Olympics may cause £3.5bn loss to the tourism industry

Olympic stadium of London 2012 (EPA)

Unwanted hotel rooms needlessly reserved for dignitaries by Olympics organisers will be a key factor in a tourism slump which is set to cost Britain billions of pounds this summer, leading figures in the travel industry have warned.

The London Organising Committee of the Olympic Games (Locog) admitted yesterday that it had overestimated by 25 per cent the number of rooms needed by officials, media and sponsors. It has handed back 120,000 of the total 600,000 nights booked for London 2012.

But tour operators said a sudden flood of vacant rooms would be too late to boost visitor numbers. Analysis for i suggests that up to one million beds will now go unsold over the Olympic period. The European Tour Operators' Association, representing firms handling inbound tourism, believes the slump could cost up to £3.5bn. Premium Tours, a London sightseeing firm, expects its business to decline by a third this year. Its boss, Neil Wootton, said: "Prices have been so high that tourists are simply moving elsewhere.

Hotel rates have broadly tripled in London over the Olympics but evidence from previous Olympiads suggests hoteliers' expectations are wildly optimistic, exacerbated by Locog's similar over-optimism.

The likelihood is that London hotels will be less than 80 per cent full with one million beds empty over the duration of the Games, or 55,000 beds a night. In July and August of a normal year, occupancy is 90 per cent or more.

But VisitBritain expects inbound tourism to be the same as last year, with 30.7 million visitors. The chief executive, Sandie Dawe, welcomed Locog's release of rooms, saying: "We have a fantastic range of deals in place to entice visitors to travel here."