IMPACTS OF MAJOR SPORT EVENTS

Professor Chris Auld

Griffith Business School

2

REFLECTIONS ON THE 2000 OLYMPICS

“Six months on, though, I’m struggling even to recall what the changes were supposed to be. ….. But why search for more than you’re ever

likely to find? We have acquired some pleasant memories. Shouldn’t we leave it at that?”

Hugh Mackay (2001)

3

• Fascination by governments with the role of sport in delivering social and economic benefits to communities (Coalter, 2007)

• Communities face pressures from global economic, social and cultural changes

• economic malaise and the erosion of traditional community life (Atherley, 2006)

• Sport events one strategy to leverage benefits from sport

INTRODUCTION

4

• Events are key component of cultural milieu

• contribute to the liveability and attractiveness of large urban centres (Clark et al, 2002; Turner, 2002)

• The post-modern city (Prosser, 1993; Turner, 2002 )

• de-industrialisation and new urban forms (Essex & Chalkley, 1998)

• focus on play and pleasure - urban spectacles (Harvey, 1989)

• distinct urban lifestyle (Clark et al, 2002)

INTRODUCTION

5

• Some cities/countries utilise sport as central element in positioning strategies

• participate in expensive bids to host international events

• continual renewal of sport infrastructure

• “Glocalisation” – local communities compete on global markets for sources of tourism and related expenditures (Downward et al, 2009)

INTRODUCTION

6

• Competitive context • “stay ahead of rivals that are trying to improve their position in the hierarchy of the world’s cities” (Shoval, 2002)

• Fuelled by press rhetoric - London ‘savaged’ by IOC report on 2012 bid- Paris ‘humiliated’ by 2008 bid failure

• Underlying assumption that hosting events and constructing stadia indicate a vibrant economy, attract business and tourism revenues

• generate net economic and social externalities to the host country (Austrian & Rosentraub, 2002; Miller, 2002)

INTRODUCTION

7

• Event bids invariably highlight the post-event impact/legacy that will result for the host community

• Commitment to rigorously address impacts and legacies, loses momentum once the event is over

• Toohey (2008) questioned long term impacts on Sydney

• limited enthusiasm for evaluation of the Olympic legacy following the Games

• Cashman (2002) and Shipway (2007) also noted the lack of post-Games analysis

INTRODUCTION

8

• Decisions about major events essentially political - not part of a rational planning process

• include little or no democratic community input (Roche (1994) )

• “groups that provide the most effective political support for politicians tend to gain” (Fort, 2006)

• Powerful symbolism and ritual

• difficult issue for politicians• anti-city/anti-nation?

• Emotional hold on the public - psychic income

INTRODUCTION

9

• Government shift from redistribution to economic development (externalities)

• Civic elites/‘downtown’ business interests/sport • powerful alliances• politicians satisfy groups that figure prominently in re-election

• Sport industry controls much of the debate

• Difficult to form effective coalitions to oppose development • anti-city/nation & anti-development• organised groups get the benefits of political actions • rationally ignorant non-participants pay the costs

INTRODUCTION

10

• Benefits concentrated amongst those with political influence/power

• Negative externalities dispersed across majority of less influential taxpayers

• Over past 20 years community involvement rarely considered when governments invested in sport events and infrastructure – but now part of IOC bid criteria (Gratton et al. 2005)

INTRODUCTION

11

Anticipated potential for benefits to accrue from investments in major events and elite sport

feel good (bad?) factor - local and national pride enhanced (diminished?) international image/profile enhanced (diminished?) productivity/confidence facility and transport infrastructure - urban regeneration economic benefits (tourism) future sporting success more vibrant/sustainable volunteer sector

Direct (multipliers) and externalities/spillovers

INVESTMENT RATIONALE

12

Two main justification types1. Economic

jobs/increased revenues/tourism/capture regional leisure expenditure

2. Non-economic/intangibles civic pride/livability/psychic income (feel good)

Debates traditionally focused on economic rather than intangibles

detractors emphasize costs - supporters overstate benefits

taxpayers are left only with information at the endpoints of the spectrum of possibilities

INVESTMENT RATIONALE

13

Athens 2004 100,00 jobs - 50,000 permanent “A more beautiful and livable city - better transport, cleaner and new housing” “A global announcement of our modern present and head start to our bright future”

World Cup South Africa 2010 US$500m to the economy Create 150,000 jobs

INVESTMENT RATIONALE

14

Governments worldwide subsidise events & stadia

Highly competitive and costly event bidding processes (Bennett, 2006; Downward et al 2009)

significant direct costs and substantial opportunity costs by taxpayers £17M for London 2012 bid $35M for Vancouver 2010 bid

INVESTMENT RATIONALE

15

Stadia/arena construction and refurbishment

USA (Siegfried & Zimbalist, 2000) new stadia

55-100% public sector resources (typically 70%) refurbished stadia

78+% public sector resources (typically 90+%)

INVESTMENT RATIONALE

16

Sydney 2000 AUD$1.54B - facilities only (total AUD$7.3B estimate)

Euro 2004 US$1.0B on infrastructure

Macau Asian Games 2005 total cost US$350M - “expenses will exceed revenues”

EVENT COSTS

17

Beijing 2008 over budget by US$800m ($3.2B - $4B) associated infrastructure US$25B

Shanghai World Expo 2010 site only - US$3.6B ($3B)related infrastructure - US$36B ($30B) Shanghai Government - US$2.4B

London 2012£1.012B plus £642M for infrastructure

Rio 2016 - budget US$14.4B

EVENT COSTS

18

Preuss (2007) argued that there has been no clear definition of the term ‘legacy’

Cashman (2006) adds that the term is elusive perception that the term is self evident and generally positive

