Key Note Media Centre
Going for Gold... But Will the UK See Any in its Coffers?
The Olympic Torch has been globetrotting from country to country almost every 4 years, with notable exceptions for the humanitarian catastrophes of two World Wars.
In July 2012, after touring the UK, that very torch will make its final journey to London to light the Olympic Flame for a third time, making London the only city to have hosted an Olympic Games three times. The last time the Games came to our shores was 1948 -- dubbed the 'Austerity Games', they had to contend with the horrors of the Second World War having so recently transpired, the fact that the East End of London was still, in some places, a blitzed ruin and the fact that the country was drowning in the mire of financial crisis.
Planned only 2 years in advance (planning for the London 2012 Games began with winning the bid in 2005), the 1948 Games embodied thrift and invention and triumphed despite being the least expensive Games of the 20th century, coming in under budget and making a profit.
In 1948 the country was in deep economic trouble and inflation was high, running at almost 10% in June 1948 according to the Office for National Statistics (ONS). Fuel prices were high and also rationed, and the Treasury had a large debt and budget deficit left over from the Second World War. It is difficult not to draw parallels between then and now, given the raised inflation currently being experienced in the UK, high fuel prices, high unemployment, and the debt and deficit issues facing the Government.
The 1948 Games proved profitable despite the economic background. Can the 2012 Games do the same? The attitude towards the London 2012 Games is radically different, with a budget of public-sector money amounting to £9.3bn, despite the economic hardship the country is currently facing. The face of the Olympics is changing, with an increasing number of bids coming from developing countries which, newly wealthy, are finding that they can afford to host the Games when they never could have before. The Rio de Janeiro 2016 Games in Brazil will be the first Olympics to be held in South America, for example.
This is the third time London will host the games following a 64-year gap and it is unlikely, given the increasing number of viable host countries, that the UK will play host to the Games again for numerous decades, with a much greater time lapse than 64 years likely. Can the UK make this Olympics a success against the odds, as was the case in 1948? Or will the last visit of the Olympic Torch for many, many years prove to be an economic misstep, as was the case for the 1976 Montreal Games, the debts of which took 30 years to repay?
Olympics 2012: The Economic Impact is the new Key Note Market Assessment which focuses on the economic impact of the London 2012 Olympic Games in the context of the economic impact of the entire Olympic movement. Key Note has pooled data which relates to the economic impact of the Sydney 2000 Games, the Athens 2004 Games and the Beijing 2008 Games in order to provide a thorough background for the assumptions made within the report.
Highlights from the report include the fact that the contribution of travel and tourism to the gross domestic product (GDP) of the host country generally increases during a Games year, with Australia seeing an 18.3% rise and Greece seeing an increase of 12%. The figures were slightly more disappointing for the People's Republic of China (PRC), where the increase was only just over half of the increase seen in Greece during its Olympic year, at 6.4%. The Olympics seem to be becoming slightly less lucrative in terms of the amount of travel and tourism expenditure they bring to a country and, therefore, Key Note is predicting that the contribution of travel and tourism expenditure to the UK's economy will grow by 7% during 2012, with the Games driving much of this expansion. Unfortunately, this is not as large an increase as was seen in Australia in 2000.
It is often assumed that the Olympics will result in an increase in visitor numbers and thus a greater demand for hotels. However, this has not historically been the case. Hotels are another area that Key Note analysed -- one of the key areas expected to benefit from hosting the Games. However, hotels in the Sydney tourism region experienced a fall in guest arrivals in 2000 of 6.3%; hotels in Athens experienced a 5.3% decline in arrivals in hotels in 2004. Meanwhile, Beijing suffered an almost catastrophic 39% fall in occupancy figures in August 2008, the Games month, compared with August 2007. Though this is partly attributable to extra hotel rooms having been built to cope with demand that did not materialise, a similar decline in business would prove devastating for London hotels.
While Key Note is not expecting such dramatic declines in occupancy during the Games, the trend from the last three Games is clear to see. With the economy still weak and money still tight for many -- something which was not so much of an issue during previous Games -- occupancy figures have the potential to disappoint. A reduced number of visitors during a Games, as displayed by the lower-than-expected visitor arrivals and hotel demand seen in previous Games, would prove economically detrimental for the country and would negate much of the touted economic benefits the Games are apparently to bring. Furthermore, if the Games keep visitors away from London and the UK thanks to perceptions that it will be too crowded, again visitor numbers and takings from visitors will suffer.
The economic impact of the Olympic Games has the potential, at least in the short term, to shape the economic future of London, if not the country as a whole. Given that the Royal Wedding, which only lasted for a weekend, was regarded as one of the key reasons for disappointing growth figures in the second quarter of 2011, then are such events really all they are cracked up to be in terms of being positive contributors to the UK economy?
In this report, Key Note has done its best to predict the likely economic impact of the Summer Olympics of 2012, but whether this will leave the UK on good terms or bad still remains to be seen.
Press enquiries: Jack Sykes at Key Note at email@example.com or 0845-504 0452. Press/review copies of the report are available on request.