To be chosen to host an international sporting event, such as the Olympics is a great privilege for any country. There are, therefore, thorough preparations that are done to ensure that the event will be a success, and that in turn the country will gain a good reputation (Barton, 2004).
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While studying the economic benefits of the Olympic Games most significant changes are noted in the areas of construction, tourism and social services sector (Preuss, 2004). This is primarily because there are a number of structures that are built solely for the purpose of accommodation during the games.
Once the event is over, the structures remain economically useful as they can be used for rental purposes leading to generation of revenues. The service sector, such as the banks and the hotel industry will experience a boom because the visiting population will be in need of these services.
Employment created during major sporting events, such as the World Cup or the Olympics is short lived (Burton & O’Reilly, 2009). This means that after the event, consumption goes back to normal and so does the level of output. This leads to some of the employees becoming unemployed again. If the period does not coincide with a time of high unemployment rates then the impact is not felt.
A good example is the Sidney Olympics Games of 2000 which came at a time when the unemployment rates were very low, and so the impact of creating employment was not largely felt (Preuss, 2004). Tourism also experiences a significant growth as visitors may wish to stay longer after the sporting activities are over. Others may prefer to come back and visit the country some time later. Investors may also have time to study the economic climate of the host country and decide to invest by establishing new firms (Smith, 2012).
Firms find the huge sporting events an excellent avenue where they can create their product and brand awareness (Burton & O’Reilly, 2009). Advertising activities are, therefore, intensified both in the stadium and the hosting city. The advantage of it is that the whole world is literary watching an activity by either attending it or through the live coverage of the event (Preuss, 2004).
Some of the companies get to sponsor the events and their banners are displayed in the stadium as a result. Still others choose to make t-shirts with the names of their products. This has a lasting effect, and it serves to boost the sale of the commodity during the sporting event and afterwards.
A case study was conducted to establish whether the Sydney Olympic Games of the year 2000 led to an economic boom. Initially, scholars in the 1990s had estimated that the overall experience would result in an increased consumption and as such in more revenue (Barton, 2004). Estimated total that the consumption of households would shoot up by $5.6 billion but instead it dropped by $ 2.1 billion.
The factor that was overlooked as a cost in the 1990 economic models is the provision of extra public services, such as security. By not considering this as additional expenses, economists and governments were bound to believe that the event led to economic benefits (Preuss, 2004). However, we can now see that it did not. Hosting major sporting events may not always lead to economic benefits.
In fact, studies have shown that most of them result into loss. If hosting these major sporting events does not always develop into economic benefits, why do countries compete to get the award? The reasons are non-economical; by doing so the hosting country sends out a message to the world that it possesses what it is necessary to hold a major world event. These benefits cannot take monetary figures but they bring national pride and give the country a prestigious global ranking (Smith, 2012).
It is an indication that the country has been able to deal with its own internal issues, and it has the capacity to protect its visitors (Zimbalist, 2005). The little revenue received from major sporting events end up being spent on elimination of consequences the visitors left when leaving the country (Zimbalist (2005). It means that the government spends a lot of money for preparation of the event and there is no money left to meet health and educational needs after the event.
This pattern of the cost of hosting major sporting events while leaving the hosting country in a financial crisis has been witnessed in Beijing in 2008, Montreal in 1972, Athens in 2004, Seoul in 1988 and in Sydney in the year 2000 (Burton & O’Reilly, 2009). It is proper to conclude that hosting a major sporting event does have its benefits and shortcomings. However, it is clear that when looking at this from an economic point of view, the cost outweighs the benefits.
Barton, L 2004, The Economic Impact of the Olympic Games, in Pricewaterhouse Coopers, European Economic Outlook, Chap.
Burton, R & O’Reilly, N 2009 ‘Consider Intangibles When Weighing Olympic Host City Benefits’, Sports Business Journal, vol. 7, no. 12, p. 33.
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Preuss, H 2004, The Economics of Staging the Olympics: A Comparison of the Games. Edward Elgar Publishing, Cheltenham, UK.
Smith, H 2012 ‘Athens 2004 Olympics: What Happened After the Athletes Went Home?’ The Guardian, p. 21.
Zimbalist, A 2005, ‘Economic Impact of Olympic Games Rarely Adds Up to Much Gold’, Sports Business Journal.