Do the Olympics Boost the Economy? Studies Show the Impact Is Likely Negative
Politicians claim the Games help the economy and create a tourism boom. But Mark Perryman, author of Why the Olympics Aren’t Good for Us and How They Can Be, busts the myth of economic regeneration.
On July 6, 2005, at the 117th International Olympic Committee Session in Singapore, London made its final presentation for its bid to host the 2012 Summer Games. Mayor Ken Livingstone, who used to be the firebrand known as “Red Ken,” had previously shown little or no interest in sport in the capital. But he was now older and cuddlier, his sharp edges smoothed by the responsibilities of mayoral office. As he made his bid, he dubbed London 2012 “The Regeneration Games,” his enthusiastic support informed by his belief that they would deliver for East London much needed economic renewal.
When the presentations ended and London erupted in celebration after besting favorite Paris in the final round of balloting, the promise of how London and the country would benefit from the Olympics hardly seemed to merit a murmur of a challenge. But in fact substantial question marks can be placed against the promises made.
Let’s examine the idea that the Olympic Games could provide stimulus for a depressed part of the host city. The thinking behind this approach was articulated by two of New Labor’s favored think tanks, Demos and the Institute for Public Policy Research, in their joint report After the Gold Rush. Published as the Olympic bid was being finalized in 2004, the report brought together a collection of contributors to identify the measures needed for a sustainable Olympic legacy. “The Olympics must be embedded within existing mainstream programs and policy agendas that start well before 2012 and continue well after,” the report insisted, adding, “For local communities to fully benefit from any opportunities, there must be an investment in community capacity and ownership.” These sentiments expressed the kind of centrist politics that Blairism had come to represent, and they have been regularly repeated by Labor’s Tory successors in office. Hindsight is a wonderful thing, but as the Greek people try to resist a program of austerity almost unimaginable in its intensity, it is salient to recall the introduction to the Demos/IPPR report, written in the afterglow of the Athens Olympics of 2004 by then Olympics minister, Tessa Jowell: “This summer, we’ve seen the transforming effect of hosting the Olympics. Athens is a changed place: cleaner, brighter, easier to get around, vibrant and modern. In Athens, as with Barcelona in 1992, the Olympics was a catalyst for investment, and the Games themselves an opportunity to present the city and country in a new light.” Of course Labor MP Jowell couldn’t have anticipated the devastating impact on the Greek economy of the global recession that began three years later. But long before the tidal wave of austerity broke, the signs weren’t looking good for the Athenian “new light” of her breathless enthusing.
It’s true that the Athens Games refuted many of the more pessimistic prognostications that preceded it. The facilities would never be finished on time, the British media confidently predicted, and the city's infrastructure would never be able to cope. In the end everything was ready and the Games passed off without too many complaints. The air pollution in the city wasn’t as bad as feared, although the smog and high daily temperatures didn’t favor the endurance events. And of course the historic setting provided a supremely evocative backdrop for Greece’s second-only hosting of the Games since their modern reinvention in 1896.
But the transformation that Jowell gushed about simply never materialized. The increasingly sorry state of almost all of the former Athens 2004 venues in the wake of the Games has been well-publicized. Twenty-one out of 22 of the stadiums, arenas, sports halls and swimming pools built for the Games are either derelict, in a state of disrepair, boarded up or unable to find a buyer and underused. As the Beijing Games opened four years later Athens faced a bill estimated at $784 million simply to maintain this ghost town of Olympian extravagance. And, according to research commissioned by the London Assembly, A Lasting Legacy for London? Assessing the Legacy of the Olympic and Paralympic Games, published in 2007, the increase in jobs for the Greek population proved to be remarkably short-term: “Immediately following the Games, the positive employment effect moved into reverse. In the three months after the Games, September–November 2004, Greek industry lost 70,000 jobs, the majority in construction.”
