World Cup: Doha and the Economics of Supply and Demand

SoccerBallFootByBronskiBeat

Arabianbusiness reports that overall hotel capacity will need to be multiplied by 5 for the FIFA world cup in 2022. But that means a lot of unused hotel rooms post World Cup, and a 22% annual increase till then. 

The simple economics of supply and demand are at play here. Too many hotel rooms, little pricing power for the Doha hotel industry. 

“Although the recent growth of the tourism industry in Qatar has been robust, it will be difficult for the country to achieve the level of visitor growth which will garner enough demand to support a 400 percent expansion in the number of hotel rooms in eight years”

Even more troubling: when capacity is plentiful, prices tend to go down to the marginal cost of an additional room, and the overall ROI on the hotel project may be negative — with too much capacity, the price does not cover the cost of new capacity.

That will be a pretty cool case study for business school students. More here.

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