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Aug 17, 2013

Brazil concerned over hotel price hikes

SAO PAULO -- The Brazilian government is concerned that some hotels listed on FIFA's website for the 2014 World Cup plan steep price hikes during the tournament and is reportedly considering investigating the FIFA-appointed agency in charge of accommodation.

Brazil's tourism board has notified the justice ministry after its research showed that rates will be up to 500 percent more expensive during the World Cup in some hotels offered by the agency MATCH Services on FIFA's website.

"It's probable that MATCH is exercising intermediation fees that are a lot higher than usually exercised in the tourism market," the board said in a document obtained by The Associated Press, "harming the rights of potential consumers."

MATCH denied any wrongdoing on Saturday, saying it "provides a totally transparent price structure."

"With a small number of exceptions where MATCH Services has had to accept higher than normal rates, all other participating hotels have accepted and agreed to embrace FIFA's and MATCH's policy to provide reasonably acceptable rates," it said in a statement.

The Swiss-based company is primarily responsible for contracting and delivering accommodation for the FIFA community, including its officials, delegates, guests and staff. It also sells rooms to FIFA's commercial affiliates, the media and customers of the official hospitality program. Rooms are offered to the general public through the FIFA website operated and maintained by MATCH.

The study by the tourism board, known as Embratur, compared prices in several dozen hotels in the 12 host cities. It was conducted through researching prices announced on booking websites, the hotels' sites and FIFA's official web page.

Embratur did not say exactly how many hotels were compared, but of the 65 hotels listed in the study's results 22 increased prices more than 200 percent, with six offering rates at least 300 percent higher. The biggest increase was by a hotel in the northeastern city of Salvador, which will charge $509 per night during the World Cup, a 583 percent increase compared to the $75 it charged this July.

The host cities with the smallest increase in rates are Recife and Sao Paulo, with hikes of about 100 percent on average. The capital of Brasilia had the most expensive hotel in the study, with certain rooms costing $639 per night, a 376 percent increase compared to the current price.

The study showed that the average cost for a room in Rio de Janeiro during the World Cup will be $461, more than double the rate in Johannesburg for the 2010 World Cup final in South Africa.

Embratur said it wants to negotiate better prices in part because it's afraid that excessive rates during the World Cup may hurt Brazil's tourism in the long run.

"Raises without limits may satisfy the profit expectations of some, but they are bad for the sustainability of the business," Embratur president Flavio Dino said in a statement sent to the AP. "We are hosting these mega events in Brazil to help increase the flux of tourists in the country in the long run. The government will do everything possible to protect the image of the country and of the industry itself."

Pricey hotel rooms became a hot topic last year during the Rio+20 U.N. conference, when the hotel sector took advantage of the spike in demand to charge exorbitant rates. The average cost of a room in Rio during the conference rose to nearly $800 a night, prompting a barrage of criticism from conference delegates. The European Parliament canceled its entire 11-person delegation due to the costs.

President Dilma Rousseff's office got involved at the time and negotiated with the hotel sector to reduce some of the prices.

In its letter to the justice ministry, which is responsible for handling consumer rights issues, Embratur also criticized MATCH for imposing minimum stays of at least two nights at the World Cup hotels. The document dated June 17 was obtained by the AP on Friday.

MATCH may also reportedly be targeted by Brazil's antitrust agency for potential violation of free competition rules. The Valor Economico newspaper has said that prosecutors have already asked the agency to investigate the company's operations.

MATCH has vehemently defended itself, saying that "it is incorrect to suggest" that the hotels it signed a contract with in Brazil are overcharging.

"The rates secured by MATCH Services from its partner hotels and those it offers to its customers are in the vast majority of cases reasonable and compare well to rates available outside of the FIFA World Cup," it said in a statement. "(Hotels are) acting in a fair and reasonable manner taking into account the market forces and the investment made by them."

It added that higher prices were already expected in Brazil during a major event like the World Cup.

"These prices are dictated by the prices MATCH Services have been able to secure from the hotels," it said. "They are not the product of an abuse of a dominant position held by MATCH Services, but rather the fact that the Brazilian hotel industry by tradition over many decades has enjoyed high yields per room night during major events, whether it is a major conference, Carnival, New Year or Formula 1 racing."

The president of the Brazilian Association of the Hotel Industry downplayed the Embratur study, calling it opportunistic because nearly all of the rates had already been set a long time ago. Enrico Fermi said the prices were established when MATCH signed agreements with more than 800 hotels right after Brazil was picked as World Cup host in 2007.

"FIFA told us that the prices here are acceptable and compatible with the international market," Fermi told the AP in a telephone interview.

The average price of a room in Johannesburg for the 2010 final was $200, while in Berlin in 2006 it was $300, according to Embratur.

"To compare room rates in Sao Paulo and Rio for the 2014 FIFA World Cup to those that MATCH Services provided in Johannesburg for the 2010 FIFA World Cup does not make sense," MATCH said in its statement. "All it would prove is that the difference is in line with the difference at any given time between the cost of accommodation in Rio or Sao Paulo and Johannesburg."

Brazil ranks 33rd in the list of most expensive hotel rates in the world, according to Fermi.

The local World Cup organizing committee and Brazil's sports ministry referred all requests for comment to Embratur. FIFA said only MATCH would comment.

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