Olympic Glitter Not Always Gold

"So this is really just...profit for the hotels and that goes back to shareholders back at the corporate headquarters back in New York City rather than actually sticking in the Vancouver economy"

"In Lillehammer, host of the 1994 Winter Games... 40 per cent of the hotels went bankrupt and two new alpine facilities were sold for US$1 to prevent bankruptcy."

Olympic glitter doesn't always mean gold: Economists
By Stephanie Levitz, THE CANADIAN PRESS (Feb 28, 2009)

VANCOUVER, B.C. - The colours of the Olympic rings, history says, represent the nations of the world. But when prospective host cities look at them, they see gold.

Each Olympic bid is preceded by reams of impact studies that promise billions in economic benefits to a Games host.

For the 2010 Winter Olympics, the figure cited most often is $10.7 billion, which takes into account the number of jobs created, the value of having a new convention centre and tax revenues.

But rarely are the same studies applied after the Games, economists say, making it almost impossible to judge whether a host's Olympic dreams do come true.

"People are apprehensive about what they might find," said Edward Mansfield, an associate partner at PriceWaterhouseCoopers, which is conducting a multi-year study of the 2010 Games for the federal and provincial governments.

Before the bid was awarded to Vancouver, consulting firm Hardy Stevenson went to past hosts and did their own study of the actual social, economic and environmental outcomes of the previous Games.

Expectations and reality didn't always meet up, said Dave Hardy, the firm's principal.

"There are some cities where they weren't met, some cities where they feel they were met but they're putting on a brave face, and other cities where I think they were considerably exceeded," he said.

That's in part due to how hard Games committees and host cities work to leverage the Olympics, he said.

In Lillehammer, host of the 1994 Winter Games, not enough was done to capitalize on potential tourism, he said.

The result was that 40 per cent of the hotels went bankrupt and two new alpine facilities were sold for US$1 to prevent bankruptcy.

Pre-Games studies also use variables that can't take into account unknown factors, like the weather or how well the city performs as a host.

They also don't reflect the cost.

When a trio of sports economists looked at the 2002 Salt Lake Games, they found all that glittered wasn't exactly gold.

In a 2008 study of tax receipts from the period during the Olympics, hotels and restaurants did do extremely well, as forecasted.

But they didn't do well enough to make up for the US$167.4 million lost in other areas of the economy.

"Most economists who are not working for the sports leagues or working for the event managers always come up with numbers that are a fraction of what the event organizers promise," said Victor Matheson, an economics professor at the College of the Holy Cross in Massachusetts and one of the authors of the study.

One factor almost never taken into account, said Matheson, is how much money being spent by or during an Olympics actually stays in the local economy.

An increase in hotel prices doesn't mean hotel employees' wages go up too, he pointed out.

"So this is really just money that is kind of a windfall profit for the hotels and that goes back to shareholders back at the corporate headquarters back in New York City rather than actually sticking in the Vancouver economy," he said.

The study most often cited in connection with perceived benefits for the 2010 Games was done by Intervistas in 2002, long before this fall's spectacular economic collapse.

But the authors say they don't feel the current economy will have much of an impact on 2010, as the payoff from a Games is more closely tied to Olympic construction and the legacies left by venues and increased tourism.

Ticket and merchandise sales for Vancouver's Olympics have already exceeded expectations.

The Calgary Olympic Development Association estimates that the '88 Winter Olympics facilities have contributed $925 million to the gross domestic product since those Games.

Canada's tourism industry is getting more than $40 million to capitalize on the Games, but linking tourist visits to the Olympics is a figure that's very difficult to quantify, Mansfield said.

"What we're trying to do is say . . . how many visitors do we think we would have gotten and then contrast that to what we actually get," he said of the work his firm is doing.

"And then say well, is that suggestive that Olympic exposure had a role."

The $10.7 billion that B.C. politicians use is the highest end of the estimates in the 2002 study.

The figure includes potential spinoff from the $900-million expansion of Vancouver's convention centre, though the centre isn't included in the province's own Olympic budget.

Without including the centre, the highest economic impact is estimated at $4.2 billion.

B.C. politicians stress that given the current economic climate, any benefit provided by the Games is worth it, especially since the province is running a $740-million deficit for the next two years.

But when they tout Games' benefits, they don't mention that the deficit is only $20 million less than the provincial Olympic budget.

"It's basically going to be a subsidy to the rest of the world, if you want to think of it that way, for hosting that event," said Rob Bauman, an economist who worked with Matheson on the review of the 2002 Games.

"Whether that ultimately pays off, that remains to be seen."