Legacy 2012: Understanding the impact of the Olympic Games


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If you would like to view the webinar or a digital version of this report, you can visit this website: www.legacy2012research.com

This report, created by the Economist Intelligence Unit and sponsored by Cisco, follows a webinar discussion held in July 2012 on the business, economic and social impact of the Olympic games on host cities and countries. The webinar brought together policymakers, practitioners and other experts in London, Beijing and Rio de Janeiro.
The report is a continuation of this discussion, featuring essays from other prominent experts as well as Economist Intelligence Unit articles based on interviews with executives in the aforementioned cities. It also highlights some of the most important comments from the July webinar, and features the results of a survey of 815 executives in the UK, China and Brazil conducted earlier in 2012. Our sincere thanks go to all contributors, interviewees and survey respondents for providing their time and insights.

The Economist Intelligence Unit bears sole responsibility for the content of this report. The findings do not necessarily reflect those of the sponsor.

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Legacy 2012: Understanding the impact of the Olympic Games

  1. 1. LEGACY 2012Understanding the impact of the Olympic games S p o n s o r e d b y:
  2. 2. LEGACY 2012: Understanding the impact of the Olympic games 3 IntroductionCONTENTS Preface Weighing the benefits and costs 2 6 Hard vs Measuring soft benefits the legacy The economic In search of effects of hosting greater precision the Olympics 4 7 8 Prestige and Prospect and peril soft power Businesses during How Beijing London 2012 benefited from the 2008 games 10 12 The regeneration The Barcalona promise model? Will the Olympics The virtues deliver for of planning for a east London? long-term impact 16 Awarding the Meeting business demand The Olympic London’s Olympic appetite for procurement bonanza goods and services 14 18 20 Olympic alignment After the party Do businesses benefit How companies can after the Olympics get a brand boost have moved on? from the games 21 Radiating outward Creating jobs Will regions outside London 2012 and the London benefit from labour-market impact the Olympics? 22 24 The road to Rio How the 2016 Olympics host is learning from its predecessors1 www.legacy2012research.com | © The Economist Group 2012
  3. 3. LEGACY 2012: Understanding the impact of the Olympic gamesPREFACEThis report, created by the Economist IntelligenceUnit and sponsored by Cisco, follows a webinardiscussion held in July 2012 on the business,economic and social impact of the Olympic gameson host cities and countries. The webinar broughttogether policymakers, practitioners and otherexperts in London, Beijing and Rio de Janeiro.The report is a continuation of this discussion,featuring essays from other prominent experts aswell as Economist Intelligence Unit articles basedon interviews with executives in the aforementionedcities. It also highlights some of the most importantcomments from the July webinar, and features theresults of a survey of 815 executives in the UK,China and Brazil conducted earlier in 2012.Our sincere thanks go to all contributors,interviewees and survey respondents forproviding their time and insights.If you would like to view the webinar or a digitalversion of this report, you can visit this website:www.legacy2012research.comThe Economist Intelligence Unit bears soleresponsibility for the content of this report.The findings do not necessarily reflect thoseof the sponsor. 2 www.legacy2012research.com | © The Economist Group 2012
  4. 4. LEGACY 2012: Understanding the impact of the Olympic gamesIntroduction The excitement of the London Olympic Games is now overwhelming majorities of China and Brazil From the Economist Intelligence Unit Weighing the benefits and costs behind us. With the spectators and athletes gone, executives expressed belief that the benefits and life in London returned to normal, the attention of the games in their countries outweighed (or of business people, economists and policymakers would outweigh, in the case of Brazil) the costs of rightly turns to the question: What will be the event’s hosting them; less than half of UK executives agreed. business and economic impact? Likewise, far fewer UK respondents than those in the other two countries believed their own business In some respects, the short-term impact appears would benefit from the games. from a preliminary reckoning to have been disappointing, as overall tourist numbers were down This may explain why less than one-quarter of UK on previous summers and many retailers reported businesses in the survey had developed strategies lighter than expected activity. But what of the longer to take advantage of the games. Indeed, judging term effects? Just as importantly, what lessons can by the survey, Chinese and Brazilian businesses be learned from these and previous games for future expected much more of a boost from the Beijing host cities and countries, and the businesses that and Rio events. operate in them? We have sought to address these questions with a series of initiatives begun in Several of the webinar participants, including May 2012 and culminating with the publication Eduardo Paes, mayor of Rio de Janeiro, and Sir John of this report. Armitt, chairman of London’s Olympic Delivery Authority, waxed enthusiastic about the positive The first was a survey of 815 senior business people— impact they expected from the games in areas such conducted by the Economist Intelligence Unit in May as job growth, urban regeneration and the resulting and June 2012—in China, the UK and Brazil to gauge contracts that local firms would win. Their optimism their views on the impact of, respectively, the Beijing was not shared, however, by economist Stefan 2008, London 2012 and Rio 2016 games. Secondly, a Szymanski, who termed the economic effect of the global webinar was hosted by Economist Conferences games as “trivial” and that on consumer demand as on 12th July which brought together key