Economic Impact of Hosting the Olympics

A recent published report titled Olympics 2012: The Economic Impact Market Assessment 2012, details many of the economic effects that have and will have on the British economy, particularly for the London metropolitan area. London’s infrastructure, sports venues, environment, transportation systems, domestic security, and tourist industry are just a few of the entities affected. The report assesses not just the 2012 Olympics but also discusses the economic impact on countries and cities that have hosted the Olympics in the past.

The Sydney games (held in 2000) and Athens games (held in 2004), for example, had direct impacts on the city and national economies in the tourist and travel industries which increased gross domestic product (GDP) by 18.3% and 12%, respectively. By contrast, due to a downturn in the global economy, the People’s Republic of China (PRC) saw an increase in GDP of just 6.4% by virtue of hosting the 2008 Olympic Games. Similarly, as the report cites, the city of London and the United Kingdom (UK) generally, which play host to the 2012 Olympic Games, can expect a modest growth rate in GDP of about 7%.

Contrary to the views of supporters of hosting the Olympic Games who claim that hotels will be major beneficiaries of increases in tourists, the report discloses that the hotel rates for past games have actually suffered decreases in hotel occupancy rates in the years when the games were held. For example, Sydney experienced a 6.3% decrease in occupancy rates from the prior year. Athens hotels saw a decline of 5.3% and Beijing suffered a large occupancy rate decline of 39%.

While it took Montreal about three decades to climb out from its debts suffered as a result of hosting the 1976 Olympic Games, Barcelona, which hosted the 1992 games, enjoyed a much better result and is considered a financial success.

Many of the economic benefits of hosting the Olympic Games are felt in years prior to the actual event in relation to construction and improvements to infrastructure. In Beijing for example, improvements included construction of a new airport (now widely considered to be one of the world’s best airports), improvements to roads and transportation links, accommodations, and addition of 37 new stadiums.

Unfortunately, if history repeats itself, the reality is that any economic benefits to the British economy by virtue of hosting the Olympics will be felt temporarily and beneficial long term effects may be illusory.

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