Summary:
Major sporting events, especially the Olympics, benefit local, regional and national economies because of improvements to the city's infrastructure and increased tourism and the related job growth.
Major sporting events have more important status and have a greater impact upon a wider community or geographical area than a single match. This essay is focused on the impact to the economy of some host cities in both of short and long terms. For example, the World Cup, organizing by the FIFA, which is the Sport's biggest single event every four years. The Olympic Games which involves more than a hundred countries, is also the most effective sporting event of such magnitude and it can, potentially, have a significant economic impact on the host city and, to a varying extent, on the host nation as a whole both positively and negatively. While the actual event may last for only a few weeks, preparations commence up to a decade beforehand and may entail considerable investment expenditures that can have longer-term economic significance.
The full economic impact of the major sporting events on a host city is spread over time, and can broadly be split into three phases:
■ Pre-Games impact
■ Games impact
■ Post-Games impact
The main economic benefits and costs associated with the events are summarized in
Table 1.1.
Economic
ImpactBenefitsCosts
Pre-Games Phase
Impacts first start to occur soon after the city has decided to bid for the events, up to a decade prior to the actual event, but become more significant after the event is awarded. The impacts here relate mainly to the investment and other preparatory activities required to stage the events, but tourism could also start to pick up in advance in some cases due to the higher profile of the host city.-Tourism
-Construction activity-Investment expenditure
-Preparatory operational
costs (including bid costs)
-Lost benefits from displaced
projects
Games phase
The impact of the events, and the associated events immediately surrounding them.-Tourism
-Stadium & infrastructure
-Jobs relating to sports
-Revenues from Games
(tickets, TV rights, projects
sponsorship, etc.)-Operational expenditure associated with events congestion
-Lost benefits from displaced projects
Post-Games phase
The longer-term impact, often referred to as the
"legacy", can last for at least a decade after the events. This mainly relates to post-event tourism and infrastructure effects.-Tourism
Stadiums & infrastructure
-Human capital
-Urban regeneration
-International Reputation-Maintenance of stadiums and infrastructure
-Lost benefits from displaced
projects
Looking upon different sizes of economies, the impact could be classified at different scales, such as local, regional and national . (e.g. to the 1996 Summer Olympics, economic impacts to the host city - Atlanta are at the local extent; to Georgia - a state in the Southwest are at the regional extent, and to the whole USA are at the national extent.) The World Cup2002, the Olympic games1992 and some other games at different locations (those countries and cities are shown on the graph 1.2) have been applied to sum up a conclusion.
Graph 1.2 some host countries and cities in the report on a World Map
The line (knows as North-South Divide) separates the rich North (the MEDCs of temperate latitudes) from the poor South (the LEDCs of tropics and sub-tropics).
2.0Analysis and evaluation
In 2002, South Korea and Japan were both co-holding the World Cup football finals, with 20 new or upgraded stadiums (ten in each country). The best football teams from 32 countries over the world came and contended for the champion of World Cup. This event has enormous positive effects to the S Korean and Japanese economies (showing in the table below), some even last for years. Moreover, the wider economic impact (they are the bully points 6 to 10) is likely to be longer-term, and maybe less quantifiable.
- The tournament was expected to increase Korea's economic output by about 2.2 per cent against 0.6 per cent in Japan, although the Japanese would see a greater inflow of some $25bn against just under $9.0bn in Korea. (Because the size of Japanese economy is much bigger than Korean.)
- 'Nearly $9bn industrial output could be raised and hundreds of thousands of jobs could be created...' predicted by the official think - tanks, like the Korea Development Institute.
- Football fans spent around $600m in South Korea during the month-long tournament.
- FIFA has promised to give South Korean and Japan $110mn each towards the costs of hosting the event, and allowed them to keep the proceeds of ticket sales.
- Domestic consumption was on the rise.
- Despite it could take two to four years for any kind of economic impact to be felt, many people believe this event give a big boost to the economies, and give the countries a unique opportunity to finally turn back on the lingering impact of the Asian financial crisis and usher in a new period of prosperity.
- The event puts South Korea under the international spotlight - raising awareness of the country and its investment potential.
