Effects of medium-sized opera festival on hotel sector in Finland, a difference-in-differences approach

The research question is to study the effects of an opera festival on the hotel industry in a small city, Savonlinna, in Finland. The Savonlinna opera festival takes place every summer except when the COVID-19 pandemic led to a cancellation. While room rates differ across hotels and booking time, the events should on average have an increasing effect on hotel rates and revenues. The conventional measures in hotel management are revenue per available room (RevPAR), average daily rate (AvPri) = (room revenue)/(rooms sold) and occupancy percentage (CU%) = (rooms sold)/(rooms available) or simply demand/supply. The festival has considerable effects on the Savonlinna region economy. Due to pandemia, two succeeding opera festivals were cancelled. The purpose of this study is have a look at hotel business statistics using a differences-in-differences method when the festival was cancelled. Savonlinna is so called summer city meaning that many Finns visit the city during the summertime. The hotel capacity doubles during the summer but the hotel room supply of good quality is far less than the number of seats in the opera festival venue. Hotel management can increase both average room price and capacity utilisation and therefore also revenue per available room (RevPAR) which is conventional measure in hotel business. The data covers nine cities and 140 months from January 2011 to August 2022. The estimation results show that all measures above mentioned increased in relation to other sample cities in Finland even when the opera festival was cancelled.