Olympic Tourism and Economics - Essay Example

Running head: OLYMPIC TOURISM Olympic Tourism and Economics November 12, 2008 Olympic Tourism and Economics Olympics, more than for being "the" mega sports event of the world, is also highlighted for its immense tourism and related economic potential, which more often than not falls considerably short of general expectations and estimated predictions. Olympic-induced activity forms only a very small portion of the total economic activity within a host community. There are many other factors that affect the economy of a community. All these factors have to be considered while planning and predicting the Olympic tourism impacts and the economic effects related to it. Preuss (n.d.), has studied several aspects of Olympic tourism that have great significance from the economic point of view with particular significance to Torino 2006 Games. When tourists return home from Olympics, people back home hear stories of their experiences from them and form opinions or change their existing opinions about these countries, which may motivate them to visit these countries. Foreign tourists create an impact of major economic significance. The greater the facilities in anticipation of the Games, the greater will the number of tourists who visit the country to watch the Games. A city gains an awareness and an image by virtue of hosting the Games, which "is a very important Olympic legacy" (Preuss, n.d., p.3). The transfer of a city's image occurs through information from media reports, direct communication from tourists, advertisements and personal visits. There is also some negative impact of Olympics on tourism which is more often than not overlooked. The Games may persuade a certain group of tourists to stay away from the host city. Preuss (n.d., p.7) classifies them as avoiders, time switchers, changers, and runaways. Avoiders are tourists who would have visited the city but for the Olympics. Time switchers are tourists who want to visit the city but would choose another time. Changers are residents who would prefer to take their holiday and leave the city at the time of Olympics. Runaways are residents who leave the city at the time of Olympics for a holiday elsewhere. On the contrary, "home stayers" are residents who opt to stay back and spend their money in the host city during Olympics, "Olympians" are tourists who travel to the host city because of the Olympics and "extentioners" are tourists who are already in the host city and who stay on longer because of the Olympics (Preuss, n.d.. p.7). Mega-sports events like Olympics, projected for their immense tourism and economic potential, have also great potential for corruption for selfish political gains. The bidding process itself poses immense scope for corruption. "Bribery, first-class travel, showers of gifts, credit cards for IOC member shopping sprees and IOC hostesses are some of the costs incurred by bidding cities" (Higham, 1999, p.82). According to Jennings (as cited in Higham, 1999, p.83), the bidding process is "a most effective means of transferring money from the public purse into private pockets." Mega events like the Olympics needs huge infrastructural facilities and the large-scale developments that a host city undertakes in anticipation of such an event ensures large-scale economic benefits to the private sector rather than economic opportunities for the residents of the host city. The intervention of business and commercial interests through Olympic sponsors has led to such dramatic expansion of Olympic sports that "no single city now can provide sufficient urban infrastructure" (Higham, 1999, p.84). Sports of a lesser label is not associated with these problems, as they are hosted in a city within its existing infrastructure and capacity thresholds, with the atmosphere promoted due to the subculture of supporters. This might enhance the image of the host city, as the sport becomes one of its cultural attractions. This form of sport-motivated tourism brings economic benefits to the local community without causing a strain on its public funds. According to Pyo et al.'s (as cited in Higham, 1999, p.84) Summer Olympic tourist market study, no recent Olympic Games have attracted actual tourist numbers that compare with the expected activity. Another fact that deserves consideration is that the Olympic tourists are more interested in the sport than the rest of the tourist attractions of the hosting city. Under-utilization of the expensive developments undertaken leads the host city into heavy financial debts. The developmental activities in anticipation of the Olympics often undertaken in the lower socio-economic areas to improve destination image as well as to cater to the tourist needs lead to displacements and evictions besides increased rates and rents. Furthermore, a host city has to incur heavy security costs associated with the staging of the Olympics. According to Higham (1999, p.87), the contributions to tourism development and destination image of "the legacies of a succession of Olympic Games, which include terrorism, the suppression of human rights, bribery, corruption, Cold War political boycotts, drug scandals, financial ruin, crowding and congestion and host community dissention" can be far from beneficial. After the 1994 Winter Olympics, the real impact on tourism was far less than the big boom expected by the Norwegian authorities (Teigland, 1999, p.305). The actual effects were far less and different from the predictions, with 40% of the full-service hotels in Lillehammer having gone bankrupt. Huge uncovered debts led to two new alpine facilities being sold for US$1 to prevent bankruptcy. The visitors to the host city were not willing to commute long distances between accommodation and sports venues. Hence, even hotels which were just 20-25 minutes away had traffic far less than expected. The visitors mainly concentrated in the main town center and this led to the bankruptcies of catering businesses even 100 meters from the main street. Furthermore, the time span for which there was a boom in the advent of