stakeholders “very short-term”. Several of the essays contributed in these three cities and their Olympic events. Lastly, to this report, such as those of Max Nathan, David the Economist Intelligence Unit asked other experts Kern and Alexandra Jones, are likewise sceptical to contribute their views on the games’ business and about the existence of clear economic and business economic impact. The latter are presented here in the benefits to Olympic hosts, especially in the longer form of essays, and are complemented by highlights term, although none are as unequivocal on the from the survey and the webinar. subject as Mr Szymanski. No meeting of minds If the benefits are as hard to prove in financial terms as Based on these discussions, it is fair to say that most of our economists say, then why host the games opinion on the Olympic legacy is starkly divided. at all? Sir John Armitt argued the case for the games In our discussions the divide manifests itself on as a catalyst of regeneration in east London. Other two levels—between business executives in each webinar participants pointed to a positive public- of the three cities, and between policymakers, health impact as the games inspire citizens to adopt officials and economists. In the survey, for example, more active lifestyles. Mr Szymanski poured water on this notion too, however, saying there is no historical Share of businesses with strategies to evidence of Olympics-related public-health gains. capitalise on revenue or marketing opportunities presented by the Olympics For some host cities (and countries), softer benefits such as international prestige and boosts to civic 82% morale are likely to be decisive. One of our essayists, 2008 Xu Guoqi of the University of Hong Kong, as well as our Beijing-based webinar panellists have all made clear that this applies to China, which celebrated the 60% event as, in Mr Xu’s words, “the country’s arrival as 2012 a major power on the world stage”. For Rio, too, the boost to its international image and civic pride may 71% be well worth the economic cost of putting on the 2016 2016 games. The business and economic benefits may (or may not) be fleeting, but the value of pride Source: Economist Intelligence Unit survey and prestige is not to be sniffed at. www.legacy2012research.com | © The Economist Group 2012 3
  5. 5. LEGACY 2012: Understanding the impact of the Olympic games HARD VS SOFT BENEFITS The economic effects of hosting the Olympics Max Nathan, research fellow, Spatial Economics Research Centre, London School of EconomicsIf economics is the dismal science, the economics of and looking after teams and visitors. That shouldthe Olympics feels particularly bleak. It is important, boost employment in construction, tourism, retailhowever, to try and put numbers on the games: host and leisure—but may displace activity elsewherecities spend very large sums, and most justify this in “In terms of (some tourists like the Olympics; others will chooseterms of wider economic and social ‘legacy’. economic impact, another city to visit). House prices in some host city we should bear neighbourhoods may rise, although if developersAssessing these impacts is tough. The effects of then build more, this effect will be tempered. Extra in mind that [themega-projects are inherently hard to predict, and infrastructure—such as new transport links—boosts games are] relativelyprone to what psychologists call ‘optimism bias’. neighbourhood amenities, and helps people moveLondon 2012 is a case in point: the budget almost trivial.… They are around the city. In turn, that may improve economicdoubled to £9.3bn, partly because security costs not important performance.rose after the July 7, 2005 attacks, and partly economic events.”because officials failed to do their sums properly Stefan Szymanski, In practice, these impacts turn out to be small. Extra(forgetting to add on sales tax, for example)1. Worse, professor of jobs largely appear before the games, and many aresome games effects may show up straight away, while sports management, specialised—think astro-turfing—so opportunities University of Michiganothers take years to emerge. Distinguishing between for local people may be limited. Analysis of the 1984 Quoted from the webinar:what urbanist Greg Clark calls ‘legacy and early “The games: opportunities Los Angeles games estimated 5,043 net new jobsdividend’ requires long-term, ex-post analysis. So for for business” were created2. A study of the 1972 Munich gameshost cities, the best evidence is probably the least found no employment boost at all 3. Projections foruseful. This conundrum helps explain why so many London suggest over 38,000 net jobs for the city,low-quality studies exist, and why it is important to but only 7,800 in eastern neighbourhoods, whereunderstand the true channels and impacts. legacy efforts are concentrated4.What do we know? Winning the games means Housing market effects seem bigger. A recentbuilding new stadia, supplying sporting equipment London study suggested that after winning the bid, house prices in Olympic boroughs rose 3.3%5. This is good news for homeowners. However, many landlords offered high-priced ‘Olympic lets’: some unfortunate tenants had to leave their homesThe situation is different from one city unnecessarily6.to another… For Rio, when you talk The accelerator effectabout the Olympics, you’re talking about These housing market changes are closely linked to[benefits that are] not tangible; there infrastructure improvements—in this case, the Eastaren’t percentages… [The Olympics] London train line, the Olympic Park and the Stratfordwill help things in the city to move...” City site. This highlights one of the key indirect Olympic effects: the games can act as a giganticEduardo Paes, mayor, Rio de Janeiro development accelerator. As in Barcelona, many ofQuoted from the webinar:“The games: opportunities for business” London’s big projects were on the cards already, but winning created a real incentive to get on with it. 4 www.legacy2012research.com | © The Economist Group 2012