In an attempt to understand what went wrong, academics Evangelia Kasimati and Peter Dawson published a report in 2009 entitled Assessing the Impact of the 2004 Olympic Games on the Greek Economy. They pointed out that “the overwhelming majority of the costs have been financed by the public purse, this appears to reflect the growing importance governments have attached to the notion of Olympic legacy.” They noted that the same applies to London 2012. Worryingly, they concluded that while the immediate impact of the Athens Games was quite positive, “the long-term economic legacy effects with respect to both GDP and unemployment appear to be quite modest.”
A similar analysis had been undertaken to assess the economic impact of the Sydney Games, held four years earlier. The findings of The Sydney Olympics, Seven Years On by James Giesecke and John Madden of Monash University's Centre of Policy Studies were, if anything, even more damning: “In terms of purely measurable economic variables the Sydney Olympics had a negative effect on New South Wales and Australia as a whole.” According to Giesecke and Madden, that doesn't mean Australians weren't willing to support the Sydney Games; rather, the promises made proved impossible to fulfill. “Taking into account a possibly higher preference for sport by Australians it is feasible that Australians were willing to cover this loss,” they said. “However it now seems … unlikely that the Games produced a double dividend of intangible benefits and an economic boost of the sort previously thought.”
Previously, in 2000, the International Association of Sport Economists published a paper reviewing the regenerative effects on Atlanta that had occurred as a result of staging the games there in 1996. In Bidding for the Olympics: Fool’s Gold? Robert Baade and Victor Matheson point out,
To a significant degree the Olympics represent an alien industry, one that does not connect or mesh well with established businesses. In addition to the Olympic Stadium, ACOG (Atlanta Committee for the Olympic Games) created an International Horse Park of 1,400 acres, spent $17 million on the Wolf Creek Shooting Complex and another $10 million on the Lake Lanier Rowing Center. These facilities may be unique, but explanations are required for how these rather esoteric developments fit with other industries and contribute to the economies of scale arguments that underlie, at least in part, the sectoral clustering, cumulative causation and disequilibrium dynamic adjustment models that represent contemporary explanations for the rapid growth in some MSAs (Metropolitan Statistical Areas).
While their analysis is rich in economist gobbledygook, the authors nevertheless offer a common-sense conclusion that couldn’t be clearer. “Diverting scarce capital and other resources from more productive uses to the Olympics very likely translates into slower rates of economic growth than that which could be realized in the absence of hosting the Olympic Games.”
The defenders of the Olympics invariably endeavor to get round these kinds of short-term cost-benefit imbalances by demanding that critics consider the longer-term positives in the shape of image and attitudinal shifts toward the host city and nation. They claim these will lead to increases in tourism, inward investment, and better economic prospects. But for Sydney there was little or no boost of this kind. An Australian Tourism Industry report based on detailed survey evidence, The Sydney Olympics and Foreign Attitudes to Australia, by authors that included Nancy Rivenburgh, a former professor of olympism at Barcelona's Centre for Olympic Studies, offered an entirely plausible explanation for the crucial American market’s reluctance to see Australia as a newly desirable destination for tourism and investment: “Given that the Sydney Olympics were constructed as global entertainment, U.S. media-coverage of the Games and Australia, for the most part, simply reinforced the already-held imagery of Australia as a far-away exotic location peopled by friendly folk who seemed almost American. Given that there was no Sydney 2000 media coverage that served to fundamentally challenge already-held images and attitudes, American perceptions, not surprisingly, remained largely constant before and after the Sydney Olympics.”
It’s actually self-evident that reaching out globally to those unaware of a host city’s potential for business and fun is almost impossible to achieve in the space of two weeks of hurried TV shots of Olympian feats in stadia that look pretty much the same the world over. With only the occasional scenic television backdrop to the main action taking place in the sporting contests themselves, why should any more profound change in the perception of the host city occur among the global audience? After watching the action from London 2012 how many additional tourists in future years are likely to step out beyond the city’s existing major tourist destinations to investigate the attractions of Tower Hamlets, Newham, Waltham Forest, and Hackney? To ask the question is to answer it.
