Europe inflation may spike on Olympics and Taylor Swift, but UBS says it won't hit locals' wallets

cnbc.com:

The Olympic Games are causing a surge in prices, but French consumers aren't likely to feel its pinch.

Mega events like the Olympics, or even big concerts like Taylor Swift's Eras tour, lead to a rise in demand for hotel — rooms and airline tickets, as well as other goods and services needed by the influx of visitors. Even so, most consumers may not feel the impact, according to UBS. 

Still, the data might suggest otherwise. That's because the method for calculating consumer price changes might pick up the spiking costs in industries associated with tourism — like hotels — and provide a distorted impression.

«The Olympic Games or a Taylor Swift concert create a sudden demand shock,» wrote Paul Donovan, chief economist at UBS Global Wealth Management, in a recent analyst note. «The measurement method for these prices is more likely to capture the unusual and transitory pattern of demand, and it is here that the increase in consumer price inflation takes place.»

This was already seen with the Eras Tour, as it boosted hotel revenue in cities across the U.S. where Swift was performing.

This year, U.K. hotel prices increased in June, but Donovan said the higher costs «may have been borne by a select group of aficionados of Swift's music» given that the Eras Tour came to Wembley Stadium that month.

Meanwhile, the Summer Games are causing a similar phenomenon in Paris. «The tourists flocking to Paris for the Olympics, and paying the price, are not representative of French consumers,» he wrote.

Though hotels in the City of Light struggled in the beginning of July, with an estimated 60% drop in occupancy rates that prompted hotels to discount rates, the trend during the Games has reversed. Paris hotel occupancy levels during the