Effects of London 2010 Olympic games upon the Tourism, Hospitality

and Events industries in the UK

Abstract

On 6th

July, 2005, the UK won the bid for becoming the host country to stage Olympics

Games in London for the year 2012. Such decisions have been brought forward with itself

various levels of arguments and key analysis in the light of social and tourism theories. The

possible impact of such decisions is related to be different from the viewpoint of every analyst.

Some consider it to be having positive effects upon the economy such as increased tourism and

international exposure to the UK, and better ties with the nations participating in an international

event. On the other hand, economists and industry analysts cite it as a bad idea with more cons

than pros. The long lasting effects of London Olympics could be devastating for the economy in

whole. This short research paper aims to shed light on the various effects of staging these events

have on the economy of Great Britain in light of tourism theories. Furthermore, it aims to

develop a balance in between theories and practical approach to realistically found out the most

accurate possible after effects after witnessing the historical analysis of various countries that

staged Olympic Events.

Research – Literature Review

There is a general thinking that whenever a country hosts any event at an international

level, its economy gets boosted in terms of employment and foreign revenue. However the other

side of the picture should always be analyzed before coming to a final conclusion. James (2006)

is very optimistic about the view that the London Olympics would uplift Great Britain’s image in

the world and would help in boosting the tourism industry due to pouring high levels of foreign

reserves. He also mentions that in order to fully utilize the benefits of London Olympics, the

country has to meet a number of challenges confronting the tourism and hospitality industry in

order to meet up to the expectations. However Richard, (2006) in in his posting on the official

website of the London Olympics 2012 is strictly against the view that the tourism industry would

get benefits from this international event. According to a study by ETOA, those nations that

stage mega international event witness a drop fall in tourism before the event begins and thereby

receive no long term benefits of tourism.

ETOA further said that there were trends of falling tourism rate and stagnation before the

Olympic events that took place in Sydney, Seoul, Barcelona and Atlanta. Eric Cohen (1995)

argues regarding the poverty of tourism theory that there are various approaches that need to be

understand and to realize the after effects of tourism on the country. Adrian & Mike (2001) agree

to this view that there is a dire need to develop a system that develops and helps to understand

the different theories in tourism industry due to ever changing market conditions.

The volatile economic effects of recession has gathered mixed views of analysts that at

one side see hosting these events as a positive signal to end of recession and on the other side

call it a mere politically based view of uplifting the economy. The theories are always subject to

limitation, whether it be in the field of economics, or sociology. This is because theories are old

and based upon assumptions and in order to understand them fully, there is a certain need to

develop a conceptual framework that takes into account rigorous developments and progressions

taking place in the modern field of tourism (Adrian & Mike, 2001).

Most of the theories developed on tourism do not take into account the practical factors

and sadly speaking no relevant or solid theory had been developed especially focused to improve

the industry’s environment after the recent global recession. The UK government expects that the

British tourism industry would flourish due to the fact that London is becoming an attractive spot

day by day for foreigners as a result of London Olympics taking place in 2012.

Tourism alliance, on their official website states that staging mega events like Olympics

can boost economic growth, especially in the tourism industry. Seoul and Barcelona have

witnessed themselves becoming a part of a prominent world holiday destination spot after

hosting the Olympics in their respective countries. However these can be categorized as short

term economic growths that have no grounding to justify the long term positive economic impact

on the hosted country. Beijing hosted the recent Olympics and built a special stadium for this

purpose. The stadium exceeded well over $1 billion when it initially boosted economic growth

due to rise in employment rate and fueling growth in the tourism industry. After the Olympics

were held, the country witnessed one of the worst ever impacts of this event where the stadium

eventually came to be useless and thousands of workers and previously employed people now

left stranded as they lost the income earning opportunities in their own country.

Lessons can always be learnt from this recent example. The Beijing Olympics that took place in

2008 left the economy with severe side effects. Lee (2008) says that in order to meet the IOC’s

demands after winning the bid for hosting the Olympics in Beijing, the Chinese government dis

its utmost effort that it could to make it the most astonishing and remembered event of the

millennium. This investment continued from 2001 to 2008, the time period China took after

bidding the place for hosting Olympics; 7 years. In order to improve transportation, the

government significantly increased its spending that could be witnessed from the fact that over

$1.1 billion had been spent on improving the transportation alone for the country.

In order for England to have more positive impacts of hosting London Olympics than negative

ones, it is better that the government plays a key role in balancing its spending on improving

public facilities including transportation, communication and at the same time on its own

economy benefiting the residents.

