THE ECONOMIC IMPACT OF THE LONDON 2012 OLYMPICS

The Economic Impact of the London 2012 Olympics



The Economic Impact of the London 2012 Olympics

Introduction

The evaluation of the economic importance of the Olympics to a host city, its region and country has become an important aspect of the overall evaluation of the value or worth of hosting the Olympic Games. These evaluations are often known as economic impact assessments or reports, and are increasingly being used in the early stages of the Olympic bidding process1. It is vitally important that the host city and the organising committee in the host city are aware of the scale of the economic benefits that hosting the Games may bring.

This allows the Games to be promoted in the local context as bringing significant benefits to the local economy as well as providing the organising committee with the scale of benefits so that it can have an improved understanding of how large the costs of bidding for and hosting the games should be. As Brown and Massey (2001:26) note, hosting the Olympics has not always brought financial reward. The 1972 Munich Olympics and 1976 Montreal Olympics made losses of £178 million and £692 million. The 1984 Los Angeles Olympics and the 1992 Barcelona Olympics made surpluses of £215 million and £2 million. This increased economic performance of Games organisers, as well as the increased economic impact of the Games is due to a larger market, particularly for television rights to the Games, but also because the higher costs of the Games with larger competitor numbers and higher expectations of the quality of Olympic venues has meant that organising committees have had to justify these costs and therefore have been driven to increase revenues and economic impacts performance of the Games organisers is a very narrow definition of the economic benefits from hosting the Olympics. The wider economic impact of the Olympic Games includes the effects that the visitors to the Games have on the local economy through their expenditures in the host city, the developmental benefits of targeted infrastructural investments in deprived areas and the long-term 'legacy' benefits that the increased exposure to the international media brings through increased tourist arrivals and tourism receipts in the years after (and before) the Games.

The combination of these effects is very complex, and cannot be determined purely from the financial performance of the Games organisers or of the additional revenues that the

Olympics bring to the host city. It is these factors have on the economy of the host city and nation that are the subject of economic impact assessments.

Economic Impact Assessments

In order to conduct an economic impact assessment (EIA) of the Olympic Games the following stages must be undertaken. Firstly, the effect of the Games on spending, by organisations such as the organising committee as well as by individuals must be calculated. Spending by the organising committee includes infrastructural spending in the pre-Games period as well as spending in the Games period ...