Getting Realistic About the Economic Benefits of Hosting
Hosts expect radical urban and economic transformation, but what tends to actually happen?
Studies have demonstrated the tendency to grossly overestimate economic gains pre-event. This story repeats itself over and over, but here are just a few examples:
- Example USA World Cup of 1998 predicted R26,8 billion gains, yet post-event analysis showed a $26,8 billion LOSS in host cities, exactly the opposite of the predicted results
- Atlanta’s 1996 Games resulted in less than half of estimated job creation figures
- The American Football Superbowl championship has been shown to have no net effect at all on the host city’s economy
Clearly, accuracy in pre-event estimations is crucial to realistic event success.
A series of studies identify three reasons for overestimation of benefits:
- Direct spending calculated as gross as opposed to net figures does not account for losses of economic substitutes for ticket sales.
- No effective way to measure tourism that would have occurred in destination without event (e.g., South Korea rise in European tourists was offset by similar loss in Japanese business tourism).
- Economic multiplier used prior to event hosting to estimate economic impact generally doubles estimated direct expenditures of international visitors, but does not account for induced spending by visitors in their home countries prior to visiting the event host nation.