With the widely acclaimed redevelopment of the city that accompanied them, the Barcelona Games, held in 1992, can certainly be regarded as an exception to the general dismal pattern. But, two decades on, the factors that accounted for the singular success of the event in the Catalan capital have been conveniently obscured. In a piece they wrote for the travel trade’s Tourism Insights, website business experts Iris Hillier and Rafael Isun cite four key reasons why matters took a different, more positive course in Barcelona.
First, the Games took place just 10 years after Spain’s first democratic elections following the death of General Franco. The country had only recently joined the European Union. Though Spain had been a popular holiday destination during the Fascist era, its attraction for tourists significantly increased in the wake of these changes and created a domestic mood of hope and expectation that greatly boosted its potential for hosting the games.
Second, Barcelona had hardly any kind of global profile prior to 1992. Very few of the journalists covering the Games had visited the city previously, and consequently knowledge of the many attractions that Barcelona had to offer was low. The architecture, culture, cosmopolitanism, and engagement of the local population could hardly fail to impress.
Third, a few years after the Games took place, European air travel was deregulated and the boom in cheap budget flights began. The overseas-city weekend break became a reality for millions, and Barcelona was better placed than most to take advantage of it. With 30 new hotels built, the city had more than doubled the number of available tourist beds in preparation for the Games. Within a year of the Games, occupancy levels had fallen from 80 percent to just 50 percent. But the arrival of low-cost travel soon took up the slack.
None of these advantages are available to London in 2012. The city is already a world-famous tourist destination; none of its landmarks are likely to be unfamiliar to the global media attending or the global audience following the Games on TV. And any boom in budget airline travel is long past.
One of the best critiques of the Olympic promise comes from the European Tour Operators Association (ETOA). A trade organization for European travel companies, the ETOA is not a hotbed of anti-corporate campaigners or an encounter group for rosy-eyed sports romantics. It’s hard to imagine that if there were any evidence that the Games would boost tourism they wouldn’t be among the Olympics’ biggest cheerleaders. But the ETOA states in its authoritative Olympic Report published in 2006: “The audiences regularly cited for such events as the Olympics are exaggerated. Attendances at the Games displace normal visitors and scare tourists away for some time. There appears to be little evidence of any benefit to tourism of hosting an Olympic Games, and considerable evidence of damage.”
One point is particularly well made. Picking on four of London’s most well-known destinations for football, tennis, and cricket, they point out that “Wembley, Wimbledon, St John’s Wood, and Kennington have not become major non-sporting resorts.” A cursory wander around the streets surrounding Wembley Stadium, the biggest location of the four, would quickly confirm this. Fast-food bars do a decent trade on match days and thus proliferate, pubs take on extra staff, but that’s about it. The sort of structural urban renewal that London 2012’s supporters promised is almost entirely absent.
The report also comments on the likelihood of global TV coverage further expanding London’s reputation as a must-visit destination: “Sports fans watch television in order to enjoy the sport. This activity is notoriously narrowly focused, as viewers get ever closer to the athletes, and each move is broken down frame by frame. The moment this is over, their attention is drawn to the next event.” The Olympic stadium, pool and velodrome will go down in history as the places where epic contests were fought and Gold medals won. But except for a dedicated few, there will be little desire to visit them subsequently. Instead, within a few months, all eyes will be on Rio de Janeiro, host of the 2016 Games.
The ETOA report suggests that the impact on tourism during an Olympic year for a host city is not much more than negligible; often it’s actually negative. In 1996 in Georgia, home state of host city Atlanta, hotel occupancy rates fell from 73 percent in the previous year to 68 percent. Sydney 2000 saw hotel occupancy fall steadily as the Games approached, from 83 percent in March to 68 percent in July and August, before a modest recovery to 80 percent during the Games themselves. In an update of its 2006 report, the ETOA established that Beijing in 2008 recorded 30 percent fewer tourists in July of the Olympic year compared with the same month in 2007, with a 5 percent decline year-on-year for August when the Games were taking place, and 25 percent below in the following months through to December. A recovery has since occurred, but this is ascribed to Beijing hoteliers’ slashing room rates rather than the attraction of a visit to the Bird’s Nest stadium. The ETOA points to a rarely mentioned consequence of hosting the Olympics: “Olympic visitors effectively scare other visitors away. Regular tourists assume that congestion and increased prices are a feature of Mega-Events.”