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R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ ¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥¥ R$ R$ R$ R$ Source: Economist Intelligence Unit survey Note: In part b, China executives were asked about Beijing 2008, UK executives about London 2012 and Brazil executives about Rio 2016.Economists are now exploring other indirect Olympic games8. They suggest the Olympics are worth almostlegacies. One study, published in the prestigious £2bn of ‘happiness’ to Britain over the period 2008-Economic Journal, looks at Olympic bidding and 2015; Londoners value the games at £480m. Theseexports7. The authors, US economists Andrew Rose are big numbers. But given the cost of London 2012 isand Mark Spiegel, find that winning countries now approaching £10bn, the economic legacy needsexperience a whopping 20% boost in national to be large indeed.trade. Strikingly, this also holds for losing bidders.Rose and Spiegel suggest that bidding countries About the authoruse the Olympics as a policy signal to indicate Max Nathan leads the public policy‘openness’: Spain won the 1992 games in 1986, the programmes of LSE’s Spatial Economicsyear it entered the European Economic Community Research Centre. He has also worked as a(EEC); China’s win in 2001 triggered World Trade senior policy adviser at the Department ofOrganisation (WTO)-brokered liberalisation shortly Communities and Local Government, and heafter. Win or lose, then, Olympic bids can help shift co-founded the Centre for Cities think tank.international perceptions, and tell a big story aboutnational futures. 1 Nathan, M and T Kornblatt (2007). “Paying for 2012: The Olympic Budget and Legacy”. Briefing Paper 2. London, Centre for Cities, ibid. 2 Baade, R and V Matheson (2002). “Bidding for the Olympics: fool’s gold?”,Economists are also looking at the likely social Transatlantic Sport: The comparative economics of North American and European sports. C Barros, M Ibrahimo and S Szymanski. Cheltenham, Edward Elgar: 127.impacts of the games. Many host cities hope the 3 J asmand, S and W Maennig (2008). “Regional Income and Employment EffectsOlympics will inspire citizens to get fitter. There is of the 1972 Munich Summer Olympic Games”. Regional Studies 42(7): 991-1002. 4 Blake, A (2005). “The economic impact of the London 2012 Olympics”.little evidence for this—even in Sydney, obesity Nottingham University Business School Working Paper No. 5. Nottingham, Nottingham University.levels rose before and after the 2000 event. The 5 K avetsos, G (2012). “The Impact of the London Olympics Announcement on Property Prices”, Urban Studies 49(7): 1453-1470.most important games effect is on national 6 C annell, F (2012). “That Olympic ideal rental is far from home and dry”, The Independent; Elliot, J (2012). “The game’s up as Olympic rentals goldwellbeing, and here too, economists are at work. rush tails off into an also-ran”, The Guardian.In 2006, researchers from the London School of 7 Rose, A and M Spiegel (2011). “The Olympic Effect”, The Economic Journal 121(553): 652-677.Economics (LSE) and Imperial College explored 8 A tkinson, G, S Mourato, et al. (2008). “Are We Willing to Pay Enough to `Back the Bid’?: Valuing the Intangible Impacts of London’s Bid to Host theBritish households’ willingness to pay for the 2012 2012 Summer Olympic Games”, Urban Studies 45(2): 419-444. www.legacy2012research.com | © The Economist Group 2012 5
  7. 7. LEGACY 2012: Understanding the impact of the Olympic games MEASURING THE LEGACY In search of greater precision John R Gold, professor, Oxford Brookes University The notion of ‘legacy’ is now central to thinking timescale over which to measure it, and about howAbout the authorJohn Gold is the author about the impact of staging the Olympics, with the to distinguish legacy from that which would haveof several books on International Olympic Committee (IOC) and host cities occurred anyway.the Olympic games, alike wishing to ensure that the games can bequeathincluding The Making of a lasting positive legacy. The nature and extent of Various initiatives have been launched to improveOlympic Cities (2012); Olympic legacy, however, are open to question. matters. The International Olympic Committee, forOlympic Cities: City instance, now requires host cities to participate in itsAgendas, Planning, Accurate statistical data is in short supply. Recent Olympic Games Impact Study, which involves completingand the World’s Games, UK Department of Trade and Industry estimates of four reports on the economic, environmental and social1896-2016 (2007 a £13.3bn benefit to the UK economy from London impact of the games at intervals over the 12 yearsand 2011); and Cities 2012 include a highly notional £6bn of foreign direct between application and final site adjustment.of Culture: Staging investment after 2012 and £2.3bn from tourism over a The approach taken at London 2012, hailed by IOCInternational Festivals period that actually includes the games (2011-2015). President Jacques Rogge as supplying a potentialand the Urban Agenda,1851-2000 (2005). Two of the cities currently bidding for the 2020 summer ‘legacy blueprint’ for future Olympics, has incorporated games variously forecast the creation of games-related legacy issues from the outset. Combined with research new employment at 152,000 (Tokyo) and 300,000- from academics and professional consultants, these 350,000 (Madrid) from the same event. The problematic exercises offer prospects of creating the subtle blend nature of such statistics partly reflects the use of non- of qualitative and quantitative methodologies standardised categories of data interpreted in whatever necessary to build more self-critical bases for assessing way is politically convenient. But it is also partly due to legacy, to promote better event planning, and to imprecision about what is meant by ‘legacy’, about the facilitate greater accountability. Olympic hosts tend to underestimate the costs Initial budget estimate (US$ at 2011 prices) Final estimated cost/budget (US$ at 2011 prices) Atlanta $2.0bn $2.6bn 1996 Sydney 2000 $1.9bn $4.9bn Athens $6.1bn 2004 $12.5bn Beijing $46bn 2008 $2.0bn London $3.7bn 2012 $12.9bn 0 10 20 30 40 50 0 10 20 30 40 50 Sources: Preuss, H (2007), Signalling Growth: Chinas Major Benefit from Staging the Olympics in Beijing 2008, Harvard Asia Pacific Review, 9(1), 45-49; Zarnowski, F (1993), A look at Olympic costs, International Journal of Olympic History, Vol 1, Number 2, Spring, 1993; SOCOG (1998), Sydney Olympics Budget; London East Research Institute (2007), A lasting legacy for London; Hellenic Republic Embassy of Greece (2004), Cost of Athens 2004 Olympics. Notes: All figures are estimates. Conversions to US$ 2011 prices are by the Economist Intelligence Unit.6 www.legacy2012research.com | © The Economist Group 2012