- There are other factors, which could be generalized as 'feel - good factors'. 'The World Cup is a great opportunity for me to promote my self-cooling can when the eyes of the world will be focused on Korea,' says president of a venture company, Icetec, 'I truly believe my invention will revolutionise the drinks industry.'
- As the country braced itself for the arrival of around 400,000 visitors, taxi drivers were getting basic foreign language training. 'I am making more efforts to be friendlier to my customers and foreign guests, 'says one taxi driver Chang Kyu Sok. 'I am determined to give a good impression to visitors.' Thus even before the tourists arrived en masse, preparations for the World Cup was boosting public morale.
- South Koreans especially and Japanese feel confident about the future - and are proud to co-host the World Cup.
The Montreal Olympic Game was so financially disastrous that other cities were deterred from bidding for some time due to the apparent risk of financial disaster. It was financed almost entirely with the city's own public funds, with a considerable amount spent on improving infrastructure and sports facilities in a relatively small area of the city. Such was the extent of the ensuring budgetary shortfall that Montreal's taxpayers are still paying a supplementary tax.
But when Los Angeles hosted the Games of 1984, which was marked as the beginning of the commercialisation of the Games and the development of global Olympic sponsorship deals, only a very small amount was invested in upgrading the city's infrastructure. The Games proved a financial success and generated a budgetary surplus, although it may have had less of a positive long-term economic impact given the lack of new infrastructure spending.
Following that, the Seoul Games in 1988 and, especially, Barcelona in 1992 showed that a city could significantly improve its infrastructure by hosting an Olympics that was also financially viable. The cities upgraded their transport and telecommunications facilities as well as constructing new urban centres with housing, retail and other community facilities that have been fully integrated into their metropolitan areas. The local residents have directly benefited from these.
Another success for the Americans, the short-term economic impact of hosting the 1996 Centennial Olympic Games (in Atlanta) on Georgia's economy was projected at $5.1 billion. Of this amount, $2.6 billion was generated through ACOG's expenditures and $2.5 billion through spending by out-of-state visitors. Hosting the Games added $1.9 billion in earnings to the state's economy and over 77,000 full- and part-time jobs were created. The Games boosted Georgia's Department of Revenue collections by $176 million.
In addition, hosting the Olympic Games increased the economic vitality of the state in longer-lasting, but admittedly less measurable, ways.
- The Olympics left a legacy of world-class facilities.
- The Olympics inspired the renovation and expansion of existing facilities.
- Hosting the Games would enhance Atlanta's reputation as a world-class location for sporting events, conventions, and leisure travel. Thus increase the number of visitors.
- Olympic-related business contracts and visitation would provide opportunities for Georgians to make initial contacts and cement relationships with current and future leaders throughout the globe. The Olympics therefore may catalyse much additional trade and investment.
- Direct, indirect, and induced spending associated with hosting the Games may provide the dollars some existing businesses need for expansion and may also help start-up businesses overcome their typically lean early years.
- The Olympics would provide community benefits including local volunteerism, job creation and training, youth and education programs, funding for community development projects, and cultural programs.
Turning our attention to the 2000 Olympics held in Sydney, The Study found that, over the entire period 1994-95 to 2005-06, the Sydney 2000 Olympics would generate a total of $6.5 billion in extra economic activity in Australia. Some $5.1 billion of this activity occurs in NSW (New South Wales) with the remainder occurring in the other states and territories. The overall impact of the Games was to increase Australian economic activity by 0.12% over a 12-year period from 1994-95. Available figures from the Australian Bureau of Statistics show Australia with $1.4 billion from Olympic-based income during the September quarter. This included $450 million in export revenue and broadcast fees of $973 million. The trade balance went from a $1.3 billion deficit in August to a September $677 million surplus . This was Australia's first trade surplus since November 1997. Moreover, the Sydney Olympic Games were an unqualified success as a result of which Australians felt a strong sense of pride, as well as gaining good image like 'friendly Australians' as a bonus.
Figure2.1 illustrates growth rates for the major components of domestic demand in the NSW region of Australia.
Despite of these several successes, major sporting events also post negatively impact, especially in a longer-term. The financial burden of hosting the 2004 Olympics is proving significant to Greece, due to an approximately $11 billion total spending.
