Is it worth hosting the Olympic Games?

ON SIDE: Members of the Deep South Media team at AFC Bournemouth’s Vitality Stadium. Gemma Thorne is pictured far left.

To celebrate our third season partnering with AFC Business, the commercial arm of Premier League club AFC Bournemouth, we’ve been writing about the relationship between business and sport. We’ve looked at the benefits of business sponsorship and how the support of companies helps youth sport in particular. In the final post of our series, Gemma Thorne from Bournemouth University (far left in our Deep South Media team picture at the Vitality Stadium), considers the economic impact of hosting the Olympic Games:

The Olympic Games: Sponsorship and Local Economy Impact

Being just eight months away from the 2020 Tokyo Olympic Games, it only seems right to take a look at what the Games mean for our worldwide businesses.

From corporate sponsorship to athlete endorsement to broadcasting rights, the Olympic Games provides businesses with endless opportunities for revenue generating campaigns.

The Games’ global reach and its extensive marketing platform becomes a driving force behind many businesses in the run up to, during, and after the mega-event. The International Olympic Committee (IOC) once said: “The Olympics are one of the most effective international marketing platforms in the world.”

And they’re not wrong- reaching over 200 countries and billions of people, is it surprising that Coca-Cola and China Mengniu Dairy have signed a deal reportedly worth $3 billion to sponsor the Olympics until 2032?

Coca-Cola has been long associated with the Games, and since their first sponsorship of the Amsterdam Olympics in 1928, they have been reaping the benefits of the global network of consumers it offers.

Sponsorships account for 45% of Olympic marketing revenues, and partnered brands such as Coca-Cola will always be one step ahead with their permitted use of trademarked terms and use of the famous Olympic rings on their advertisements.

When Official Global Partners of the Olympic Games are already at an advantage, smaller brands that want their voice heard but don’t have a large marketing budget are likely to start engaging in ambush marketing – something we’ve seen for a long time.

Ambush marketing, where a company will attempt to unofficially associate its product with an event, might consist of increased advertising shortly before it begins, or reflecting values or ideas related to the event.

This kind of marketing is what might anger Official Partners, and could even mean they see a reduction in the amount of return they gain from their massive investments.

So, is it worth hosting the Olympic Games?

For much of the twentieth century, hosting the Olympics was a manageable cost, and was held in those countries with thriving economies and advanced infrastructure. A lot has changed since then.

Submitting a bid to the IOC to host the Olympics now costs typically between $50-$100 million in planning, travel, advice and organisation. Tokyo’s unsuccessful 2016 bid cost around $150 million while, presumably with some carry-overs, its 2020 bid had a price-tag of $75 million.

Hosting the Games in 2016, Rio de Janeiro’s spending highlighted the real cost of staging the Olympics. With a $13 billion spend, the country still struggles with enormous debt, cuts to public services and continuous maintenance costs for now abandoned facilities.

And it’s not just Rio’s economy that suffered. Much infrastructure built for the 2004 Athens Olympics contributed to Greece’s debt crisis, and Beijing’s $460 million stadium sits unused, soaking up $10 million per year for upkeep.

As costs have skyrocketed, revenue made often only covers a small portion. Even the sum brought in through television fees is shared with the IOC.

Despite often being a loss-making venture for a hosting country, the Games mean that host cities get a major economic boost for the time period that surrounds them. Temporary jobs arise for thousands of workers, tourists are drawn to the local areas and many sponsors, athletes, and officials visit – providing additional revenue.

In 2012, the London Olympics cost near to £9 billion, but less than a year on the UK economy had already seen the games generate a £9.9 billion trade and investment boost.

The lead up to the 2012 Olympics saw the beginning of a well needed economic lift at the height of a global recession.

In fact, an independent report at the time projected that the total benefit from London 2012 could reach up to £41 billion by 2020.

One of the main areas that benefitted was the construction industry, which gave the economy a £7.3 billion boost. We also saw a significant decline in unemployment (reduction of London’s levels by 1.2%), with 70,000 workless people already in employment by 2013 due to the Games.

Back in 2013, now Prime Minister Boris Johnson hailed the impact of the 2012 Olympics, and said overseas investment totalled billions. He said hosting helped the country to “sprint ahead in the global race for business”.

To further celebrate the renewal of our partnership with AFC Business, we got together for a kickabout by the pitch at the Vitality Stadium. Watch our video now. If you spot any star players, let us know!