  8. 8. LEGACY 2012: Understanding the impact of the Olympic games Adaptability at a premium Businesses able to service the numerous visitors attracted by the games had the greatest prospect to benefit. But they would have to be adaptable, flexible and competitive. The sectors with the biggest potential to gain were tourism hospitality, catering, retail and taxis. Where there was a clear opportunity to benefit, albeit for a short period only, firms had to ensure that they had the necessaryPROSPECT capacity, i.e. temporary labour and stocks, to satisfy the increased demand during the games. But theyAND PERIL needed to avoid incurring long-term commitments and costs. Once the games ended, businesses had to be able to discard the additional temporary capacity without incurring crippling expenses.Businesses during London 2012 Some businesses will have lost out, because of whatDavid Kern, chief economist, is referred to as “displacement”. Many traditionalBritish Chambers of Commerce tourists did not visit London this summer. It will likely turn out that hotels, restaurants and theatresAlthough a source of pride to most Londoners, it will catering for this important market segment saw aprobably take years to determine whether the long- drop in their “normal” revenues; unless, that is, theyterm benefits of hosting the 2012 Olympics justify proved sufficiently agile to refocus their activitiesthe costs, and whether the infrastructure built for towards Olympics visitors.the Olympics will yield rewards in the longer term.In the shorter term, the games will have provided Many expected London to be as busy as usual inmany businesses with the opportunity to increase summer 2012, with new Olympics visitors makingsales and profits, but they must be aware that the up for (or exceeding) those who stayed away. ButOlympics also entail pitfalls. This applies to London this view was probably too optimistic. Moreover,as well as future host cities, such as Rio de Janeiro. traditional visitors who avoided the UK this summerAgainst a dismal general economic background as are likely to have more money and more time tothat which currently prevails, great caution is needed spend than those coming to the Olympics.to avoid taking unnecessary risks that may threatenbusinesses’ long-term survival. The Olympics are a great opportunity, which well-managed businesses can and should exploit.Most analysts, including the Office for Budget But they also entail risks, and are definitely not aResponsibility, believe that the net effect of the license to print money. The UK economy is facingOlympics on Britain’s GDP in the third quarter of 2012 serious difficulties. The eurozone situation iswill be favourable. But this is by no means certain. It dangerous and many members are in recession.is clear that there will be positive as well as negative Even if a new crisis is mercifully avoided duringinfluences. The Olympics are generating a degree of the games, the number of eurozone visitors isnational enthusiasm and a “feel good” factor. Business likely to be less than one might have hoped, andand consumer confidence will have improved during the their spending power will be constrained. The UKgames, and this will probably have boosted spending. is in technical recession, and growth will remain disappointingly low for some time. In theseBut the negative influences cannot be shrugged circumstances, businesses must avoid at alloff. The anticipated transport congestion and costs risks that threaten their survival, and mustovercrowding resulting from the games will likely have above all protect their cashflow and liquidity.deterred numerous visitors and damaged productivity.The potential adverse effects would be reinforced by About the authorthe working days that will have been lost, as people As chief economist, David Kern comments ontook time off to watch the games. We know that the behalf of the British Chambers of Commerce oncivil service, and many private employers, advised economic policy issues. He was formerly NatWesttheir staff to avoid travelling into London and work Group Chief Economist, and since 2000 has runfrom home during the Olympics. If this were to happen an independent macroeconomic consultancy,on a big scale, businesses servicing these workers Kern Consulting.would have been adversely affected. www.legacy2012research.com | © The Economist Group 2012 7
  9. 9. LEGACY 2012: Understanding the impact of the Olympic games prestige and soft power How Beijing benefited from the 2008 games Xu Guoqi, professor of history, University of Hong Kong The 2008 Beijing Olympics was a unique event that held. The government intended to use the games probably has few meaningful lessons for future hosts. as a demonstration of soft power, a coming-out Whereas most host cities these days are motivated party that underlined China’s growing economic by the potential economic gains on offer, China’s strength, openness and international prestige. authorities were driven by the desire to maximise In this respect, the games were clearly a success, the political and economic symbolism from hosting with the International Olympic Committee the country’s first ever Olympics. To that end, their President, Jacques Rogge, labelling them as primary goals were to present Beijing (and China) “truly exceptional.” They were exactly the kind in the best possible light and ensure that global of well-executed, high-profile branding exercise audiences saw the event as a success. that the Chinese government felt the country needed to boost its international reputation Realising these goals came at a cost. At $40bn and domestic legitimacy. spent