Major sport events and longterm tourism impacts

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Major sport events and long-term tourism impacts

• Solberg HA, Preuss H
• Journal of Sport Management
• 21 213-234, 2007

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Objectives

• What infrastructure do cities need to host major
  sport events
• Potential welfare-economic benefits and costs of
  the changes in infrastructure
• How can infrastructure be used to maximize
  benefits for future tourism
• What should pay the costs of hosting the events

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Stages of long-term period

• Possibility to promote a city through Olympic bid
  is limited
• Process NOT identical for every event

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Supply side structural requirements

• Major sport events have potential to develop
  urban structure
• Housing, labor, recreation, transportation
• Must compare long-term development plan with
  necessary event-related structural requirements
• Before bidding for or creating events
• Whether event-specific development exceeds
  long-term demand from locals and visitors
• Peak demand during mega events exceed capacity in
  almost every host city
• High costs may create negative long-term impacts
  by reducing other activities that require tax
  funding

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Supply side structural requirements

• Whole Athletes Villages converted to housing
  after events
• Sport parks, rather than a single sport facility

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Soft-infrastructure change

• Skills and knowledge upgrade in service industry
• English courses
• Improve skills and knowledge necessary to win
  more bid competitions
• Improve skills required to secure a safer
  environment
• Police, security network

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Destination marketing

• Production of destination marketing involve
  public goods
• Risk for suboptimal production
• May be driven by free-rider motives, let others
  to fund marketing
• Government involvement
• Promote destination by hosting additional sport
  or cultural events, fairs, exhibitions, cultural
  festivals, concerts
• Combine with improvement in soft-infrastructure,
  have potential to increase long-term tourism

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Increased awareness and image

• Increased awareness and image of host city or
  nation may be mixed or no results
• Duration of any increased-awareness effects
  limited
• 55 did not remember host nations 1 year after
  Euro 2000 football cup
• Only 10 remember host nations 5 years after Euro
  1996
• Tourism products and service, image of
  destination, more strongly influenced by citys
  broader environment
• Not only the sport event

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Investment

• Not all event-related infrastructure serve
  tourism
• Cities hoping to reach long-term revenues from
  post-event tourism
• General structure, not necessary for the event,
  but necessary to attract and serve tourists
  museums, shopping malls, special tourist
  attractions
• Unpredictable sociopolitical factors
• 9-11 attacks, SARS, terrorist attacks

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Welfare-economic impacts from inbound tourism

• Australia enjoyed stronger growth than its
  neighboring countries 1994-2000
• One of main targets convention market
• Small number of tourists, high spending power
• Decreased inbound tourism to Australia after
  Olympics
• Revenue per guest night for all commercial
  accommodations also decreased after Olympics
• Preparation and increasing supply vs tourism
  crises and oversupply

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Welfare-economic impacts from inbound tourism

• Increased tourism demand before Olympics
• Number of hotel rooms in Sydney ?40 from 1994 to
  2000
• Significant decline in number of rooms after
  Olympics
• In part because of conversion of hotel rooms for
  residential purposes
• Demand too low to meet the enhancement in
  capacity before Olympics
• Employment in accommodation industry declined
  after Olympics
• Higher in 1998-99 than 2002-04

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Post-event tourism effect

• Time switching effect of tourists to Sydney
• Postponement or forwarding of a
  once-in-a-lifetime trip to Australia
• What effects would have been without the event
• Barcelona revenue per available room decreased by
  60 in 2 years after Olympics
• Although number of tourists continue to grow, not
  enough to balance the growth in hotel rooms
• Balanced by positive long-term events use
  Olympics to build up image as cultural city
  museums, pedestrian zones
• Lillehammer unrealistic optimism caused
  overinvestments in local hotel sector
• Several bankruptcies in tourism industry

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Market failure

• Market failure occurs if those who would have
  benefited from welfare-economic gains are unable
  to coordinate their actions
• Resulting in lack of funding that prevents the
  events from being staged
• Typically results from presence of public goods
• Tourism products are bundle of separate products
  offered by different suppliers ? supply side
  needs to coordinate to maximize aggregate profit
• Governments should only become involved in
  hosting of sport events to prevent market failure
• Some hotels may adopt free-rider strategy
• Let others bear burden of financing the event
• The product of events become suboptimal

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• Neither profit-maximizing producers nor event
  organizers will undertake activities designed to
  generate revenue for other producers
• Rationale for governmental intervene
• Funding the event
• Motivate those who expect to benefit from events
  to provide the government with prognosis that
  exaggerate the positive impacts
• Local decision makers have high interest in
  attracting events
• Host destination can take advantage of asymmetric
  information to provide the government with higher
  prediction

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Conclusions

• Large events can generate revenues that cover
  operational costs, but not investment in
  infrastructure
• Events can stimulate inbound tourism
• Too much optimism can initiate investments that
  exceed long-term demand
• Attracting more tourists in post-event period may
  require considerable investment
• Duration of event promotion period is short
• Upgrades of local infrastructure to provide
  sufficient quantity and quality of tourism
  products and services