Page last updated at 21:56 GMT, Thursday, 1 October 2009 22:56 UK

Olympic bidders look to strike gold

By Bill Wilson
Business reporter, BBC News

Beijing Olympics
The ceremony in Copenhagen will select the host city to succeed London

With the hosts of the 2016 Olympics to be selected in Copenhagen on Friday, each of the four candidates will be hoping to secure not only a major sports competition, but also an economic windfall.

Chicago, Madrid, Rio de Janeiro and Tokyo will be hoping their economies strike gold as the best athletes in the world visit their city.

Thousands of tourists will visit the host city and hotels will be filled, while millions will be spent on tickets, consumer goods and souvenirs.

Winning the Olympic Games could also kick-start other economic sectors, including construction, finance, culture, exhibitions and sports.

"If a government makes a decision to invest in an Olympic Games, they are going to spend money on things like construction," says Simon Chadwick, professor of sports business at Coventry University.

"That obviously helps out across the economy, first in terms of things like employment around the building work and and then, later, the better roads can help facilitate things like more supply jobs."

He adds: "If you look at Barcelona in 1992, one of the major benefits was the regeneration of the docks there that went with the games.

"They also said that as part of the regeneration around the games that no-one would be more than 10 minutes away from a sport facility."

'Net economic benefit'

But while the 1992 games boosted Barcelona's tourist profile and regenerated the city, there is also the more recent example of Athens in 2004, which experienced a post-Olympic economic slowdown.

Prof Chadwick says that Athens did benefit in some ways, including a new tram network built around the games.

A country could spend $10bn on a games, but only get back $8bn for its economy
Prof Simon Chadwick, Coventry University

However, he points out that it is easy to be blinded by the economic and infrastructure upside of winning the games, without taking into account the potential drain on city and state coffers.

"What you have to keep in mind is that most of the studies and reports about Olympic bids talk in terms of economic benefits - but what we have to talk about is the net economic impact," he told the BBC.

"What has to be kept in mind is that often the highlighted benefits are an incomplete picture of the economic situation.

"A country could spend $10bn on a games, but only get back $8bn for its economy."

Also, after the dramatic increase in investment in the pre-Olympics stage, accompanied by a boom in consumption and revenues, investment and consumption traditionally shrink in a post-Olympics stage.

There is also the burden of maintenance costs for idle Olympic venues, as well as a potential downturn in the use of new games-related infrastructure.

'Positive impact'

The bookmakers' favourites to win the games is Chicago, whose bid is being supported by President Barack Obama.

At a White House briefing earlier this week, his spokesman Robert Gibbs touted the "tangible economic benefits" of the Chicago Olympics bid.

President Obama
President Obama is backing the Chicago bid

The Chicago 2016 bid team has projected an impact of $22.5bn in the entire state of Illinois and the equivalent of one year's worth of work for 315,000 people.

But Allen Sanderson, a sports economist at the University of Chicago, has warned: "If we do things well, there will be a positive impact.

"If we do things poorly, zero is an optimistic outcome."

In a report, Anderson Economic Group has said the Olympics could trigger a maximum $4.4bn in additional tourism and infrastructure spending in Chicago and Cook County.

But it also warns that this figure may be too optimistic, should Chicago win the games.

"If private financing for infrastructure is not realised, and donations and ticket sales revenues fall short of targets, our estimated economic impact would be reduced as taxpayers see the benefits offset by higher taxes," the report says.

'Investment programmes'

Meanwhile, President Luiz Inacio Lula da Silva of Brazil has taken a leaf out of his US counterpart's book by becoming closely involved with the games.

"Brazil is the only country among the 10 largest economies not to have organised an Olympics," he said.

Pele promotes Rio's bid to host the 2016 Games
Brazil football legend Pele is in Denmark to boost Rio's bid hopes

"We want to show that Brazil is in much better [economic] shape than other developed countries. The financial crisis hit us last and we got out of it first."

He said that in September alone Brazil had created 240,000 new jobs, and that between now and 2017, the country had "investment programmes that are extraordinary".

"There will be one million new jobs this year. These are the conditions we have to raise and show [to IOC members]," he said.

And Rio will be hoping the opportunity to award South America the Olympics for the first time could prove decisive.

Long-time IOC member Dick Pound noted recently: "Policy wise, the IOC has to decide if we're ready to go to a new continent [South America]. Is the time right?"


From the infrastructure point of view, Madrid, which lost out on the 2012 games, has been called a "safe" choice.

Most of its infrastructure is already complete, with three-quarters of the sports venues either complete or under construction and finances guaranteed.

There will be benefits for whichever city wins the games, but I don't think we will be hearing too much from them about the costs involved
Professor Simon Chadwick, Coventry University

Madrid's Mayor Alberto Ruiz-Gallardon said: "In these times of financial instability throughout the world, Madrid offers reliability."

Meanwhile, Tokyo, which hosted the games in 1964, has already set aside $4.4bn for the Olympics and any shortfall is guaranteed by local and national governments.

This sum - which means cash does not need to be raised through private finance - is enough to cover building costs for the venues, infrastructure and sports facilities.

The governor of Tokyo, Shintaro Ishihara, says hosting the Olympics "is a national project, which will leave tangible and intangible fortunes" to Japanese citizens.

But, as the 2016 decision approaches, Prof Chadwick says: "There will be benefits for whichever city wins the games, but I don't think we will be hearing too much from them on Friday about the costs involved."

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