on Olympic-related infrastructure and other preparations, the Beijing games were easily the A well-needed infrastructure upgrade most expensive ever held. Cost, however, was a With the spectacle of the games the clear priority, minor concern for the authorities, who aimed to their economic impact on Beijing was always going spend as much as possible to ensure that Beijing to be mixed. By far the biggest direct benefit was 2008 was the most spectacular Olympics ever the acceleration of infrastructure investment in the city, with four new metro lines and 50 new stations opened in 2008 alone. This and other Olympics- related investments are said to have boosted GDP growth in the city by about 1% every year between 2001 and 2008. These sorts of investments should “The impact [of the Beijing games] has been give the city the kind of infrastructure it will need long-lasting and significant. People may to minimise congestion as it continues to expand associate the games a little with government over the coming decades. intervention, but that direction has helped Beijing to reorganise itself, to rebuild its Less impressive was the economic impact during infrastructure and also to introduce such good the games itself. To prevent Beijing’s famous concepts as environmental protection….” smog causing any embarrassment, factories were ordered to shut down. And to minimise traffic David Wu, Beijing office lead partner, PricewaterhouseCoopers congestion, tourists from inside and outside China Quoted from the webinar: were discouraged from attending. These steps will “The games: opportunities for business” have increased the economic costs and reduced the economic benefits of hosting the games.8 www.legacy2012research.com | © The Economist Group 2012
  10. 10. LEGACY 2012: Understanding the impact of the Olympic games Prestige effect: share of executives who believe the games will (or did) catapult the host into the Premier League of cities 89% 41% 60% 2008 2012 2016 Source: Economist Intelligence Unit surveyMoreover, very little attention was paid to ensuring Perhaps most importantly, for developingthat Olympic venues would be fully utilised after countries in particular the Beijing experiencethe games had come to an end. Today, the famous underlines that hosting the Olympics can beBird’s Nest stadium and Water Cube aquatic centre about much more than direct economic benefits.are rarely used for their declared purpose, and their Indeed, the celebration of a country’s arrivalfuture is uncertain. as a major power on the world stage, and the brand boost that this provides, can be evenFew countries or cities are in a position to put so more valuable.much effort and financial resource into ensuringthat the games they host are a success, so the About the authortransferable lessons here are limited. One is that Xu Guoqi is professor of history at theconcentrating spending on transport and other long- University of Hong Kong and author ofterm infrastructure investments rather than sporting Olympic Dreams: China and Sports, 1895-2008.venues can help to create a lasting economic legacy. He is now writing a book titled Chinese andAnother is that, if organisers are concerned about the Americans: A Shared History to be publisheduse of Olympic venues after the games have come to by Harvard University Press.an end, they should plan for this well in advance. www.legacy2012research.com | © The Economist Group 2012 9
  11. 11. LEGACY 2012: Understanding the impact of the Olympic games THE REGENERATION PROMISE Will the Olympics deliver for east London? Chris Gratton and Larissa Davies, Sport Industry Research Centre, Sheffield Hallam University The London Olympics represent a huge opportunity and other factors, such as the long-term viability of to transform a deprived area of the city beyond venues built for the games. The organisers of London 2012. From an urban regeneration standpoint, 2012 have clearly put a lot of thought into these the goal is to use the Olympics as a catalyst for issues, but there is still uncertainty about the future converting what was once low-value industrial land of some venues, including the Olympic stadium itself. into higher-value residential and commercial sites that provide both more homes and more jobs for Moreover, even when plans are well thought-out the area’s residents. Planning to secure this kind they can be vulnerable to economic and political of legacy is widely considered to have been a key issues beyond the control of event and legacy strength of the approach adopted in London, with organisations. For example, public funding is legacy-related challenges addressed earlier and often required after the event to maximise the more convincingly than in most previous cases of regeneration benefits, but with the UK government event-led regeneration. The work already put into still trying to rein in spending in the wake of the securing a lasting legacy means that hopes are high, financial crisis this may end up being on a smaller but the question remains: Will London 2012 be able scale than previously hoped. to deliver on its promise to regenerate east London? While regeneration is a realistic expectation for cities that host the Olympics, planners should not expect this to take place automatically. Evidence from the literature1 and former Olympic cities, “In London there was no question such as Barcelona, suggests that the success of from the beginning that this was event-led regeneration depends on several critical a regeneration opportunity.” factors, including the strategic master planning Sir John Armitt, chairman, Olympic Delivery Authority of interventions, the integration of sporting and Quoted from the webinar: associated infrastructure into the long-term “The games: opportunities for business” economic and development plans for the area,10 www.legacy2012research.com | © The Economist Group 2012
