Prof. Dr. Holger Preuß :: Johannes Gutenberg-Universität Mainz
  

 

Prof. Dr. Holger Preuß :: Johannes Gutenberg-Universität Mainz
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Olympic Research
Overview Athens 2004 Turin 2006 Beijing 2008 Vancouver 2010 Innsbruck  2012 London 2012 Buenos Aires 2013 Olympic Idea and its futureLillehammer
2016
Rio
2016
Pyeongchang
2018


Olympic Economics

The economics of Olympic Games have only been a research field for the past 15 years. However, a Delphi-study conducted among 55 international scholars in sport economics named “event management” and “event impact” as the main upcoming research field, emphasising the Olympics as a prominent and important area. In the following I will give a brief overview on this research objective.

Festivalisation of City Politics

Cities all over the world lack resources and struggle in global competition to attract economic activity and gain importance for their destination. The Olympic Games are an event that provides what many cities are looking for. Firstly, the Olympics attract fresh economic resources, which are in particular the IOC contribution, governmental subsidies, foreign direct investments and most importantly the consumption expenditures of foreign Olympic tourists. Secondly, the preparation for the Games triggers an accelerated city transformation due to the immense infrastructural demands of Olympic Games. Thirdly, the Games create a worldwide attention, which can be seen as a free city marketing opportunity to attract new tourists, businesses, fairs, congresses, events, and stimulate trade in the years following the Olympics.

This explains why ever more cities have shown an interest in staging the Olympic Games since Los Angeles 1984. Recently not only developed nations attracted the Games or other mega events but also newly industrialized countries in particular the BRIC (Brazil, Russia, India, and China). Politicians of these countries hope to benefit from the event legacy such as former hosts have shown. However, legacy has to be well planned and requires additional investments to activate and leverage the wanted long-term changes of location factors.

Researching the Economic Impact

From a macroeconomic perspective the key welfare issue is whether or not Olympics really achieve efficient outcomes given the potentially incompatible aims of different stakeholders, which invariably lead to some debatable investments of scarce public resources. An enormous intervention like Olympic Games always changes the location and therefore creates winners and losers.

Latest research tries to provide evidence whether the often exaggerated economic expectations of politicians and many citizens become reality. Serious economic studies analyse the Game’s output based on circle theory. The models try to consider as many direct and indirect Olympic spending as possible and their consequential induced effects. However, there are two shortcomings. Firstly, effects resulting from a long-term change of the hosts’ location factors cannot be detected and secondly, it is difficult to isolate all Olympic effects from those of non-Olympic activities. Fact is that the direct economic impact of Olympic Games is short lasting and then vanishes completely. Overall, the size of the impact is relatively small for most national economies and therefore it is not surprising that many scholars do not find a statistically significant impact on the national GDP. Olympic Games do not support a lasting economic growth for a nation, but certainly change the host city.

Transforming the Host City

While impact studies only consider the output and macroeconomic consequences of Olympic-related activities, cost-benefit analyses also include changes of production and location factors. The change of location factors can stimulate non-event related economic activity following the Games such as the transformation of Barcelona, which encouraged many tourists to come after the Olympics in 1992. Due to the pressure to deliver an adequate infrastructure for the Games, most host cities undergo an accelerated urban transformation, which can be seen as the major Olympic legacy. Even though some Games-related infrastructure – in particular special sport venues – is not needed in the long-term, the whole city transformation must be taken into consideration when discussing opportunity costs and alternative spending of the rather small share of resources contributed by the city.

A common phenomenon during the preparation for the Games is that additional projects become piggy-backed to the direct Olympic-related city transformation. This can be positive in case former obstacles can better be overcome, however it also can be negative when time pressure creates massive cost overruns and other projects are crowded out due to price increases. In general, the Olympic Games themselves required a more or less similar infrastructure over the years and therefore only a moderate increase in costs is justified through the Games. The dramatic growth of overall costs from Atlanta 1996 to London 2012 can be traced to the political wish to transform the city.

The discussion on bidding for Olympics is often only based on the measurable economic Games output. Future research starts focussing more on the change of location factors, models detecting long-term economic growth, and other intangibles.

