Costs and Benefits of the Olympics

Olympic logo

 

Readers Question: Evaluate the arguments for and against the view that major sports events are good for the economy? (15)

Major sports events such as the World Cup and the Olympics are often seen as a potential source of economic regeneration. Yet, many are worried about the economic costs of hosting a major sporting event that only lasts for three weeks. These are some of the economic benefits and potential costs of the Olympics and other major sporting events.

Economic Benefits of the Olympics

1. Encourages Investment in Transport and Infrastructure.

Major sporting events usually require upgrades to transport and communication links. This investment leaves a lasting legacy for the whole economy. Better transport links reduce congestion and help to improve efficiency for local business. It can help increase the productive capacity of the economy (shifting aggregate supply to the right). For example, for the London Olympics in 2012 we have seen new rail links created in East London, and improvements to existing underground and overground train services (London Olympic rail networks)

2. Influx of Foreign Visitors.

A major sporting event like the Olympics can attract 10,000s of people for the duration of the games. These foreign tourists bring a boost to the local economy. In particular the local tourist trade, shops / hotels will benefit from the surge in visitor numbers. However, it is worth noting that these visitor numbers tend to be temporary. The major sporting event only lasts for a few weeks; potentially there could be many empty hotel beds in the future. On the other hand people argue a major sporting event can lead to a long term growth in visitor numbers. 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

Typically, major sporting events require investment in building stadium and hotels. This creates jobs for the local economy for up to 4 years before the event. These extra jobs help create a positive multiplier effect amongst the local economy. It is hoped that the London Olympics will help regenerate the east end of London. Some argue this temporary job boost can prove more permanent, if the economic regeneration continues after the games.

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

The cost of hosting a major sporting event has increased significantly in recent years. It includes, not only, all the investment but also the heightened security. It is hard to meet these costs through sponsorship and ticket sales alone. Therefore, it can lead to higher taxes for the local population.

2. Will the infrastructure be used in the future?

The Olympics requires a lot of investment, which may not necessarily be used in the future. Many custom built sporting events may not be used in the future.

3. Disruption during the event

It is feared that during the Olympics there will be a disruption to local businesses not effected. For example increased security features make it more difficult to continue normal business.

Evaluation

  • It depends 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

Further Reading

35 Responses to Costs and Benefits of the Olympics

  1. A. Doug July 11, 2008 at 3:16 pm #

    preety much sums up my views really.org

  2. Edward Maaaaace July 14, 2008 at 9:38 am #

    oh yes alex i agree…this essay gets straight to the point.

  3. mark July 16, 2008 at 9:52 am #

    yeah same

  4. James Walton July 17, 2008 at 10:06 am #

    I think costs and benefits of the olympics is similar to hairdressing, sometimes you get a good cut = benefits, sometimes a bad cut = costs. On a lighter note i have just contracted malaria. In my last days of life i am writing an article on sustainable sporting events. I stumbled accross this site on my research. Thnaks very much economis help :) wish me luck! R.I.P

  5. marls got malaria July 17, 2008 at 10:01 am #

    yeah i agree mush!

  6. A.J October 30, 2008 at 4:28 pm #

    r.i.p james walton lol this helped me with me coursework

    thanks!

  7. hari March 23, 2009 at 7:11 am #

    i agree some cost of benifits

  8. SuperMamz April 18, 2009 at 10:17 pm #

    r.i.p james walton and thanks for the pros and cons of the olympics its been of great help.

  9. holly and kim June 23, 2009 at 10:51 am #

    thankyou, you really helped us in our pe lesson… gcse project ;] x

  10. Kim & Dorah August 11, 2009 at 1:08 am #

    you helped us in our p.e lesson for NCEA Level 2 in NEW ZEALAND !!!!!!!!!!!!!!!!! :)

    KIA ORA !
    CHUUURRRR (:

  11. Mrs Wilson August 11, 2009 at 1:13 am #

    what an attention seeker james

  12. callum October 5, 2009 at 8:27 am #

    this was an awsome website thnks all the way from australia

  13. Kris Bell November 5, 2009 at 2:09 pm #

    I think this is fantastic data, thanks alot. James Walton your a fucking wanker and your wife has aids so she will be joining you in hell. ;-). x

  14. Badboy er November 10, 2009 at 4:48 am #

    its mii bday 2daii yay!!!! im turnin 11
    i also think tha this website helped thanx who eva rote it ;p

  15. Aida November 10, 2009 at 4:51 am #

    its my bday sorry mii friend rote his name sorry

  16. James Walton January 12, 2010 at 7:40 pm #

    By the way this helped me with my research paper at the University of Kansas in Lawerance, KS

  17. Carolyn Thomas February 16, 2010 at 6:07 pm #

    Here in Canada, where the obscenely expensive 2010 party called the Winter Games is in full swing, it’s clear that this is all about money and partying (with athletic achievement a much-ballyhooed but less important factor – that’s why each sport has its own world championship).

