The Active Effects of the Olympic Games on the Economy - Essay Example

Chapter 3: Methodology: According to Saunders et al, defining the aims and objectives of the research study is important to generate evidence of the “the researcher’s clear sense of purpose and direction.” (Saunders, 2003:25). This research study has set out to examine the impact of the Olympic Games in China in an economic sense. Since this is primarily reflected through an improvement in tourism and its related economic benefits, the focus of this study will be to assess the impact of hosting of the 2008 Olympic Games in Beijing in terms of its impact on the tourism sector although the overall effect on its economy is also a part of the path that will provide the answers to this question. Saunders, Lewis and Thornhill also state that: “….your research philosophy depends on the way that you think about the development of knowledge.” (Saunders, Lewis and Thornhill, 2003:83). The literature review, as presented above, has provided quite a lot of knowledge about the economic impact of the Olympic Games in other cities that have previously hosted the Olympic Games. In this study, the research philosophy that I have chosen is positivism, according to which the major thrust of the study is the collection of secondary data which is used as the basis upon which conclusions are reached in the study. It must be pointed out that primary data collection through a survey or questionnaire method does not lend itself well to this study, neither does a quantitative approach. This is mostly due to the scope of the research subject, since the topic understudy is the economic impact of the Olympic games of 2008, which requires a wide range of informative sources rather than the views of a limited sample of the population. As a result, the collection and analysis of secondary data sources as available through books, news reports, websites and library sources appears best suited to answer the research question in this study and to test the hypothesis as to whether the Games are indeed producing a positive effect on the economy. A qualitative rather than a quantitative approach was selected for this study, mostly due to constraints in time, as well as the impracticality of working with colossal amounts of financial data. In addressing the hypothesis of the Games having a positive impact on China’s economy, a quantitative approach would have necessitated the collection of vast amounts of financial data, not only on the tourism industry but also on China’s GDP and detailed information on how the financial picture has been changing month by month, taking into account all of the factors bringing about such a change. Therefore a qualitative approach was selected, since it allows the researcher to carefully examine a wide collection of secondary data sources to address the hypothesis, where most of the authors have already carried out some economic analyses to arrive at their conclusions. This also allows the researcher to integrate data with the theory examined in the literature review in order to arrive at a balanced analysis. This study proposes the hypothesis – The Olympic games of 2008 will have a positive impact upon the economy. Most research studies utilize this deductive approach in scientific research. The deductive approach means that a hypothesis is proposed at the beginning of the study and this is tested through the process of qualitative or quantitative analysis. The research hypothesis of this study is that the Olympic Games will have a positive impact upon China’s economy and the available data on Olympic theory as collected through the literature review will be tested on a qualitative basis. “Your research strategy will be a general plan of how you will go about answering the research questions you have set.” (Saunders, Lewis and Thornhill, 2003:90). The study contains a clear objective, which is to examine the economic impact of the Olympic Games 2008, especially in reference to the tourism industry. The first step in this approach has been to examine the economic aspects of the Olympic Games as outlined by Olympic theory. This is presented side by side with China’s objectives and goals in seeking the hosting of the Olympic Games in 2008. Such secondary data sources are the backbone of this research effort and form the major data source that is subjected to analysis. It must be noted that the absence of primary research through an empirical study using a limited sample, is a limitation in this research study. However, this weakness is addressed by choosing cross sectional as the time horizon in this research. According to Saunders et al (2003) every possible method that may be selected is likely to have some unique strengths and weaknesses, however multi methods can help to reduce and/or limit the weakness. In this study, the data that is collected is primarily focused upon the present scenario in China, however China’s unique historical aspects have also been taken into consideration and the previous impact of the Games in other countries in earlier years provides a more balanced framework of information upon which to draw conclusions. In addition to the Olympic theory that has been derived from the literature review above, additional sources on China are also discussed below, in testing the hypothesis proposed in this study to see whether the Games are indeed likely to have a positive effect on China’s economy. While a good research effort is based upon a strong framework of theory and qualitative data is the main method used in this research, quantitative data is also provided, in terms of increase in China’s tourist inflows, etc. The addition of this quantitative data adds to and enhances the research view. . “It is quite usual for a single study to combine quantitative and qualitative methods and to use primary and secondary data.” (Saunders, Lewis and Thornhill, 2003:99). William Trochim (2001) also points out that every study has a qualitative as well as a quantitative element to it, since even a numerical response may involve several shades of meaning and even purely verbal responses can be counted. Therefore, it is the approach adopted by the researcher and the nature of the conclusions that are sought to be drawn which will dictate the choice of method. In this instance, while the Olympic theories provide the general background upon which inferences can be drawn, it is the specific figures relating to China’s economy, especially in the tourism area which allows the researcher to arrive at a meaningful conclusion on the impact of the Games. The limitation in this study is that forecasting analyses have not been applied to large scale figures in order to more accurately predict the economic outcome of the Olympic Games. However, due to the paucity of time and inaccessibility of large amounts of financial data, this is a necessary limitation in this study. It was not possible for the researcher to glean accurate information on actual expenses incurred thus far on the Olympic Games, in order to compare and contrast this with the projected and actual figures on the tourism intake into the country. One reason for this is the fact that Chinese authorities have been unwilling to disclose such figures and therefore the actual expenses are likely to remain obscured. However, an effort has been made to arrive at a conclusion that would be as reasonable as possible. Chapter Four: Findings and Discussion The major findings from the literature review appear to suggest that cities that have hosted the Olympic Games in the past have not been able to show a profit from the Games. In