various from one event to another, the result differs with the normal profit that is normally obtained from the hotel services. The drive for profit has also contributed to the high rise in the demand for Olympic Games by major countries that have previously hosted the event (Jasmand and Maennig, 2008).
Despite the positive impacts of mega-events on the hotel industry, little has been investigated on the negative impact of Olympic on the hotel industry. Several studies have been conducted on the positive impact of the Olympic games in hotel industry yet minimal negative since this forms one of the major areas that can be used to analyze hotel industry (Blake & Li, 2009). General negative impacts of Olympic Games on the host country have been studies yet on the hotel industry little has been done to determine the areas that need improvement. There is need to understand most of the negative impact of the mega event on the hotel industry of the host county (Byrnes, 2012).
Post-event analysis shows some few challenges that result from hosting Olympic games within a country. For instance, one of the main challenges that have been observed is the drop in employment. In all countries that have hosted the Olympic games, employment normally drops as those employees that were employed on a temporary basis are dropped to cope up with the normal employment rate in the country. During Turin, Italy Winter Olympic Games (2002-2008) the overall result of the Olympic games indicated more drop of employment by more than 8.6% the year after the event (Department for Transport, 2010).
Changes in the price of good have been one of the negative impacts of Olympic Games on the hotel industry. Overpricing of products within the country has resulted during the Olympic Games period with many products used within the hotel industry is the most affected. According to Ahlfeldt and Kavetsos (2014), Vancouver Winter Olympics in 2010 saw the increase in hotel room price by over 30% leading to high demand for hotel service. Other services such as transportation cost have not been investigated to determine the impact of the Olympic games on transportation cost as a major service offered in the hotel industry. Other services that are also showing indication of an increase in price include catering services and conference facilities. These areas need to be investigated to establish the negative impact of Olympic Games on the price of other services apart from the general lodging price (Department for Transport, 2009).
Social effects are other areas that are most likely to be impacted by the influx of visitors due to mega-events. In the context of hotel industry little has been done on the negative impact of mega-events such as Olympic Games on the social lives of locals (Fletcher & Porter, 2008). For instance, the social impacts of Olympic Games in the country are expected to high since visitors come with their culture that is shared with other people from other country or the locals. More research needs to be done to unveil the socio impact of the mega sporting event on the hotel industry. Culture influence is another area that can be influenced by the huge number of visitors coming into a foreign country. Many visitors coming into the country are expected to come and spread their culture and at the same get some different culture from other people. This implies that the hotel industry there still needs to research on the impact of mega-events such as Olympic Games on the culture and social factors within the industry not as a general area of concern in the country (Adler, Dolan & Kavetsos, 2015).
The negative impact of the Olympic Games on the economic environment of the hotel industry has also received little investigations. More research has been done on the economic impact of Olympic Games on some hotel factors such as employment, the price of good and economic growth. In some studies, more focus is placed on the negative impact of the mega event on the growth rate of the hotel industry with minimal studies in problems that result before and after the event (Bayer & Juessen, 2015). Post-event analysis also indicates that some economic challenges such drops in profits with the industry that affects the demand and supply of hotel services has been seen during Olympic that occurred in the UK in 2010. For instance, Olympic Games in Sydney indicated demand decreases, and this causes the negative occupancy rate, ADR, and RevPAR. Another study that little shows this negative impact of Olympic Games on the economy with the hotel industry was Athens Olympic that saw negative demand yields the decrease of the occupancy rate that was attributed to increasing supply of hotel services bore the event (Baade & Matheson 2016).
In conclusion, the impact of mega-events especially Olympic Games on the hotel industry of the host country. Impact of Olympic Games has a long history that can be traced to the history of the Olympic Games on hostel industry. The Olympic Games has transformed with the hotel industry being one of the benefactors for the mega event. Some of the areas that have been investigating include the impact of Olympic on employment, growth, service prices and the expected impact of the event. Little impact analysis on the impact of Olympic games event on host country hotel industry also shows some areas that still need studies.
Some of the areas that have already investigated include the growth of the hotel industry, changes in the hotel metrics such as occupancy rate, ADR, and RevPAR, demand, and supply of hotel services. Another area that has also been investigating is the changes in the employment rate within the country and this cut across the period before the event and after the event. Theoretical understanding of the impact of Olympic Games on the hotel industry also shows some theories and models that have been used to study the impact of the event. Some of the findings from the literature show that quality management as an important factor influencing the profitability of the industry during Olympic Games. Interrelation and interdependence is one theory that shows various factors that are related within the hotel industry with property development being one such factor (Kavetsos, 2012).
On contrary, some other areas have not been investigated and need more research to be done. Some of these areas include the negative impact of Olympic Games on hotel industry especially on social, cultural and environment of the hotel industry. This differs with those researches done on these areas outside the industry that has wider research coverage. This implies that outside the hotel industry some research has been done in these areas with little done particularly in the hotel industry. There is a need for research to understand the areas that need to be improved so as to reduce the negative impact of Olympic Games on the hotel industry (Henshera & Brewera, 2010).