London 2012 boom time for hotels, says credit rating body
Monday, 07 May 2012
May 7 - Moody's, the credit rating body, has produced a downbeat assessment of the economic impact of London 2012, saying the Games are "unlikely to provide a substantial macroeconomic boost to the UK in 2012".
However, the corporation says that the Olympics and Paralympics present a "golden opportunity" for the hotel sector.
It predicts that corporate sponsors will benefit from the Games the most.
In a new report, Moody's Investors Service concludes that the impact of infrastructure developments linked to the Games on the UK's gross domestic product (GDP) has "probably already been felt".
It says: "Construction work on venues and transport links has been underway for several years already, and is unlikely to provide a significant fillip to the UK economy this year.
"Past work may have gone some way to cushion the dramatic decline in UK construction activity, which in total has fallen by more than 10 percent since the start of 2008.
"Transport and infrastructure improvements do have the potential to boost national income over the longer term by adding to the productive capacity of the economy.
"However, given the localised nature of these improvements we believe that this long-term impact is also likely to be relatively small in macroeconomic terms."
Turning to the net impact of the Games on UK tourism, the report says this is likely to be "positive overall, but less than gross visitor numbers alone would suggest".
It says the contribution of travel and tourism to UK GDP is expected to be "broadly unchanged" this year at £102 billion ($165 billion/€124 billion).
It continues: "In part, this may reflect domestic spending on attending the Olympics being offset by weaker spending on other forms of domestic tourism.
"Within the total economic impact from tourism, the lion's share (68 percent) is accounted for by domestic spending, with foreign visitor spending accounting for a little under a third of the total."
Nonetheless, Moody's predicts that the hotel sector will be "a clear beneficiary".
Hotels can expect "some very positive revenue per room numbers during and around the events themselves", although "this could result in some weak year-on-year comparable results in 2013".
Moody's predicts that retail and consumer products will be the next largest beneficiaries.
"The mere presence of approximately 500,000 new potential shoppers in and around London can only be beneficial for the retail sector," it says.
Click here to read Moody's report online.