Air France to take a $193m hit as tourists shun Paris Olympics

HThe specter of the 2024 Summer Olympics in Paris isn’t doing the French national airline’s bottom line any good. Air France announced on Monday that it expects a loss of up to 180 million euros (US$193 million) during the current financial quarter as tourists avoid Paris during the Olympics, held between July 26 and August 11, 2024.

Fearing crowds and high prices, tourists are not flooding the Parisian capital for the Olympics. “International markets show a significant shift away from Paris,” the carrier said in a statement. “Travel between the city and other destinations is also below the usual June-August average as residents in France appear to be postponing their holidays until after the Olympics or considering alternative travel plans.”

As a result, Air France-KLM estimates “a negative impact on the future revenue of its unit in an order of magnitude of 160 million – 180 million euros for the period June to August 2024”. The carrier expects travel to France to return to normal following the end of the Olympics, “with encouraging demand levels forecast for late August and September.

For context, Air France-KLM reported revenues of over $9.3 billion in the third quarter of 2023, driven by strong summer demand.

Air France’s statement is in line with data from the Paris tourism office, which recently forecast a 14.8% drop in foreign arrivals in July 2024 compared to the same month in 2023.

The same trend is echoed in the hospitality industry. With one month to go until the start of the Summer Olympics, hotel occupancy levels in Paris are peaking at 77.8% for Saturday, July 27, the night of the 14 gold medal events, according to the latest CoStar Forward STAR data . Opening night is a close second, as Friday, July 26 currently shows an occupancy rate of 77.7%. The lowest occupancy rate for this summer’s Olympic period is 59.8% on Sunday, August 11, the final night of competition.

But the entire Olympics period falls below the 81.4% average occupancy the city saw in July 2023, as reported by Insee, France’s official statistics office.

Despite all this, the 2024 Summer Olympics are expected to be a net positive for Paris, generating a 8.9 billion euros (9.6 billion US dollars) in economic impact for the city, according to an independent study by the Center for the Law and Economics of Sport (CDES), which monitored the Paris Games for the International Olympic Committee (IOC) and the organizers of the Paris Olympics.

Between 2.3 and 3.1 million ticketed visitors are expected to visit Paris during the Olympics, roughly two-thirds of them French. Tourists, domestic and international, are expected to spend $2.8 billion, according to the Paris Tourism Office.

Then, add in corporate and private funding. While most of the $7.5 billion in funding for the Paris games comes from media rights, sponsorship and tickets, there has also been significant private investment in long-term infrastructure projects, including a $1.7 billion contribution from the IOC.

In addition, $3.2 billion in public funding is being provided for projects that address the long-term needs of local communities. Of this, 80% goes to Saint-Denis, one of the poorest suburbs of Paris in France. Home to the Stade de France, France’s national football and rugby stadium, Saint-Denis also holds the Olympic Village, which will be transformed into 2,800 housing units and two new schools after the summer games are over.

Tourism experts say travelers will return to Paris once the Olympics are over. “The lower demand we’re seeing for the early summer months can be seen as a temporary fix,” said Christina Choueifaty, senior account manager at STR, a company that provides hotel analytics and benchmark data. “In the long term, the Olympics will further strengthen the city’s position as a major tourist destination, potentially attracting even more demand in the future.”