  12. 12. LEGACY 2012: Understanding the impact of the Olympic games Patience required Top responses of UK executives asked It is also clear from discussions with stakeholders about the greatest benefits to the in London and evidence from other Olympic cities2 host city expected from from the that it could take many years before legacy effects are realised. This is something that should be Olympic games more widely acknowledged by planners, who often promise the transformation of places, only for communities to be disappointed when they do Re-generation of existing, not see immediate results. or creation of new, neighbourhoods Even with these challenges and uncertainties, the Olympics represent an opportunity to pull together current and future area-based initiatives for east 46% London into a holistic regeneration framework that has a coherent focus. At present, however, the governance of the regeneration process and evaluation of its effects are fragmented and unclear. These are critical components of successful Short-term boost to regeneration and need to be addressed if the economic growth opportunities presented by the London Olympics are to be capitalised upon. Failure to translate strategies into delivery, a loss of community engagement and inclusion, and political uncertainty 40% or conflict could all lead to a lack of follow-up investment from the private sector, which would clearly undermine longer term regeneration goals. Improved Any evaluation of long-term regeneration effects transport in east London at this stage is purely speculative. Despite claims that legacy is already evident, it is systems likely to be 15–20 years before the real regeneration legacy of the 2012 games begins to emerge, at 28% which point the success of the games will be judged on the extent to which the transformation of east London has occurred. Convergence will be judged on whether indicators of deprivation show any significant change in years to come, and whether Increase in the communities that have hosted the games in the tourism east of the city have the same economic and social opportunities as their neighbours across London. 1 C ashman, R (2006). The bitter-sweet awakening : the legacy of the Sydney 2000 Olympic Games. Petersham, NSW: Walla Walla Press in conjunction 26% with the Australian Centre for Olympic Studies, University of Technology, Sydney; Gold, J and M Gold (2008). “Olympic Cities: Regeneration, City Rebranding and Changing Urban Agendas”, Geography Compass 2 (1), 300–318. 2 Davies, L (2011). “Using sports infrastructure to deliver economic and social change: Lessons for London beyond 2012”, Local Economy 26 (4), 227-231; Gratton, C and H Preuss (2008). “ Maximizing Olympic Impacts by Building Up Legacies”, The International Journal of the History of Sport 25 (14). Economic stimulus during About the authors construction Chris Gratton is professor of sport economics phase and co-director of the Sport Industry Research Centre (SIRC) at Sheffield Hallam University, 25% and is the UK representative on the European Union Workshop on Sport and Economics. Larissa Davies is a researcher at the SIRC andSource: Economist Intelligence Unit survey a lecturer in geography. www.legacy2012research.com | © The Economist Group 2012 11
  13. 13. LEGACY 2012: Understanding the impact of the Olympic games THE BARCELONA MODEL? The virtues of planning for a long-term impact An interview with the For Antoni Vives, deputy mayor of Barcelona, the 1992 deputy mayor of Barcelona Olympics were more than just a sporting event. The games brought momentous economic and cultural change to the Catalan capital, boosting the city’s profile, increasing tourist numbers and unlocking much needed inward investment. One economic impact study cites the 1992 games as “a model from the sporting, organisational, economic, social and urban planning perspectives”1. Other host cities have tried to replicate Barcelona’s achievement, but with varying degrees of success. According to Mr Vives the key is that, in planning for the games, business leaders and policymakers must look far ahead of the event itself. “The games were very successful,” he says. “But the real success came afterward.” With the city’s nomination as host in 1986 coming little more than a decade after the death of dictator Francisco Franco and Spain’s transition to democracy, the games marked the start of a new era for the city and for Catalonia. “It represented a very important point of inflection,” says Xavier Trias, Barcelona’s mayor. “This event was the engine of a great transformation—technological, economic and in terms of social planning.” Infrastructure catalyst Barcelona used the games as the catalyst for the construction or completion of a large number of infrastructure projects, many of which were not directly related to the event. “If we hadn’t had “The holding of the Beijing games helped to inject professionalism into city management.” David Wu, Beijing office lead partner, PricewaterhouseCoopers Quoted from the webinar: “The games: opportunities for business”12 www.legacy2012research.com | © The Economist Group 2012
  14. 14. LEGACY 2012: Understanding the impact of the Olympic games Share of executives who believe that the Olympics are a 82% useful catalyst for 71% 60% infrastructure and urban regeneration projects 2008 2012 2016 Source: Economist Intelligence Unit surveythe games, it would have been difficult to convince was being unable to see in their full dimensionthe Spanish government to invest in Catalonia,” the beneficial effects that could be realised inexplains Mr Vives. “With the games, it was the longer term,” he says. “If those had beenimpossible for them to skip the subject.” understood, some of the deficit in infrastructure and even mentality would have been solved atThe city’s business development strategy adopted that time.”ahead of the games, including investment in thebuilt environment and efforts to attract businesses Barcelona might not have taken full advantage ofand tourists, was maintained after the games came all the opportunities flowing from the games, butto an end. It is clear to Mr Vives that the strategy the city has since become a major business hub,has paid off—if not for Spain, then for Barcelona. with logistics, ICT (information and communications“Everything is falling apart in the south of Europe,” technology) and business services leading the wayasserts Mr Vives. “But Barcelona is still getting in fuelling job creation. Moreover, it