    And Vancouverites will continue to pay for these Games long after the drunken fans have returned home after 17 days. According to economist Dr. Jeffrey Owen at Indiana State University, it’s a myth that hosting an Olympics event makes good business sense, despite what all those economic impact studies predict.

    “To date, there has not been a single study of an Olympics or other large-scale sporting event that has found empirical evidence of significant economic impacts.”

    More on this at: ‘Why the Olympics Are Bad Business’ at
    http://ethicalnag.org/2010/02/14/olympics/

  18. samirah March 21, 2010 at 11:40 am #

    this website is really good

  19. loans April 15, 2010 at 2:19 pm #

    good points

  20. Nokubonga August 6, 2010 at 2:39 pm #

    These are really true…Here in South Africa, I’ve seen lots of positives about hosting a major sporting event but also negatives. Its much like business though, If you are willing to gamble (take a risk), you might find yourself reaping really good fruits in future (in terms of investments-fdi)

  21. Kim September 1, 2010 at 9:33 am #

    Thank you, this has helped with an essay I am writing. I have been researching into how businesses will benefit from the London 2012 Olympics, and speculating on how those who advertise specific Olympic Services may suffer after the games have finished. If you look at http://www.olympicbusinesspages.com, you can see all of the sectors which expect to benefit in some way – there are of course the obvious ones such as hotels and transport, but also attractions who will gain extra visitors on days when visitors are not attending an Olympics event and need something to do. Also businesses such as estate agents for those interested in renting a property close to the Olympics. Thanks again for the information, much appreciated!

  22. rewrwerrew November 17, 2010 at 11:18 am #

    i agree severely

  23. Jack Edenborough February 8, 2011 at 3:15 pm #

    This website was very helpful for our business presentation. R.I.P James Walton

  24. showman February 20, 2011 at 7:00 pm #

    thankssssssssssssssssssssssssss

  25. showman February 20, 2011 at 7:02 pm #

    thanks from al – islamyia school you help my thank you

  26. veronika tan July 7, 2011 at 10:14 pm #

    I am writing to you to ask permission if i am able to use one of your images for my school coursework.
    Can you please reply in 5 working days. (send email)
    Thank you so much.

    Veronika Tan

  27. Ismay Byrne October 13, 2011 at 10:47 am #

    Please could I use your picture of the Olympic rings for my GCSE CiDA work. Thank you.

  28. Bradley Wade January 30, 2012 at 10:24 am #

    Thank you so much, this has helped me get my A* in A-level economics. Short and brief which is essentail for my criteria. cheers.

  29. abdi February 21, 2013 at 9:50 am #

    talk about london sports can anybody help to write these please

Trackbacks/Pingbacks

  1. Olympic Economics — Economics Blog - August 11, 2008

    [...] These are some of the costs and benefits of hosting the Olympics [...]

  2. Cost of Olympics — Economics Blog - November 30, 2008

    [...] Costs and benefits of Olympics [...]

  3. Is hosting a major sporting event a blessing or a curse? « BBC World Have Your Say - February 18, 2010

    [...] aside there is also the question of whether sporting events are economically viable. Here it is argued that there are many economic advantage to hosting large sporting events. But the games in [...]

  4. Costs and Benefits London Olympics 2012 — Economics Blog - December 29, 2010

    [...] Costs and benefits of Olympics [...]

  5. The Reading List » Will the Olympic Legacy Deliver a Better Britain? - June 10, 2012

    [...] YouGov poll suggested that the majority of Brits believe that the Olympics will be good for London. From an economic viewpoint the opportunity to host such a major sporting event is seen as providing a much-needed boost to the [...]

  6. PARENTING OLYMPICS 2014 « Lady in the House - February 18, 2014

    […] http://www.economicshelp.org/blog/29/sport/costs-and-benefits-of-the-olympics/ […]

Optimization WordPress Plugins & Solutions by W3 EDGE