the number of tourists was far less than predicted. The increase in the number of tourists to the host town started only three years after the host election and lasted only two years. The most important result of Teigland's (1999, p.312) is that "tourist developments at a national level between 1991 and 1997 have been (nearly) independent of the 1994 Olympics." Partial rise in foreign demand, about 2%, after the Games is more or less counterbalanced by the partial decline in domestic demand, about 2%, after the Games. The short-term effects on foreign demand (10% increase) was also counterbalanced by the domestic demand (9% decline). These effects indicate that the net change is more due to the general changes in the Norwegian economy than by the 1994 event. In effect, the long-term impacts, in general, of the Lillehammer Olympics are "marginal and out of proportion as compared to the high costs of hosting the Games" (Spilling, as cited in Teigland, 1999, p.316). Beijing is another city that suffered a great deal of negative impacts from the Olympics. Seven years ago, when Beijing gained the rights for hosting the Olympic Games, hoteliers invested heavily in anticipation of the increasing numbers of tourists who would arrive at Beijing for the Games, and increased the rents several times their original rates. However, the numbers fell far short of expectations. Red Hotel Beijing received a $1.5 million facelift which was associated with a six-fold increase ($262) in room rents, which later on was revised to a threefold increase ($130). By mid-August, Red Hotel's occupancy was still only at 50% (Tschang, 2008, p.1). This is but one example. According to the Beijing tourism bureau, only 77% of the 22,300 five-star hotel rooms and 45.5% of the 34,500 four-star hotel rooms in Beijing were filled during the Olympic period till mid-August, with more than 60% of rooms in the three-star and lower hotels remaining empty (Tschang, 2008, p.1). There are certain other factors too that affect the accommodation business in a host city negatively such as the strictly controlled visa application during the Olympics. A major share of the hotel business comprises of business meetings and conferences, which had to be postponed for Olympics, as was the case with Dongguan Exhibition International Hotel (Jing, 2008). Big business meetings that have more than 500 participants are seldom held during the time of the events. Beijing has 5,790 (on-fifth) more hotels now than it had at the end of 2007, "which will have sector stakeholder nervous from an oversupply perspective" (BusinessWeek, as cited in "Can Chinese travel," 2008). This situation of oversupply of hotel rooms along with China's original problems of rising fuel prices and declining load factors gives rise to the need for a well-defined post-Olympic distribution and sales strategy ("Can Chinese travel," 2008). Besides Olympic-related activities, several other extrinsic factors, especially economic, are also important for future tourism activity in an Olympic region. "By encouraging development consistent with "normal" growth patterns rather than "Olympic" growth patterns, the negative impacts of an oversupplied market can be minimized" ("Observations," n.d.). The short-term and long-term effects from past Olympics in the host communities have been mixed. The 1988 Winter Olympics legitimized Calgary as a national and international destination for conventions and business meetings. Calgary's western heritage image was revitalized. The World Tourism Organization chose Calgary as Canada's official World Tourism Education and Research Center. Awareness level of Calgary remained high for about three years and growth in visitor levels has sustained on a localized level ("Observations," n.d.). The significant effects of the 1992 Summer Olympics in Barcelona included a temporary boost to the local economy of an originally depressed Catalona region, significant urban regeneration in the host city and a short-term boost to the city's tourism. However, the dramatic increase in supply posed challenges to hotel operators and tourism-related businesses. Atlanta, with the 1996 Olympics, tried to enhance its image as a leading business city and sports center of the world. However, Atlanta's already rapidly growing economy made isolating the Olympic effect difficult ("Observations," n.d.). Nevertheless, it is noteworthy that the Olympic-induced development in the city has given the stimulus for revitalization and more high tech advancements. Post Sydney Olympics, Sydney faced a significant challenge as regards the long-term future of the Olympic facilities. The Homebush Olympic Complex, the Stadium Australia, the Sydney Football Stadium, the Sydney Cricket Ground, the Sydney Superdome, and the Sydney Entertainment Centre were vying to attract major events post Olympics. "At the same time, the Olympics have helped to create a more competitive economic attitude in Australia, and it is the benefits that are being generated by this that will far outweigh and outlast other factors" ("Olympic economics," 2001, p.34). The nomination of Athens as the hosting city of 2004 Olympics had interesting effects on the stock exchanges of the two candidates that were contesting for the rights of hosting the Games - Greece, the final winner, and Italy, the loser. A study by Veraros, Kasimati & Dawson (2004, p.749) reveals a "significantly positive effect on the Athens Stock Exchange as a whole, as well as on the infrastructure-related industry" post nomination. No significant effect was noted on the Milan Stock Exchange. There are two main factors that could explain this effect. The Greeks had been disappointed earlier during the bidding of the Olympics of 1996 when Athens, which was considered a forerunner in the first two rounds of voting, was finally overtaken by Atlanta. Hence, to avoid another national disappointment, the bidding committee had kept a very low profile during the candidacy for the 2004 Olympics. Secondly, the difference in the sizes of the two economies and the importance of the two cities within each national