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Accommodation and the Olympics – have rents spiked?

For the second time in three years, Rio de Janeiro is hosting a major global event. Whereas the last big sports show in town was the football World Cup of 2014, August will see the city play host to the 2016 Olympic Games, with the 2016 Paralympic Games following in September.

Estimates of visitor numbers vary, but the population of Rio de Janeiro is expected to swell by a minimum of 500,000 during the Games. Such an increase in numbers inevitably puts a city’s infrastructure under strain, with the availability and cost of accommodation changing significantly, albeit temporarily. There is therefore good reason for mobility managers to carefully consider the effect of major events on their international assignments, both new and ongoing.

Hotels and serviced accommodation

An obvious area of impact is hotel prices, which always increase during major events. Before planning any assignments where a hotel is required, mobility managers will need to check how much prices have increased by and for how long these increases will be evident. Business trips or look-see visits planned for August and early September would benefit from rescheduling where possible, to avoid these elevated prices. 

Subject to similar forces are serviced apartments, where rates will at least double and potentially rise by as much as five times during the Olympic month. ECA last surveyed serviced apartment rents for Rio de Janeiro in March (the traditional high-season) and the difference between prices then and now is stark. However, availability either side of the Olympics is reasonable, with rates set to return to typical levels for the time of year after the Games.

Long-term accommodation

Major events naturally attract increased levels of media coverage, both positive and negative. Many references to spiking property rents are, in fact, related to serviced accommodation rented out on a long-term basis rather than typical long-lease rental properties. Rental renewals for one-year leases for these properties will be increased to compensate for some of the income landlords could have generated had they rented them out in the short-term during the lucrative Olympic month.

While non-serviced long-term accommodation should be less affected, there are some issues to be aware of. For example, landlords who normally rent out on long-term contracts may try to get rid of tenants in the run up to the Games, thereby enabling them to rent out the property in the short-term at a far higher price before returning to the long-term rental market. Other landlords have already decided to increase their rents blaming “the Olympics”, not for any market-based reason, but purely to see if they can get away with it. The people most likely to be affected are those renewing or signing new leases during the Olympic period. A rise in short-term lettings at the expense of long-term property availability, combined with increased interest in the city as a result of the Olympics, is likely to cause rental price inflation in the short-term.

In practical terms, there are a number of provisions that are advisable when managing assignments that overlap with major events. Entering renewal negotiations as early as possible will help mitigate against unexpected roadblocks from landlords. In addition, it is highly recommended to try and avoid sending new assignees to post during such events, when it is more difficult not only to secure permanent accommodation but also to find somewhere to stay temporarily while looking for that accommodation. 

After the Games

On the conclusion of the Paralympic Games on 20 September, we should see the accommodation market in Rio de Janeiro quickly return to pre-event conditions. When ECA surveyed residential rents in March this year, the results reflected a stagnating property market. Weak commodity prices have contributed to a shrinking economy and falling tax revenues, with budgets for education, police and health being scaled back. 
When these weak economic fundamentals are combined with the ongoing Petrobras corruption scandal and Zika virus epidemic, the rental markets in major Brazilian cities appear set for decline and landlords will find it increasingly difficult to use the “Olympic effect” in their favour.

A review of rental prices in locations that have hosted other major international events in recent years show that they tend to have no effect on long-term rental trends. 

Average monthly rents in cities hosting major events

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