Major sport events and long-term tourism impacts Solberg

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

Event long-term tourism Objectives n n 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 2

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

Event long-term tourism Supply side: structural requirements n Major sport events have potential to develop urban structure n n Must compare long-term development plan with necessary event-related structural requirements n n Housing, labor, recreation, transportation Before bidding for or creating events Whether event-specific development exceeds long-term demand from locals and visitors n Peak demand during mega events exceed capacity in almost every host city 4

Event long-term tourism Supply side: structural requirements n n n 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 5

Event long-term tourism 6

Event long-term tourism Soft-infrastructure change n Skills and knowledge upgrade in service industry n n n English courses Improve skills and knowledge necessary to win more bid competitions Improve skills required to secure a safer environment n Police, security network 7

Event long-term tourism Destination marketing n Production of destination marketing involve public goods n n 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 n Combine with improvement in softinfrastructure, have potential to increase long- 8

Event long-term tourism 9

Event long-term tourism Increased awareness and image n n Increased awareness and image of host city or nation may be mixed or no results Duration of any increased-awareness effects limited n n n 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 n Not only the sport event 10

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Event long-term tourism Investment n n Not all event-related infrastructure serve tourism Cities hoping to reach long-term revenues from post-event tourism n n General structure, not necessary for the event, but necessary to attract and serve tourists: museums, shopping malls, special tourist attractions Unpredictable sociopolitical factors n 9 -11 attacks, SARS, terrorist attacks 12

Welfare-economic impacts from inbound tourism Event long-term tourism n n Australia enjoyed stronger growth than its neighboring countries 1994 -2000 One of main targets: convention market n n n 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 n Preparation and increasing supply vs tourism crises and oversupply 13

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Welfare-economic impacts from inbound tourism Event long-term tourism n Increased tourism demand before Olympics n n Significant decline in number of rooms after Olympics n n n Number of hotel rooms in Sydney ↑ 40% from 1994 to 2000 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 n Higher in 1998 -99 than 2002 -04 15

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Event long-term tourism Post-event tourism effect n Time switching effect of tourists to Sydney n n n 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 n n 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 17

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

Event long-term tourism 19 Market failure n Market failure occurs if those who would have benefited from welfare-economic gains are unable to coordinate their actions n n n 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

Event long-term tourism Market failure n n Governments should only become involved in hosting of sport events to prevent market failure Some hotels may adopt free-rider strategy n n Let others bear burden of financing the event The product of events become suboptimal 20

Event long-term tourism Role of governments n n Neither profit-maximizing producers nor event organizers will undertake activities designed to generate revenue for other producers Rationale for governmental intervene n n Funding the event Motivate those who expect to benefit from events to provide the government with prognosis that exaggerate the positive impacts n n Local decision makers have high interest in attracting events Host destination can take advantage of asymmetric information to provide the government with higher prediction 21

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Event long-term tourism Conclusions n n Large events can generate revenues that cover operational costs, but not investment in infrastructure Events can stimulate inbound tourism n n Too much optimism can initiate investments that exceed long-term demand Attracting more tourists in post-event period may require considerable investment n n Duration of event promotion period is short Upgrades of local infrastructure to provide sufficient quantity and quality of tourism products and services 23

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

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

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

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