Major sport events and long-term tourism impacts

1. Major sport events and long-term tourism impacts Solberg HA, Preuss H Journal of Sport Management 21: 213-234, 2007

2. Event long-term tourism 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

3. Event long-term tourism Stages of long-term period • Possibility to promote a city through Olympic bid is limited • Process NOT identical for every event

4. Event long-term tourism 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

5. Event long-term tourism Supply side: structural requirements • High costs may create negative long-term impacts by reducing other activities that require tax funding • Whole Athletes Villages converted to housing after events • Sport parks, rather than a single sport facility

6. Event long-term tourism

7. Event long-term tourism 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

8. Event long-term tourism 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

9. Event long-term tourism

10. Event long-term tourism 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 city’s broader environment • Not only the sport event

11. Event long-term tourism

12. Event long-term tourism 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

13. Event long-term tourism 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

14. Event long-term tourism

15. Event long-term tourism 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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17. Event long-term tourism 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

18. Event long-term tourism Post-event tourism effect • Lillehammer: unrealistic optimism caused overinvestments in local hotel sector • Several bankruptcies in tourism industry

19. Event long-term tourism 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

20. Event long-term tourism Market failure • 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

21. Event long-term tourism Role of governments • 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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23. Event long-term tourism 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

24. Event long-term tourism Tourists after events NOT significant Fourie & Santana-Gallego, 2011

25. Event long-term tourism Participating countries,Events held in off-season (non-summer) Fourie & Santana-Gallego, 2011

26. Event long-term tourism Tourists increase in all bidders Fourie & Santana-Gallego, 2011

27. Event long-term tourism Events included in analysis Fourie & Santana-Gallego, 2011