economy could be an influencing factor that can explain the difference in the stock exchange reactions. Athens' population exceeds that of Rome. Athens is the center of economic activity in Greece while in Italy, the economic activity centers around Milan and Turin (Veraros, Kasimati & Dawson, 2004, p.752). Regardless of all the negative impacts and considering the positive impacts, Olympics can be used to optimize tourism benefits. From an estimated A$6.5 billion that had been contributed to the Australian GDP between 1994 and 2006 as a consequence of hosting the Games, A$5.1 billion would accrue to New South Wales where the Games was hosted, which project an average annual increment of 0.12% to Australia's GDP, which though a small percentage is still substantial (Chalip, 2002, p.5). Sydney's beautification program, which rose from A$1.5 million in the budget year 1994-1995 to A$114.4 million in 1998-1999, had generated substantial employment and economic activity during the Olympic period. Though the non-residential construction activity dropped by 18% in1999-2000 and by another 13% in 2000-2001, the boom and bust of the construction cycle has been "a mixed economic blessing" (Chalip, 2002, p.6). Hosting of Olympics has the potential for raising the position of the host city as well as the country in international market, albeit in the short term. The challenge is to exploit that potential and to build on it (Chalip, 2002, p.7). Australia had launched a campaign to optimize the tourism impact of the Olympic Games, which was built around four core strategic elements - repositioning the country by capitalizing on the media, aggressively seeking convention business, minimizing the diversion effect of the Games and promoting pre- and post-Games touring (Chalip, 2002, p.8). According to Chalip, the target is not the visitor to the Games, but the visitor who could be prompted to visit the country because it is hosting the Games. The challenge, then, is to utilize the international attention given to the Games to create market awareness and interest, which in turn could be converted into a visit. To capitalize on the Games-induced gains, further strategies should be developed post Games. Furthermore, if Olympics is to be leveraged to its maximum advantage, "we need to understand the economic basis for public investments in leveraging, and we need to test the assumptions on which those investments are founded" (Chalip, 2002, p.15). In conclusion, Olympic-induced activity forms only a very small portion of the total economic activity within a host community. There are many other factors that affect the economy of a community. All these factors have to be considered while planning and predicting the Olympic tourism impacts and the economic effects related to it. The magnitude of an Olympic-induced increase in tourism in a city or country hosting the Olympics "cannot be accurately predicted based on either the successful presentation of the Games or the amount of positive imagery generated in the media" ("Observations," n.d.). Olympic-related increase in tourism and other related business sectors mostly occur within the host communities and satellite venue areas, and does not include areas farther to these centers of activities. The destinations that are directly connected to the host city receive the maximum benefits. Long-term development is concentrated within a short period of time which creates excess capacity, mismatched supply and demand conditions which lead to bankruptcies, foreclosures and other negative economic impacts. It is imperative to define clear objectives to gain overall success and sustainable development. Identifying target markets and specific industry segments along with holistic approaches to dilute limited resources will help in defining Olympic leveraging strategies. "It is important to preserve the relationships and the networks that are built for Olympic planning to prepare for and respond to the post-Games environment" ("Observations," n.d.). References Can Chinese travel suppliers maintain their growth momentum, post the Beijing summer games (2008). Retrieved November 11, 2008, from http://www.eyefortravel.com/news/asian-news/china-will-struggle-without-post-olymic-strategy Chalip, Laurence (2002). Using the Olympics to optimise tourism benefits: University lecture on the Olympics [PDF document]. Retrieved from Lecture Notes Online Web site: http://olympicstudies.uab.es/lectures/web/pdf/chalip.pdf Higham, J. (1999). Commentary - Sport as an avenue of tourism development: An analysis of the positive and negative impacts of sport tourism. Current Issues in Tourism, 2(1). Retrieved November 10, 2008, from http://www.multilingual-matters.net/cit/002/0082/cit0020082.pdf Jing, T. (2008). Post-Olympic hotels in Dongguan: Target guests mainly from Southeast Asia. Retrieved November 11, 2008, from http://www.lifeofguangzhou.com/node_10/node_37/node_84/2008/09/08/122083854651128.shtml Observations from past Olympic Host Communities (n.d.). Retrieved November 11, 2008, from http://travel.utah.gov/research_and_planning/2002_olympics/documents/OlympicMarketingFocus.prn.pdf Olympic economics: Sydney and the destination economy (2001). Locum Destination Review, 3. Retrieved November 11, 2008, from http://www.locum-destination.com/pdf/LDR3Olympic_economics.pdf Preuss, H. (n.d.). Aspects of Olympic Games tourism. Retrieved November 9, 2008, from http://www.sete.gr/files/Ekdiloseis/041012_HolgerPreuss.pdf Teigland, J. (1999). Mega-events and impacts on tourism; the predictions and realities of the Lillehammer Olympics. Impact Assessment and Project Appraisal, 17(4), 305-317. Tschang, C. C. (2008, August 19). Olympic vacancies haunt Beijing hotels. BusinessWeek. Retrieved http://www.businessweek.com/globalbiz/content/aug2008/gb20080819_224722.htm Veraros, N., Kasimati, E. & Dawson, P. (2004). The 2004 Olympic Games announcement and its effect on the Athens and Milan stock exchanges. Applied Economic Letters, 11, 749-753. Retrieved November 11, 2008, from http://people.bath.ac.uk/ecpek/index_files/paper2.pdf Read More