now has its owninvestment from all over the world, and we get high industrial version of the games in the hosting of theratings from Standard Poor’s and other agencies.” Mobile World Congress, the annual meeting of the world’s mobile communications industry.He acknowledges that errors were made. At anational level, Mr Vives cites the failure to fully These positive developments can all be traceddevelop rail connections with the city. And while a back to the 1992 games, says Mr Vives. “It was thenew airport was built for the games, “we didn’t take first party after the dictator died,” he explains.up the chance to turn Barcelona into a transport “We were a young city at the time and wehub,” he says. “That was a lost opportunity.” Mr understood that this was a chance to makeVives ascribes this to the fact that the city had not people understand that we were something.”realised just how widespread were the business and 1 B runet i Cid, F (2002). “The economic impact of the Barcelona Olympiceconomic opportunities presented by the Olympic Games, 1986-2004”, Barcelona: the legacy of the Games 1992-2002.nomination. “The biggest mistake in our approach Barcelona: Centre d’Estudis Olímpics, 1992. www.legacy2012research.com | © The Economist Group 2012 13
  15. 15. LEGACY 2012: Understanding the impact of the Olympic games AWARDING THE BUSINESS London’s Olympic procurement bonanza From the Economist Intelligence Unit How effective do you think is/was the civic authorities co-operation with businesses to increase the latters chances of reaping significant benefits from the games? 2008 2012 2016 3% 4% 4% 10% 16% 28% 30% 33% 61% 28% 46% 38% Very effective Very effective Very effective Slightly effective Slightly effective Slightly effective Not effective Not effective Not effective Don’t know Don’t know Don’t knowSource: Economist Intelligence Unit survey14 www.legacy2012research.com | © The Economist Group 2012
  16. 16. LEGACY 2012: Understanding the impact of the Olympic gamesThe UK spent a whopping £6.6bn on venues andinfrastructure for the London Olympics. Organisershave come under pressure to maximise the long-term gains and benefits for smaller businesses, butthe overriding need to deliver projects on time andto budget has limited their room for manoeuvre. “The games are what we call aEven so, future hosts can learn from London’s ‘convergence opportunity’ forcarefully planned approach. [east London]… About 72%“This was a highly political project”, says John of UK contractors are smallFernau, head of procurement at the OlympicDelivery Authority (ODA). “There was a great list and medium-size enterprises,of aspirations …[so] one of the first things we a lot of them locally based.did was hold a series of board-level workshopsto try and rationalise these into more tangible Bob Neill MP, parliamentary under secretary of state, Communities and Local Governmentobjectives.” Quoted from the webinar: “The games: opportunities for business”The outcome was a “balanced scorecard”summarising the ODA’s objectives and procurementpolicy. “It includes all the things you’d expect “That’s the strength of CompeteFor”, he says.to see, such as cost, time and quality, but it also “You’re opening up competition throughout thegoes beyond that into … long-term sustainability, supply chain, which is good for us because it drivesenvironmental factors, safety and security, [and] efficiency and high performance and good forequality and inclusion”, says Mr Fernau. “By creating SMEs because they get the opportunity to bid forthat balanced scorecard we’re trying to build the contracts.” On the face of it, the impact haslegacy factors into the procurement process.” been impressive, with SMEs accounting for 75%To ensure this happened, the ODA used its of the contracts awarded through the CompeteForscorecard when choosing primary contractors procurement process.and then forced those companies to do the samewhen handing out work to their sub-contractors. Not everyone agrees that CompeteFor has been a roaring success. “In a way we were too successfulWhen objectives clash in driving interest from potential suppliers”, saysThe main problem is that the goals chosen can Mr Fernau. “From the market’s perspective it hassometimes be in conflict with one another, turned into a love it or hate it situation. The peopleparticularly when it comes to small and medium- who’ve won contracts love it and those who didn’tsize enterprises (SMEs). As Mr Fernau explains: hate it.” One of the reasons, he thinks, is that some“We want to drive engagement with SMEs … suppliers thought they would win contracts simply[but] our prime objective is to deliver the by signing up to the system and therefore neglectedinfrastructure for the games.… We aren’t going much of the development work that normally goesto break a contract down into a thousand small into winning business.packages that SMEs can bid for and then try andintegrate it and deliver it at the same time; we’re Although London’s experience highlights somegoing to contract with one main contractor so of the tensions and trade-offs between competingthey’ve got sole responsibility.” Olympic objectives, future hosts with an eye on legacy should be able to learn from its attentionThe ODA has still done much to ensure that smaller to detail in delivering the games. Meanwhile, thebusinesses can access the opportunities being created, biggest lesson for businesses hoping to benefit fromhowever. The main tool used for this is CompeteFor, future Olympics seems to be that, no matter howan online system which allows suppliers to register sophisticated the efforts of organisers, they willtheir interest and apply to deliver contracts put out to still need to work hard if they want to secure a slicetender by the ODA or companies it has contracted with. of the pie. www.legacy2012research.com | © The Economist Group 2012 15