Shipway (2007) suggested that there appears to have been “an assumption that legacy benefits will flow down to the community at the end of the Games, as a matter of course”

EVENT LEGACY

19

Attempts to define legacy (e.g., by the IOC) narrowly focused on sports facilities and other ‘public improvements’ ignoring less recognised intangible outcomes

“Irrespective of the time of production and space, legacy is all planned and unplanned, positive and negative,

tangible and intangible structures created for and by a sport event that remain longer than the event itself”

(Preuss, 2007)

EVENT LEGACY

20

This definition suggests a shift to a new paradigm in event impact/legacy research

longer term and more strategic approach to impact studies examine the leveraging of long term benefits rather than only focusing on short term outcomes (Chalip, 2006) economic welfare and efficiency i.e., costs/benefits (Downward et al, 2009)

EVENT LEGACY

21

Nature of returns (intangible and economic) on public sector investment in sport events largely under-researched and remain uncertain (Gratton et al. 2005)

Austrian and Rosentraub, (2002) indicated that anticipated outcomes frequently not realised

no clear evidence that use of public funds results in sizable benefits to host communities

Downward et al (2009) – “gloomy” data Why then the tremendous joy on the beach in Rio

recently? (50,000 people!)

EVIDENCE

22

1986-87 America’s Cup (Soutar & McLeod,1993) significantly improved quality of life expectations of benefits & costs more extreme than actual

Gold Coast Indy (Fredline & Faulkner, 1998) benefits - tourism promotion, opportunities for socialising,

increased self-esteem, and increased employment and business opportunities.

costs - noise levels, traffic congestion, crowding and disruption to lifestyle.

“prepared to accept these negative impacts because they perceive that the event benefits the community at large”

EVIDENCE - INTANGIBLES

23

World Skiing Championships (Andersson et al. 2004) majority of residents were supportive positive attitudes predominantly desire for livelier social

context rather than economic impacts Meta-analysis (Solberg, 2006)

majority of people welcomed idea of hosting sport events level of support grew as the event grew nearer and higher

after the event finished than when first proposed substantial proportion of people willing for the event to be

funded by dedicated taxes Civic pride effect mainly confined to those who attend

sport event helped define city (Swindell & Rosentraub, 1998)

EVIDENCE - INTANGIBLES

24

Data are mixedmodels & assumptions/values

Variable impacts & difficult to determine before the event (Gratton et al, 2000)

Sport diverts economic development into labour intensive, low wage activities (Dye 1990)

Most don’t cover costs (Quirk & Fort, 1992)Hanover World Expo - lost US$1B 18m visitors but 40m forecast

EVIDENCE - ECONOMIC

25

USA major sport events Superbowl economic impacts questioned (Porter, 1999) hotel rooms booked for week but shorter stay, less

spending than normal patterns

Athens 2004“costs US$1B higher than expected and rewards less

than hoped for” “real” cost probably double the official US$6.7B totalUS$15,500 debt per person for 20 years!

EVIDENCE - ECONOMIC

26

Impact of AZ Diamondbacks340 full-time jobscost to city: $240 Million$706,000 per job

Other studies smaller cost per job in Baltimore: $127,000 - $331,000

EVIDENCE - ECONOMIC

27

Ex ante Evidence (19 studies) often misleadingconsiderable variance in results (data/assumptions/who)results not reliableincentives to win bidsstrong interest groups

Ex post Evidence (5 long term studies) more reliable (consistent) - neutral researchersdata suggests that at best hosting events adds nothing

statistically to employment or value of the economy (Downward et al 2009)

EVIDENCE - ECONOMIC

28

Misrepresentation of employment data e.g., nature of employment, pay

Fudging multiplier coefficients e.g., using a national multiplier for local study

Failure to accurately define the study area leakage not accounted for

Inclusion of local spectators leisure $ would be spent elsewhere

MISUSE OF EVENT IMPACT RESEARCH

29

Failure to exclude time-switchers/casuals Confusion of turnover & multiplier Use total rather than new spending Omission of opportunity costs

would a shopping centre attract more visitors? Measuring only benefits - not costs Assume zero hotel occupancy rate

(Bale 1993, Baim 1994, Crompton 1995, Porter 1999, Siegfried & Zimbalist 2000)

MISUSE OF EVENT IMPACT RESEARCH

30

CONCLUSIONS

Mixed data concerning potential impacts/legacies Anticipated outcomes (especially economic) frequently not

realized or fall well below expectations (Austrian & Rosentraub; 2002; Preuss & Solberg, 2006)

Quantity and distribution of returns (especially medium and long-term) on public sector investment in sport events are uncertain Gratton, et al (2005)

31

CONCLUSIONS

At the very least, there is a need for some skepticism (Swindell & Rosentraub, 1998)

Possible to assess expenditures during and immediately after sport events, assessment of the longer-term legacy is more elusive (Gratton et al., 2005). the “stated benefits…are often…vague” (Cashman,

2002) Ongoing stimulus may be required to sustain multiplier

effects – NB teams vs events (Downward et al 2009)

32

CONCLUSIONS

Social and psychological impacts can exceed economic impacts (Gratton et al. 2005; Ritchie, 2001)

Such benefits may now more valued by the community (Swindell & Rosentraub, 1998; Crompton, 2004)

However, intangible benefits have been reported less frequently (Downward & Ralston, 2006)

Crompton (2004) advocated that impact studies should focus more on the psychic income generated by events

33

“…while a coherent theoretical case can be made for public sector investment in sports, the evidence in support of this case is relatively weak, and suggests

considerable caution and planning being required to harness the spillover

effects from the investments”

(Downward et al, 2009)

34

Griffith Business SchoolGriffith Business School

QUESTIONS?