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That the Olympic Games are a boon to the host’s economy has been a contentious issue, even as the competition between candidate cities has intensified. The reports of unused stadia hemorrhaging money after the event clash with profit projections before. Where are the benefits, then?
An American economist who has followed mega-sporting events says that local organizers should focus on the intangible — to achieve real impacts.
Robert Baade, an economist at Lake Forest College, Ill., claims the collective morale boost from hosting can bring about economic legacies and higher productivity. Meanwhile, his studies show that the promises of spontaneous increases in income are unfounded.
“Positive feelings, the feel-good factor are implications worth competing for,” said Baade in a recent phone interview. “The feel-good, soft, cushy feeling for prevailing in the international competition has a substantial importance.”
A happy herd can go far. Political parties can divert their energy from in-house spats to constructive planning of infrastructure. Barcelona, renowned for political instability, was united in going under heavy urban renewal before the 1992 Summer Olympic Games to become “a tourist Mecca,” as Baade put it.
For the general public, “the better people feel about themselves, the more productive they will be,” said Baade. The 1988 Summer Olympics in Seoul are widely considered the crown jewel of the country’s development that unified the population and heightened the level of pride among the masses.
Baade called hosting the Olympics a “high-risk proposition.” If channeling these intangible benefits to bear fruit seems so difficult, turning the event into a cash cow has historically been impossible.
“There is the perception that encouraging or inducing many people to the Olympic environs will lead to greater economic activity, and at first blush, you might expect that,” he said. “But the promises aren’t met in every case I have seen.”
First, there are “distributive implications” when accounting for national spectators. History has shown that most of the visitors will come from local areas. While certain industries such as tourism, “in particular in the area where the games are held, not surprisingly, experience a boost...they come at the expense of other alternatives.”
Salt Lake City’s gain was Colorado resorts’ loss in 2002. Sydney “stole” from Melbourne and Brisbane in 2000. In 2018, one could anticipate the increased number of tourists at the Olympic sites coming from those who visit competitor resorts such as Muju; the total numbers would remain the same, as vacationers have limited discretionary income and cannot afford two trips.
Next, the foreign visitor number suffers from another problem, namely a substitution effect Baade calls “time-switching.” His studies of the 2002 FIFA World Cup show the number of international tourists as virtually unchanged.
“There was a person-for-person substitution effect during the World Cup,” he said. “An awful lot of people who might have otherwise gone to Korea during the time didn’t go because of the stressed transportation system and the competition for hotel spaces.”
Before the event, the prospective analyses trumpeted a one-percent-or-more boost to Korea’s GDP, but that was proven wrong.
“The impact was benign.”
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