  17. 17. LEGACY 2012: Understanding the impact of the Olympic games MEETING DEMAND The Olympic appetite for goods and services Experts compare the effects in Barcelona, Beijing and London If unwrapped from the elaborate “Bird’s Nest” Overall, the economic impact of hosting the games Olympic stadium, the steel used would stretch for can look impressive. Between 1986, when Barcelona 36 kilometres. But it was not only Chinese steel was nominated as a host city, and 1992, the year the suppliers who benefited from the 2008 Beijing games were staged, the city went from stagnation games. Hosting the Olympics can boost business to boom. The construction industry in particular for companies ranging from concrete makers and received a major boost from Olympics-related IT specialists to security firms, parking facilities spending on transport, housing and other public- and hoteliers. Yet, despite this temporary surge in infrastructure improvements1. demand, not all segments of the economy benefit. Revenue windfalls not guaranteed But while Olympic cities experience a surge in demand for goods and services, the rewards are not “We’ve seen new products being created by always evenly spread and do not necessarily lead to a boost in revenues for all suppliers. One reason is suppliers to the games in order to meet some that terms can be set for companies that sign up to of the sustainability targets that we’ve set be part of the Olympic bid. In London, for example, the local organising committee guaranteed to block them. The games have pushed them to become book a certain percentage of rooms in hotels that more innovative [and this will help them signed on as a participating business, explains Michael Gray, general manager of Hyatt Regency going forward].” London and area director UK Ireland for Hyatt. Sir John Armitt, chairman, Olympic Delivery Authority Quoted from the webinar: “The games: opportunities for business” “That’s a chunk of business that LOCOG put into the hotels,” says Mr Gray. But it also meant that prices16 www.legacy2012research.com | © The Economist Group 2012
  18. 18. LEGACY 2012: Understanding the impact of the Olympic gamescould not be increased beyond the rate of inflation,limiting the profits that these hotels could make. How would you describe the“We signed up because we’re loyal Brits and we increase in demand for goodswanted London to win,” he says. “But it certainly and services that businessesmade for reasonably priced hotel accommodation can expect from the Olympics?in the city.” The demand increase will …When it comes to building the facilities needed tohost the games, tried and tested companies tend to Tail off rapidly after the games come to an endwin the contracts, says Marc Dollinger, a business Be sustained for about one yearprofessor at Indiana University’s Kelley School Be sustained for 2-3 yearsof Business and co-author of a 2009 study on the Be long-lasting – more than three yearseconomic impact of the Beijing games2. This can There will be very little demand boost at allprevent new companies from capitalising on thesurge in demand. “It’s not new firms jumping in,”says Mr Dollinger. “It’s the people who usually pourthe concrete and build the roads who benefit—and 20%they’re very well connected.” 23% 3%During the games, predictions of hotels burstingat the seams and restaurants with hour-long waitsfor a table can prove unfounded since the rise in 23% 31%visitors to a host city is offset as locals leave toescape the crowds and regular travellers postponetheir trips. This proved to be the case for London’shotels during the 2012 games. London was not soldout, and Mr Gray says that hoteliers were desperatefor the tourism authorities to let the world know 7% 3%there was still accommodation.Stars in their eyesNor is it easy for local companies—particularly 20% 17%small enterprises—to secure economic gains afterthe games have closed. Mr Dollinger argues thatOlympic organisers could do more to lay downplans that could foster local economic enterprisepost-games. 53%“It does help large businesses,” he says. “It’s asuperb platform to promote your products andservices.” But, he adds, local authorities and 11% 6%communities become so wrapped up with thebidding process and the thrill of being namedas host city that they rarely press for the kindof plans that would have a broader impact onthe community. 15%“They get stars in their eyes and they’re so 18%happy to be chosen that it’s hard for them tospeak up for small businesses,” he says. “Whenthey announce the winner, everyone is yelling 51%and screaming—and that’s not a good bargainingposition to be in.”1 B runet i Cid, F (2002). “The economic impact of the Barcelona Olympic Games, 1986-2004”, Barcelona: the legacy of the Games 1992-2002. Barcelona: Centre d’Estudis Olímpics, 1992.2 D ollinger, M, X Li and C Mooney (2009). “Mega-events and Entrepreneurial Source: Economist Intelligence Unit survey Rents: Lessons from the Beijing Olympics (Draft)”. www.legacy2012research.com | © The Economist Group 2012 17
  19. 19. LEGACY 2012: Understanding the impact of the Olympic games OLYMPIC ALIGNMENT How companies can get a brand boost from the games What branding experts have to say Paying for an Olympics “halo effect” has a long Certainly, much has been made of what some see history. As early as 1896, Kodak contributed to as draconian rules to protect the branding rights the Athens Organising Committee, receiving an of Olympic sponsors—including the possibility of advertisement in the official programme as its visitors at the 2012 London Olympics being arrested reward. Today, the only difference is that the sums for wearing a t-shirt bearing the logo of Pepsi, required for this kind of transaction are vast. Yet rival to Coca-Cola, an official sponsor. while strict rules guarantee exclusivity to those writing a sponsor’s cheque, branding experts argue Even businesses contracted to work on the games are that non-Olympic companies can also enhance their not allowed to use Olympic logos or to publicise their image by associating themselves with the games. relationship with the games through press materials, Local Organizing Committee revenues from sponsoring (in US$m) Munich 1972 Montreal 1976 600 400 $684m 200 Athens Los Angeles 2004 $48m 1984 $249m $0 $279m $516m Sydney Seoul 2000 1988 $612m $658m Atlanta Barcelona 1996 1992 Source: Preuss, H (2007). The Economics of Staging the Olympics: A Comparison of the Games.18 www.legacy2012research.com | © The Economist Group 2012