By now, it’s likely that the next big supply chain for hotel rooms will be the one that’s already on the drawing board.
This is because, in a recent article for Next Big Futures, hotel supply chains that have yet to start up have already created more than enough supply for the hotels that will be sold at the 2020 Summer Olympics in Rio de Janeiro.
As we’ve mentioned, the majority of hotels sold during the Rio Olympics will be in Brazil, with the remaining rooms in other countries.
So, to be fair, the biggest demand for hotels will be coming from the U.S. and China, which will be selling rooms at rates that are at least half of the average cost in the U, U.K. and Canada.
But, as with everything in this industry, there’s no guarantee that you’ll get the room you want.
“If you want a room at the Rio Games, it may be harder to find than you thought,” says Brian Schindler, a hotel supply specialist with a focus on hotels and hospitality.
“We know this because we’ve seen it in the last few years.”
And there are two big reasons why.
First, the demand for rooms is high.
Last year, hotel guests spent an average of $2,746 on their rooms, according to the Hotel Industry Association.
The industry also expects that demand will continue to rise, as more guests will be attending the Olympics and, eventually, the 2020 Paralympics.
“There’s a growing number of people who are really going to be staying at home during the Olympics,” Schindlers says.
“People are going to want to be able to get the rooms they want during the games.”
And so, the hotels will start selling hotel rooms during the Games, and, hopefully, during the Paralympic Games as well.
But for the time being, the best hotels for athletes will be located at the venues that have already started building the rooms that they need.
“The hotels are going for the big, beautiful rooms that will fit right in with the Olympics, and that’s going to get sold at a higher rate,” Schinkler says.
This will give hotels the ability to quickly expand their supply, and also make it easier for them to sell more rooms at higher rates.
“You’re not going to find the big rooms, the fancy rooms, at the end of the day,” Schankler says, adding that some hotels will want to sell just a few rooms per week, which is what you’ll see at most hotels.
In this way, the more hotels that start up during the Summer Olympics, the bigger the hotels should be.
As the demand continues to grow, the price for the hotel rooms that are going up is going to fall.
“When the demand starts to increase, the prices will go down,” Schinler says of hotels, “but when they’re lower, you’re going to see a lot of hotels starting to go out of business.”
So, while the demand will be there for rooms in Rio and other cities, the supply is going too.
For instance, while many hotels already have rooms on the books for the 2020 Olympic Games, Schindels said he does not expect that to be the case during the 2020 Games.
“It’s not going be a problem,” he says.
But the same can’t be said for the supply.
For the hotel industry, this means that hotels will have to start thinking about how to sell rooms during this period.
“What’s the most cost-effective way to sell your room?”
And, for hotel chains, that will include creating an inventory of rooms and adding inventory on their websites, which can help them to make better decisions about how much room to sell.
“All of these factors will be important in terms of what the industry will do,” Schinsler says with a smile.
“And it will be more expensive, but it’s going have a more positive impact on hotel operators.”
So while demand is going up, the availability of rooms is going down.
And when demand for the Olympics ends, hotels will face a tough choice.
“They’ll have to either sell more than they need or cut back on their inventory,” Schinder says, “which is going be expensive and time consuming.”
And, as the supply of hotels is going out of favor, hotels are probably going to have to rethink how they use their inventory to sell room.
“That will be a big issue,” Schinner says.
At this point, he’s not sure that the hotel supply will continue at its current pace.
“Maybe they’ll find a way to continue to use inventory to make more rooms,” Schintler says when asked if he thinks that’s a realistic option.
But he says that the supply may have to come to a halt.
“At some point, the industry may have some room to breathe,” he adds.
“But that’s not happening anytime soon.”