One key element to understand the after effects of London Olympics on its tourism and

hospitality industry is very important; time factor. Most of the previous studies on Olympics

were conducted after winning the bid and before hosting the event. Little had been done on the

national and international level to get accurate data to realize the most authentic and true effects

of Olympics, after this event had been taken place. Either the lack of political will was present

due to which this study could never take place, or the infrastructure especially designed for

hosting Olympics had not been in use after hosting the event.

A big threat to the London Olympics can be drawn from the fact that there is no reliable set of

data to study the after effects of Olympics. Olympics is an international event that is held only

once in four years. Brown & Masey (2001) strongly argue that Olympics do not bring with itself

any financial benefits. The 1972 Munich Olympics and 1976 Montreal Olympics witnessed

financial losses of more than 850 GBP in total. However the Los Angeles Olympics and

Barcelona Olympics of 1984 and 1992 respectively resulted in net benefit of roughly over 215

million in total. It is clearly evident that the benefits are not as promising as the side effects are.

An input-output model has been used in order to describe in details the effects of London

Olympics on the UK economy. An input output model is in the form of a matrix where major

inputs and outputs of the economy get listed down along with varying levels of changes to note

the different aspects of changes in production and consumption and anticipate a demand and

supply theory. The IOC does absorb all debt to itself for hosting this event. Although IOC has

stake in the shares of revenues for hosting Olympic Games, yet it is the responsibility of the host

country to bear all debt and financial expenses. Considering the fact that many companies

including Flyglobespan and XL airlines have gone bankrupt leaving thousands of passengers and

crew members stranded as they wait to get bailed out, the UK government is confronted with

many challenges in order to boost up their economy.

The British government is already in the process to manage its increasing public debt by raising

tax rates and cutting public expenditure. The situation is not very promising in the country but

since it has won the bid for hosting Olympics, it is on the brink of getting it organized with not

more than 2 years remaining to witness a mega event. George Osborne has come up with the

recommendation of cutting public expenditure severely affecting the police, welfare and councils

of the British economy. The Chancellor of England says to cut the welfare spending by as much

as 7.1% by April. It is not clear whether these efforts are part of agreement to finance Olympic

Games or just another measure to curb recession.

Historical 81 billion dollars would have been cut over 4 years had been witnessed this time. It is

anticipated that more than 500,000 jobs could be lost in effect of these precautionary measures to

heal the rising debt of the British government, according to BBC UK (2010).

Conclusion

The paper concludes with providing mixed reviews of the London Olympics effects upon

the hospitality and tourism industry of the United Kingdom. While it is not uneasy to generate

roughly 2 to 3 billion GBP in revenues due to increased tourism, it also should be realized that

this positive effect would never be easy to accomplish without solving the challenges with

British government is confronted of. Andrew, (2007) states that the British tourism industry is

anticipating bad impacts of London Olympics due to the fact that the government is doing its

best in order to drastically cut its public spending. The target of a 2 billion GBP revenues could

be hampered if the government keeps making and following these policies.

The government is already in efforts of cutting the public expenditure on foreign

marketing that does not promise any god results to the tourism industry of the UK. The benefits

of hosting London Olympics by the ministers are inflated and not in real aspect anyway at all, as

stated from the above mentioned article reference.

The UK government has to increase its public spending or bring soft changes to its public

spending cuts if it wants to boost its economic growth via tourism industry. More studies should

be conducted to analyze the after effects of hosting Olympics in London. This would ensure a

more transparent policy planning structure that could be adapted in order to improve the

economic performance of UK.

Analysis of past studies conducted upon the after effects of staging Olympics in other

countries should be understood in details to devise policies that could target economic growth of

the tourism industry and the economy at whole in the long run, after London Olympics gets over.

Olympics have always been held debated in the light of various tourism and social theories.

However the biggest drawback of theories is that they rely on pure assumptions that cannot be

ignored in today’s highly complex practical business environment theories are deigned to

elaborate our understanding of different concepts regarding any industry or economy, but limit

our knowledge in all practical terms. Practicality needs to be taken into account at all times

whenever any policy needs to be crafted.

The British government now needs to spend more attention in developing its tourism

industry and should spend good amount of allocated budget on this sector to make it more

prominent at international level in front of the entire world. This is a massive opportunity for UK

to showcase itself positively to the entire world in all aspects. However, without sound strategy

and investment in tourism industry, the promising results are far from being visible down the

road. Urgent attention needs to be paid to the tourism industry so that it flourishes as more and

more jobs get created giving people opportunities to earn decent income.

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