Intangibles – the Unknown Economic Benefits

The improvement of location factors through Olympics is one major intangible legacy. Recently, scholars have worked on developing new and better methodologies to measure intangibles, because they indirectly have influence on the economy of the host nation. Examples for intangibles related to the economy are the worldwide location marketing, the value of happiness of citizens, the entertainment and “feel-good” factor for the population, the emotions to consume or invest locally, the motivation to become a volunteer, the skill development of human resources or simply the reduction of health costs through motivating citizens to actively do sports.

Seeing the variety of intangibles it is clear that these are potentially the main economic benefits but difficult to measure. However, when discussing alternative investments of scarce public resources, a host community must also consider missing the intangible effects of the Olympics.

Economic Winners and Losers

There are several winners of the Olympics. Firstly the local politicians, who can use external resources flowing into the city, such as government subsidies, plus the reallocations within the city budget to change the structure of the city according to their political priorities. The second group of winners is the construction industry, which can confidently expect to receive contracts for extensive construction projects including parks, hotels, roads, sports facilities, housing, and sometimes convention and trade fair centres. Many of these projects contribute to the gentrification of areas of the city - a process that benefits higher-income groups, which constitute the third set of winners. The fourth group is tourists who benefit from an improved tourism infrastructure and additional attractions in the host city. A further group of winners is the city's general population, many of whom benefit from the general upswing in economic activity, a greater supply of service based on the improvement of urban infrastructure and the image of the city. Although the extent of Games-related economic activity differs greatly between host cities, the transformed city, the better image and greater overall demand leads to higher income and additional jobs. The criticism that additional income and employment only benefit members of the middle and upper classes must be rejected. Each activity stimulated by the Olympics creates demand and therefore employment and/or additional income - directly and also indirectly - in industries not visibly related to the Games.

Olympics also affect certain groups negatively. The Games serve a particular complex of targets and the winners are those that benefit from the targets being reached. Investing in Olympic Games also means that other projects in the city may be crowded out. Public money that was spent on the Games cannot be used for other activities and therefore the losers are all those that have other targets, which cannot be served but might have been realised without the Games. Many losers of Olympic Games are therefore from the low-income groups, given the obvious priority for basic education, cheap affordable housing, adequate medical care and social integration – aspects not directly supported by Olympic Games. Additionally, the poor can suffer from the subsequent gentrification of the city. When bidding for the Games, the potential negative effects and whether they can be borne from an economic point of view requires on-going research.

Olympic Research 

Since Berlin's unsuccessful application (1993) for the Olympic Games 2000, Holger Preuss has engaged  intensively in the different facets of the Olympic Games. His main focus is placed on economic and sociological questions, often accompanied by empirical on-site studies.

The book "The Economics of Staging the Olympics - A Comparison of the Games 1972-2008" offers the most comprehensive information published by Holger Preuss about the Olympic Games, but in many journal publications the Olympic Games are discussed as well.

In Routledge Journals 24 issues with an Olympic or Paralympic focus have been published (details can be found here).

Often research takes place in cooperation with colleagues or students from the Johannes Gutenberg-University Mainz (Research Team Olympia), but as well from time to time in collaboration with foreign universities and researchers. Institutional partners from outside the university are the International Olympic Committee (IOC),  the International Olympic Academy (IOA), the former German Olympic Institute (DOI), the German Olympic Academy Willi Daume (DOA), the German Olympic Sports Federation (DOSB) and the Deutsche Sportmarketing (DSM).

Also as a consultant for Olympic applicant cities Holger Preuss is in demand. As an expert for impact- and feasibility studies he has been consulted from the applicants Berne 2010, Frankfurt 2012, Budapest 2012, Leipzig 2012, Innsbruck 2014 and Prague 2016/2020. Besides he is part of a group of scientific consultants, who assist the organisers (VOCOG) of the Winter Games 2010 in Vancouver in the marketing sector.

An overview of all research works can be found on the respective pages of the Games 2004 till 2012 and under the heading "basic research", which will be installed soon.


 
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