Preparations for this event appear to have contributed materially to the relatively strong performance of the Greek economy over the past three years. This has been sustained during a period when most of the rest of the European economy was suffering a marked slowdown, although there are other important factors (including lower interest rates due to euro entry and sizeable EU fiscal transfers) that have helped to boost the Greek economy over this period.
However, (with expenditure on the Olympics project) with construction delays and the increasing estimated cost of staging the Athens Olympics, cost overruns have marked concentrated in the years 2003 and 2004 and this has contributed to a widening of the government's budget deficit. The 2002 deficit was 1.4% of GDP, but this rose to an estimated 3.2% of GDP last year, exceeding the limit permitted under the EU's Stability and Growth Pact and significantly in excess of the original 0.9% target. Together with the expected decline in investment spending after the Games are completed, there is clearly a risk that Greek GDP growth could slow more rapidly than suggested by the current consensus forecast of around 3% growth in 2005. The new infrastructure constructed for the Games should be a positive legacy for Athens, but it may be associated with a debt overhang that could take many years to pay off. Also, how are the citizens going to use the sporting facilities (such as the Olympics Village and massive stadiums) efficiently? Therefore, economic sustainability in a longer-term is vital to the success of holding the Games.
It has been argued that the Olympic Games merely provide a one-time impulse to the domestic economy (nationally). The effects of a non-recurring boost to expenditure weaken over time and the multiplier works in the opposite direction as demand falls and the economy returns to the equilibrium income that existed before the Games. Indeed, Figure 2.2 would appear to support such a hypothesis in the case of Spain.
- Both public consumption and investment slowed as preparations were finalised in the run up to the Barcelona Olympics, and the subsequent contraction in investment expenditure proved particularly sharp.
- Consumer spending held up well until the third quarter of 1992 when the Games were held, but then fell back in subsequent quarters.
In fact, the hypothesis needs to refer to a wider economic situation. The 1992 Olympics coincided with a wider economic downturn in Europe, related in part to the aftermath of German reunification.
Figure2.3 compares GDP growth in Euro land with that of Spain and the Catalonia region, illustrating how the slowdown in Spanish growth rates largely reflected a wider European trend.
One could perhaps argue that the slowdown proved somewhat more abrupt in Spain, particularly in Catalonia (regionally), which may have been connected to a post-Olympics hangover, but the effect should not be exaggerated and could reflect other factors (e.g. different industry structures).
Indeed, this conclusion is borne out by Figure2.4, which illustrates how the growth rate of GDP in the state of Georgia exhibited little significant fluctuation in the years surrounding the Atlanta Games of 1996.
- A more significant effect does seem apparent at the sectoral level, within those industries most closely related to the Games.
- This is particularly clear in the hotels sector, where there was very strong growth in the year of the Games followed by a relatively sharp contraction in the subsequent year.
- A similar slowdown also seems apparent in the construction and transport & utilities sectors following strong growth in the run up to the Games, although the effect is more muted.
- Given that hotels account for less than 1% of the state's GDP, while construction and transport & utilities together account for only around 15% of state GDP, it is perhaps not surprising that any effect on aggregate GDP from fluctuations in these sectors seems to have been overshadowed by other sectors unaffected by the Olympics.
Overall, the evidence for a significant post-Olympic slowdown is not clear. One may expect some deceleration of growth rates in sectors linked closely to Games-related activity, but as these sectors generally account for a relatively small proportion of the economy, overall output growth seems unlikely to be significantly affected. Of course, this will also depend somewhat on the size of the host city's economy and the amount invested in Games preparations. For example, these factors might make the post-Olympics slowdown relatively more significant in the case of Athens.
3.0Conclusion and evaluation
To sum up, major sporting events have brought benefits to people on different extents. On the other hand, it also brings negative impacts to the bidding country over time (in those three phrases).
