0702 en Presentation Impact Mega Events

Johannes Gutenberg Universitt, Mainz

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Economic effectsEconomic effectsof megaof mega--eventsevents

Informal Meeting of Directors-General Responsible for Sport

Bonn, 1 - 2 February 2007

Prof. Dr Holger PreussInstitute of Sport Sciences

Department of Social Sciences, Media and SportJohannes Gutenberg University, Mainz


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Contents

1. Economic importance of sport and events2. Theories on hype and communication3. The event strategy - Advantages and problems4. The three phases of the event strategy

- The bidding phase= transparency through a sport satellite account

- The preparation phase= strategic planning with a view to sustainability

- The event phase= impact assessment using the sport satellite account

5. Recommendations

1. Importance2. Theory3. Event strategy4. Phases- Bidding- Preparation- Event5. Recommen-dations


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Economic importance of sport

1. In economic terms, the value of recreational and professional sport is estimated to range between one and three per cent of the GDP ofEU Member States. Sport generates many jobs.=> A pan-European sport satellite account is necessary to determine

and compare the economic importance and impact of sport in EU countries.

2. Sport is a cross-sectional business closely tied to otherindustries. => Thanks to these close ties, the expanding effects of public funding of sport

are stronger than the contracting effects of less public spending (at least in Germany).

3. Sport also serves as entertainment; mega-events such as OlympicGames (Barcelona, Athens, Lillehammer, Turin), football World Cups (Italy, Germany) or EUROs (England, Belgium,Netherlands, Portugal) can have particularly strong short-term effects on the national economy.

1. Importance2. Theory3. Event strategy4. PhasesBiddingPreparationEvent

5. Recommen-dations


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Hype and communication theory

attention(rare asset)

the media

mega-event

win-win situationreports on

show

s int

eres

t in

generates


5. Recommen-dations recipient

eventsender(OC, government ) message


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Communication theory

recipienteventsender

(OC, government ) message

OpportunityMessages about positive economic effects of the event, about the country in general and its achievements.

Risk- Events also transmit negative messages- The media cannot be controlled.

Athens 2004 34.6 billion globalviewing hours

Turin 2006 10.6 billion globalviewing hours

Sender can use the media hype to spread messages

- about the event

- other messages1. Importance2. Theory3. Event strategy4. PhasesBiddingPreparationEvent

5. Recommen-dations


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Economic effects of mega-events

1 - new/existing location factors- general public relationssignalling

2transitoryeconomic

activity

- consumption by tourists- investments- consumption by the OC and 3rd parties


5. Recommen-dations

long-termlegacy

- long-term economic activity bychanging location factors

= Event strategy1 2 3


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Event strategy

Aim = long-term increase in economic activity

1 Problem: location factors and PR at the location are public goodssignalling

2Problem: many of those benefiting

from the event did not contributeto its financing

transitory economic activity


5. Recommen-dations

long-term legacy

Problem: location factors are public goods

Problems may cause market failures, which can only be remedied by state intervention. BUT this is where dependency on hype effects begins.


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Effects of hype: Bidding phase

Idea Bidding phase Preparation phase Event phase

all

opportunity: measures are known and can be planned so as to foster the development of the location

mandatorymeasure


5. Recommen-dations

USP

opportunity: Individual shaping of location factors, the legacyand the signalling effect

risk: winners curse

voluntarymeasure

= What is the events overall economic impact? When does it turninto a curse?


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Effects of hype: Bidding phase


hype

advantages(global attentioncreates common

goal)

- accelerated development of thelocation

- often political consensus- provision of additional funds

hype


5. Recommen-dations

disadvantages(caused by time pressure,complexity and external

requirements)

- planning errors- insufficient sustainability

= To what degree does an event actually fit into the overall developmentof a location?


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Effects of hype: Event phase



5. Recommen-dations

hype+ location+ general PR- possible negative reports

enables favourablesignalling

hypechanges

location factors(legacy)

+ new event structures:infrastructure | emotion | know-how | networks | image | culture

- may cause undesirable structuralchanges

hype

inducestransitoryeconomic

activity

+ visitors from abroad+ strong consumption by the OC (security, etc.)- redistribution & market shuffle- may be undesirable in economic policy terms


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Digressions



DIGRESSIONS5. Recommen-dations

Digression I

as an aid to decision-making onsport policysport satellite

account

Digression II

to ensure responsible handling of tax payers money and fair treatment of EU Member States

sustained planning


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Digression I: Sport satellite account

Estimating the macroeconomic effects of an event

1intangible; hard to control;difficult to attribute certain effects to a specific event

signalling

2transitory economic

activitytangible; easily attributable to the event


DIGRESSION I5. Recommen-dations

3depends on external factors, hard to estimate; difficult to attribute effectsto an event

long-term legacy


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2transitory economic

activity (TEA)

determine TEA using the sport satelliteaccount as an aid to political decision-making on investments in sport

Escape the winners curse by making temporaryadvantages of the event transparent

= with a sport satellite account, which can also be used fora cost/benefit analysis!




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Satellite accounts are special data systems whose contents provide anoverall picture of sport based on national accounts, enablingmacroeconomic analyses.=> In other words, sport satellite accounts are deeply structured

input/output tables containing sport-specific data.

Instructions for use:

1. Determine the primary impulse (through sport/investment/event)2. Write the primary expenses into the sport-specific input/output table

(which takes account of intermediate input and output)1. Importance2. Theory3. Event strategy4. PhasesBiddingPreparationEvent


Result: Information (ex post) concerning:- change in tax revenues- change in the number of jobs- change in the GDP- benefiting branches- direct and indirect (multiplier) effects


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Further applications include:

Information concerning the impact of investment in sport facilities

increased public funding for sport,

alternative financing of sport,

tax deductions for sport clubs,

state measures to preserve sport structures,

changed societal framework conditions,(e.g. impact of demographic changes on public health or education)

changed organizational structures in the area of sport(e.g. professionalization; shift from sport clubs to fitness centres)




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Digression II: Long-term planning


3depends on external factors; hard to forecast; difficult to attribute effects to events

long-termlegacy


DIGRESSION II5. Recommen-dations


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necessary infrastructure for the event

long-term development of

the location1. Importance2. Theory3. Event strategy4. PhasesBiddingPreparationEvent



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Area C

event-related development of

location

Area A

favourabledevelopment of

location



Area B

generaldevelopment of

location


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Area B

generaldevelopment of

location

Area C

event-related development of

location

Area A

favourabledevelopment of

location

Aim:

maximize temporaryinfrastructure

Aim:

avoid hinderingplanned development(risk of redistributionand debt overload)

Aim:

maximize favourableeffects ondevelopment




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Conclusions and recommendations

1

- harmonize the definition of sport- EU-wide guidelines for a sport satellite

account=> trends are becoming visible earlier=> justification for state sport funding=> predictive instrument

sport satellite account

2

- sustainability must be examined on a case-by-case basis; EU Member Statesshould use a common approach to suchexamination=> fair intra-European competition => escape the winners curse

sustainability1. Importance2. Theory3. Event strategy4. PhasesBiddingPreparationEvent

5. Recommen-dations 3

- Mega-events in Europe strengthenlocation factors and send signals.A public funding for mega-events is oftenjustified.=> other EU Member States also benefit

from events in the EU

location factors

0702 en Presentation Impact Mega Events

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