the words of Baade and Metheson, “the evidence suggests that the economic impact of the Olympics is transitory, one time changes rather than a steady-state change.” (Baade and Matheson, 2002: 28). In the case of Beijing, Owen states that based upon the objective and the scope of the Beijing Olympics, it appears to fall into that category of Olympic cities which have brought about a stimulating transformation of the entire built environment, such as that which occurred in Tokyo in 1964 and Montreal in 1976. (Owen, 2005:12). When viewed in conjunction with Chinese ambitions to gain a leading spot among the world’s most developed nations and accumulate power for itself on the political front, it appears that the transformational power of the Olympic Games is being harnessed in order to further Chinese ambitions. Beijing aims to place itself in the position of the world’s top tier cities. Currently, three of the first tier cities in Asia are Hong Kong, Singapore and Tokyo. According to Derudder et al (2003), Beijing currently qualifies as a second tier city that is on par with other world cities like Washington, Cairo and Hamburg. However, through the complete revamping of infrastructure that is currently in process at Beijing, the city may well transform itself into a first tier city with facilities that could easily elevate it to the status of a first tier city. Some studies have pointed out that the construction of new stadiums may be welcomed during the actual time period leading up to and during the Games, however once the events are completed, they become equivalent to white elephants (Burton, 2003:40). Beijing has allocated substantial amounts for the construction of new Olympic venues and stadiums. Out of the 37 facilities that have been listed to be used for Olympic events, sixteen of them are being newly constructed and others are being upgrades, which also involves substantial costs. Total amounts projected to be spent on the addition and upgradation of infrastructure for the Olympic Games is an amount of 2061.60 billion US dollars, of which the investments on venues and non sports related infrastructure will be only 14.257 billion US dollars. (Owen, 2005:12). Therefore, it is evident that a major portion of the expenses that are to be made will be in constructing stadiums and venues for holding Olympic events. The question that arises in this context is, how useful is this likely to be in terms of Beijing’s future economic potential? While the stadiums will no doubt be the subject of tourist interest during the period to and leading up to the Games, there is an equally likely possibility that they will degenerate to the status of white elephants once the Games are over, as in Sydney, and will no longer hold tourist interest. In order to continue to utilize the stadiums that have been constructed effectively, Beijing will have to continue to host international sporting events on a large scale in order to ensure optimum usage of the stadium infrastructure that has been generated. This does not appear to be predictable with any guarantee of accuracy; therefore it is quite likely that such construction expenses will be a net loss. While they will undoubtedly improve employment prospects for the local population in the short term while the construction work is going on, the employment will be only temporary and is therefore unlikely to produce substantial long term benefits in terms of employment. Beijing has about 458 hotels with 84,812 rooms in Beijing, so that the problem of tourist accommodation is unlikely to pose a problem, and it is projected that the number of hotels will increase to 800 hotels with about 130,000 rooms. (Owens 2005:15). However, while it may be assumed that there will be sufficient tourist traffic generated during the Olympic season to ensure full hotel occupancy, it appears likely that building up the number of hotels to almost double their existing number may not justify the expense if Beijing is unable to continue to generate the kind of heavy tourist traffic it is likely to enjoy during the Olympic season. In specific relation to tourism, the argument that Porter has advanced about hotel occupancy essentially remaining the same with the only notable result of the Games being an escalation in those hotel revenues is supported by the experience of Utah, where room occupancy rates nearly doubled during the Games, but no increase in hotel occupancy was produced. (State of Utah, 2000:17). This suggests that the occupancy generated during non-Olympic times may actually be being displaced entirely in the existing hotels due to the Olympic Games, rather than supplementing and augmenting it. To support this view, Owen cites the case of Atlanta, which had been reporting steadily increasing attendance rates at conventions, however during the duration of the Olympics in 1995-96, there was a ten percent drop in attendance. Similarly, hotel occupancy rates also declined from 72.9% to 68%, inspite of the belief that the Olympics would boost hotel occupancy rates. (Owen, 2005:7). Therefore, there was in fact, a decline in local business as opposed to the gains that were projected, so that those vendors who leased vending space for the Olympics sued the city of Atlanta, because they claimed that they were misled about the potential business prospects.(Lubbock Avalanche Journal). It appears that there could be a similar fall out in the case of Beijing as well, so that the projected gains to the Beijing locals do not materialize, especially in view of concerns about corruption that have been voiced by some citizens.(Hewitt, 2001). However, there is one notable aspect which suggests that the Beijing Games may indeed produce long term economic benefits for the city. As pointed out by Owen, a large portion of the non BODOG budget has been earmarked for environmental protection.(Owen, 2005:12). The Beijing Olympic Plan states: “We shall energetically develop science and technology and be determined to make the Beijing Olympic Games be a window and stage of showing Chinese new/high technology and innovative strength simultaneously.” (BOP at pp 2). The city of Beijing intends to use the pretext of the Olympic games in order to develop environmental protection and bring about improvements in waste disposal, water conservation and the greening of the landscape. As a part of this initiative, some of the measures that have been taken up include the reduction of pollution, construction of more highways, the expansion of the city transport systems and the conversion of city buses so that they use clean energy sources. The plan also includes teaching English to Chinese cabbies and improving the driving habits of the general Chinese population. All of these measures are likely to bring about significant improvements in the infrastructure of the city and improve the prospects of the city as an important centre of business, which is likely to pull in more investors into the city, even after the Games have been concluded.(Owen, 2005:12-13). Moreover, the actual projected expenses may also be somewhat reduced due to the vast number of subsidies that are being received by the Beijing Olympic organizing Committee, in the form of direct and indirect subsidies from local and national government, with revenues from foreign sources such as sponsorships and broadcast rights. Athletes who win prize money have also been granted a tax exempt status and since in the case of Beijing, fiscal impacts are likely to exist only in the realm of indirect spending, this could result in a form of tax increment financing which will help to reduce costs. Read More