While the financial outcome from hosting the sporting events can be identified reasonably clearly after the event (at least two to four year, the Post-Games impact could be justified; therefore, the case of Athens does not include in phrase three), it is much more difficult to generalise about the overall economic impact of the Olympic Games. The contrasting examples of Montreal were taxpayers are still meeting the financial costs of the Games, and Los Angeles, which ran a large financial surplus, can be quoted here. In terms of the wider economic, the legacy of the Barcelona and Sydney Games is generally regarded as positive, but quantifying this effect is difficult. There are great uncertainties around many of the assumptions underlying such analysis. Such as changes of the EU laws and policies may affect individual business, and even national trade.
There is some evidence of post-Games economic slowdowns, particularly in the most affected sectors such as construction and hotels, but it is difficult to demonstrate a causal link here given that there are so many other factors that influence overall economic performance during such periods.
Clearly, most of the countries, which won their bids for the Games are classified as MEDCs, that demonstrate state of economy and resources available could be a major factor for hosting major sporting events. Table 3.1 shows the two common indicators measuring economic development of the seven countries. It gives a general idea of levels of development via numerical way. And this is reflected to the assumption above.
Economic
DevelopmentSpain
- Oly.USA
- Oly.Australia
- Oly.Japan
W.C.2002S. Korea
W.C.2002Greece
- Oly.China
- Oly.
GDP 18 00036 20023 200249 0016 10017 2003 600
HDI 0.9130.9390.9390.933----0.8850.726
However, between countries divided by the line of 'North-south divide' (See Figure 1.2), the develop gap has been narrowing. A country, such as China, has won a bid of the 2008 Beijing Olympic Games. As I feel really proud of this, I have decided to be a volunteer by the time. It could be a better way to sense effects by such a major sporting event, rather than according to past data.
4.0 Appendix
Scales
EventsBarcelona
- --12yrsAtlanta
- --8yrsSydney
- --4yrsAthens
- -3months
LocalNew suburban highways and tunnels reduced downtown traffic by 15 percent.The local residents are mostly benefited from the world-class facilities, including the $189 million Olympic Stadium, a tennis facility at Stone Mountain, the $10 million Lake Lanier Rowing Centre and more.Those world-class sporting facilities have provided Sydney with the state of the art sporting infrastructure to host other international sporting and major events.
RegionalPrior to the 1992 Barcelona Olympic Games, Barcelona was ranked as the 16th most popular tourist destination in Europe. By 1999, it had risen to third.
From October 1986 (the month Barcelona won the bid) to July 1992, the general rate of unemployment in Barcelona fell from 18.4% to 9.6%-a drop of nearly 50%.The Atlanta Olympic Games added $5.1 billion to the Georgia economy.
Many of Georgia's public and private universities would benefit from newly constructed and renovated facilities. E.g. ACOG contributed $47 million to create the Olympic Village for the construction of new dormitories that eventually will be used to house Georgia Tech and Georgia State University students.The Games provided for the regeneration of previously poor and partly contaminated land at Homebush Bay. This land is close to the geographic centre of Sydney, providing facilities for Sydneysiders.
The International Aquatic Centre is a very popular venue for the swimming public.65,000 new permanent jobs
- kilometres of new road
- ,000 new trees, 11 million new shrubs
A New International Airport
An expanded metro system
A new, ultra-modern Traffic Management Centre
An increase in tourism
A $1.3 billion (€1.22 billion) boost in public sector revenues
35% improvement of the quality of the environment
NationalThe Barcelona Games added $16.6 billion to the Spanish economy between 1986 and 1993.As a result of the 1996 Atlanta Games, spending from out-of-state visitors injected $2.5 billion into the economy.It was estimated that the Sydney 2000 Olympic Games will add $6.5 billion to the Australian GDP and 100,000 full-time jobs over a 12 year period from 1994-2006.
Australia saw an 11% increase in total visitors for 2000. Interestingly, the highest month total (565,000 arrivals) was achieved in December-3 months after the Olympic Games.
1.5 million additional international tourists are expected to visit Australia until 2006 because of the staging of the Olympic Games. This is estimated to generate an additional $2.7 billion in tourism exports.For the people of Greece, the legacy of the 2004 Olympic Games will begin with the economic benefits of investing in upgrades to the transportation infrastructure, telecommunications system, and the environment. These investments
would benefit Greece for years to come.
- 0Bibliography
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