It is often argued that major sports events like the World Cup and the Olympics can lead to economic regeneration. Some worry about the economic costs involved in hosting a major sporting event that lasts for only three weeks.
The following are some of the economic benefits of the Olympic Games and other major sporting events.
2. Influx of foreign visitors: Major sporting events, such as the Olympics, can attract thousands of foreign visitors. The presence of these foreign tourists boosts the local economy. The surge in visitors will benefit not only the local tourist industry but also local shops and hotels. However, it is important to keep in mind that these numbers are usually temporary. Major sporting events only last a few weeks; there may be many empty hotel rooms in the future. In contrast, some argue that a major sporting event can spur a long-term increase in tourists. e.g. China felt the Beijing Olympics created a feeling that China could be a popular tourist destination. Barcelona saw higher visitor numbers continue after the Barcelona Olympics of 1992.
3. Job creation: In most cases, major sporting events require the construction of stadiums and hotels. As a result, jobs are generated in the local economy for up to four years before the event. Additionally, the extra jobs generate a positive multiplier effect for the local economy.
4. Higher economic growth: It is estimated that the ‘Olympics Effect’ leads to a boost in economic growth due to the higher investment and foreign visitors. This leads to higher tax revenues for the government.
Costs of events like the Olympics
1. Expense: In recent years, the cost of hosting a major sporting event has increased significantly. Not only does it cover all the investments, but it also features a heightened level of security. By relying solely on sponsorship and ticket sales, it is very difficult to meet these costs. Therefore, the local population could face higher taxes. Costs have been significant burdens on local economies in places like Montreal and Athens. The Montreal Olympics was estimated to have cost $120 million (1970) – then rising to an estimated $310 million (1973). The final cost was around 13-times greater at $1.6bn. It took 30 years to pay off the Olympic debt.
2. Will the infrastructure be used in the future?: There is a lot of investment necessary for the Olympics, which may not always be used later. Some customized sporting events are unlikely to be used in the future. It is inefficient to use resources if they weren’t used. As a result, taxpayers will have to pay for the cost of construction but will not see any improvement in public services.
3. Disruption during the event: It is feared that during the Olympics there will be a disruption to local businesses not affected. As an example, increased security makes it increasingly difficult for businesses to continue as usual.
4. Opportunity cost: Local taxpayers are not always supportive because they feel that there are better alternatives to spending public money on the Olympic stadium. For example, building social housing, improving the environment, and improved transport.
5. Local business squeezed out by contracts with multinational sponsors: The Olympics is partly financed by large marketing budgets of multinationals, such as Coca-Cola, Visa, Samsung, and others. However, the advertising comes with strict rules about monopoly privileges associated with the Olympics. Local businesses can be banned from mentioning the Olympics; there is no scope for local suppliers to be involved.
Evaluation
- It depends on how much investment is required in the first place. e.g. do all stadiums need to be built? can the stadiums and facilities be effectively used after the games?
- Can firms keep to initial cost estimates? (e.g. New Wembley was much more expensive than first predicted)
- Some sectors of the economy benefit much more than others. Good for tourism and hotel owners, but locals may feel they have more disruption.
- The host city may benefit the most, but the cost spread across the country, which doesn’t see the same benefits.
