The Strategist

Rio 2016 Olympics: unsold tickets and political instability

08/05/2016 - 13:18

Tickets for the Olympic Games in Rio de Janeiro are being sold not as fast as at the last Olympics. In addition, demand for air tickets and hotel rooms is too low due to a recession in Brazil, Zika virus epidemic and concerns about safety.

Uri R
Uri R
By August 1, the organizers have sold only about 79% out of 6.1 million tickets for the Olympics. This is much less than final figures for the last two summer Olympic Games in London and Beijing, where sales exceeded 95%. Yet, percentage of Rio has already outstripped the previous Summer Games in Athens, Atlanta, Barcelona and Seoul, which failed to overcome the barrier of 80%, according to Statista portal. "I think this is an acceptable result", - says David Wallechinsky, president of the International Society of Olympic Historians (ISOH).

Wallechinsky associates the impressive ticket sales in London and Beijing with unique factors, such as the huge population of China, well-being of England, as well as its proximity to continental Europe and love for all kinds of sports. At most of the Olympics, about 75% of tickets are usually purchased by local residents. In the case of Brazil, however, trip to the country is long and expensive for foreigners, and the Brazilians themselves mostly prefer football.

The organizers hope that demand from the local population and some foreigners would speed up ticket sales at the last minute. So far, revenue from the sales reached $ 304 million, or 95% of the plan. Yet, some experts doubt that the results would ever be improved. For comparison, organizers of the London Games gained 659 million pounds ($ 880 million) from ticket sales, exceeding the plan by 32%. "All who come from abroad, have already decided whether go or not", - says Director of consulting firm Maquina do Esporte Erich Beting".   

Reservation of hotels and air tickets is also not in line with expectations. Latam Tavel, one of the largest tour operators in Brazil and sponsor of the Rio 2016, recently reported that the hotel reservation is 30% lower than the initial forecasts. Head of Latam Travel’s Brazilian unit Marcelo Dezem believes that the weak demand reflects a deep recession in the country. Unemployment in Brazil now exceeds 11%, and it is expected that GDP will shrink by more than 3% this year. In addition, people are scared with publications on terrorism and Zika virus. These bad news "affect those who have not decided yet", says Dezem.

At the same time, Airbnb reported that bookings property through its service exceeded forecasts. By August 1, 66 000 tourists confirmed their reservation, says Marcelo Dezem, Airbnb’s manager in Brazil. According to him, number of proposals from owners of rooms, apartments or houses in Rio has doubled to more than 38 000 for the last year. The company declined to disclose percentage of proposals not booked for the Olympics period, yet demand "continues to grow," says Dezem.

Meanwhile, local businesses are preparing for an influx of tourists. A queue of those wishing to take a picture near the five Olympic rings is already lining up on the famous Copacabana promenade in Rio de Janeiro.

Today, the Olympic Games have become not just a global sporting event, but a means of realization of investment public-private projects.

In the midst of the Brazilian economic crisis and growing unemployment rate (the figure was 11.6 million people as of the end of June), the Olympic Games may be a chance for the country to improve its financial situation. However, experts warn that this effect will be short-term and local. FIFA World Cup, held in Brazil in 2014, did not become a salvation for the local economy.

Brazil’s interim President Michel Temer affirmed that flow of foreign investments into the country’s economy will increase after completion of the process of Dilma Rousseff’s impeachment. The initiative should be supported by at least two-thirds of the senators. Meanwhile, supporters of Dilma Rousseff continue mass demonstrations.

Budget of the upcoming 2016 Olympics in Brazil still remains an open question. According to preliminary information, it has already been expanded by $ 100 million. The State Department estimates that total cost of the Olympic Games in Rio de Janeiro will total 9.73 billion. At the same time, the budget increase can have a negative impact on the economy, which has been in decline the past twenty years. Therefore, the government is trying to maximize use of private capital for financing of the summer competition.