I am heading to the U.S. next week and will be speaking at the Wharton China conference on Saturday about the tourism sector in China. We are currently the largest digital direct marketing company for the travel sector in China, and the Wharton people have asked me to talk about the impact of the Olympics on the Chinese travel sector.

If you do not work in the travel sector, you might be assuming that with all the tourists arriving in China and the hotel room rates jumping 300-800% that hotels and travel sector suppliers are planning to earn big bucks. This is not true. In 2007, hotels in Beijing had already cut their marketing budgets for this year — so that means suppliers won't be earning much income — and since not all hotels in Beijing earn most of their revenue from hotel rooms (surprise, surprise), their F&B and MICE businesses will suffer. A few months ago, the Beijing government issued a rule that forbid new conferences and exhibitions from coming into Beijing for about three months around the August 8 opening of the Olympics, so this hits Beijing hotels very hard if they rely on that MICE business (and at least 14 of our clients who are 4-star and 5-star hotels in Beijing rely on MICE for at least 35% of their revenue). There will be 2-3 weeks of downtime before and after the Olympics that will balance any increased earnings by companies during the actual two weeks of the games.

Last night in Shanghai, the Amcham Travel & Tourism committee held an off-the-record meeting, and while I can't divulge what was said, I can say that the hotel executives present expected, at best, a mild revenue increase at the end of 2008 for Beijing hotels. That's "at best". And two weeks ago in Shanghai, I was at a conference where Susan Sun, the CFO at Ctrip.com, said they were even planning for a modest decline in booking and revenue for the third quarter of 2008.

Sure, airports are being expanded and construction companies are making lots of money, but the hotel (and most airline) brands do not expect mountains of cash at the end of 2008.

Here is a good piece on the effect of the Olympics on Sydney via an Arthur Andersen Hotel Industry Benchmark Survey:

Operational challenges faced by Sydney hotels during the Olympics included declining Food & Beverage revenue, displacement of loyal demand and increased payroll costs.

This all being said, there is still great uncertainty among executives, so I hope everyone in the travel sector is wrong and I hope there are ways to greatly increase revenue for the last two quarters of 2008 within the travel sector. I hope.