But if overall figures for the year in which the Olympics take place are often down, surely the Games attract greater tourist income whilst they are actually taking place? Not according to the ETOA, whose study shows that the Olympics, when looked at in financial terms, don’t deliver. This is due to the nature of the visitors who accompany the holding of the Games: “During the Olympic period, the entire bed-stock of a destination is devoted to the travelling officials, the press and spectators. These visitors are unlike “regular” tourists, having different spending and behavior patterns. They are not interested in “tourism”—they are interested in sport. They tend not to spend money on leisure and entertainment, and when not in the stadia they watch events on TV rather than engaging in other activities.”
Any financial benefit from Olympic tourism is almost exclusively short-term and hotel-specific, jacking up the room prices for a few weeks for a clientele who are unlikely ever to visit again, as they move on to the next major sporting event. The ETOA ends up with a withering assessment of the likely benefit of the Games for tourism: “During the Olympics, a destination effectively closes for normal business. The repercussions are felt before and after: both tourists and the tour operators that supply them are scared off immediately before and during the events. This “absence” then creates its own effect, as the normal conveyor belt of contented customers begetting new arrivals has been broken.”
Although perhaps the most visible, tourism is of course only one of the economic and social benefits the Olympics seek to claim as their own. However, in Bidding for the Olympics Baade and Matheson offer the beginnings of an alternative to the existing Olympic system: “If cities are intent on hosting the Olympic Games they must do the obvious, that is they must take steps to counteract the monopoly power of the International Olympic Committee.” This is precisely what London and every other bidding city has failed to do. The IOC has been allowed to elevate itself into a kind of all-powerful quasi-state, with the affiliated nations of the world, and the contestants in the quadrennial beauty pageant to determine the host city, fully compliant in this development. As Baade and Matheson point out, there is a compelling need to challenge the IOC: “It is in the collective interest of potential host cities to devise means to change the nature of the bidding process.”
The Games are designed to serve the interests of the IOC in maintaining and defending their very particular model of the Olympics, and not the needs of the host city and nation. As Baade and Matheson conclude, the IOC is rarely if ever concerned to find “the most effective methods for integrating Olympic infrastructure needs with the present economy and a vision of its future.” The consequence of this is that “cities that succeed in hosting the Olympics may well only find fools’ Gold for their efforts.” With this as our overview, all the complaints of overspending, locations, ticket pricing and post-Games legacy make some kind of sense. The IOC has its version of what it wants the Olympics to look like and any attempt to break with this results in the bid failing. If selected, the host city will have been so successfully incorporated into the IOC’s agenda that any ongoing challenge is soon extinguished. Staffed by sports’ own political class, in many cases with no obvious constituency of athletes to which they are accountable, the IOC and its local variants, the Olympic Delivery Authority (ODA) and the London Organizing Committee of the Olympic and Paralympic Games (LOCOG), trap elected politicians and much of the media in their gaze of unsubstantiated expectation.
It is no accident that this process has occurred over the past 30 years, dating back to the first Games to be driven explicitly by commercial interests: Los Angeles 1984. City economies have experienced a shift from industries of manufacturing and accumulation to service and consumption. This has created a spiraling contest over a city’s badge value and identity status, which the Olympics and other mega-events promise, with little or no basis in reality, to enhance.
By unpacking the fallacies of the IOC and its supporters, the entire promise of the Olympics as something socially benevolent is demolished. But more important, a vision for an alternative Olympism can begin to be constructed.
Copyright © 2012 by Mark Perryman. Excerpted by permission of OR Books. All rights reserved.