Olympics Fun to Watch but a Terrible Investment

At the Olympics in China, every color was represented… and that was just the drinking water. Evan Sayet

I recently read that the Minister of State for Small Business and Tourism in Canada thinks that there are “great upcoming opportunities, including the Pan Am Games” to draw in tourist dollars to Canada. Well yes, I do understand that politicians who are not known for their business acumen think the Olympics and similar sporting events are going to fill up the cash registers in the community they are held.

Of course if any of them would do their homework they would remember the Mayor of Montreal, Jean Drapeau, confidently predicted that “the 1976 Olympics can no more have a deficit than a man can have a baby”. The Olympic legacy was a poor one for Montreal. The city faced 30 years of debt after the games finished. The stadium became known as “The Big Owe”, and its astronomical costs were only finally paid in full in December 2006.

However the politicians will tell you there is mucho tourist dollars associated with the Olympics, Commonwealth Games, Pan Am Games etc. The facts of course never get in the way of a politician who wants to make the big score by bringing home a big event for their jurisdiction.

Well, looking for an out-of-the-way holiday destination this summer – some undiscovered place that’s off the tourist trail? Try London. You might think the British capital would be jammed to the rafters with visitors flying in for the 2012 Olympics, which has attracted 100,000 spectators from other countries. But in an economic phenomenon that repeats itself every cycle; the Olympics have driven away most of the 300,000 tourists who’d usually be in London over the summer – a loss that far outweighs any tourism benefits from the Games. Source

By Jove never heard the Mayor of London telling us this was going to happen!

The results are dramatic. This week during the Olympics you could roll a bowling ball through Covent Garden without striking anyone. In Leicester Square, you can actually see the ground. Soho’s bars have plenty of patio seats available. If you have been to London in the summer you know that in any normal early August, these places would all be packed to the rafters.

It may go against intuition, but having the Olympics arrive in town has made London a completely different place .The central London attractions such as the London Zoo, St. Paul’s Cathedral, Westminster Abbey and the British Museum are all seeing attendance figures down 30 to 35 per cent last week compared to the same week last year. As a result there are no queues and tickets are easy to get.

“Olympics would earn billions, we were told. Some hope!” the Daily Mail tabloid harrumphed this week.”

The hotel industry is suffering from the lowest booking levels in years.  58 per cent of Britain’s hoteliers felt that the Olympics and the Diamond Jubilee have been “non-events” that have had a “negative impact” on business.

Bloody awful! Has anyone briefed her majesty and her entourage?

The result has been a mass selloff of empty rooms. Rooms at four-star hotels in Bloomsbury and St. Paul’s are going for less than £170, £80 to £100 below their usual summer rates.

Further from the Olympic site, the Hilton Paddington (do they serve marmalade sandwiches?) was dumping its rooms for less than £120, and rooms in decent three-star hotels in West London were easy to find for less than £100.  London hotel prices are on average now 25 per cent lower than usual.

Gawd Blimey, London’s legendary West End theatres have been devastated; their expensive plays largely ignored by crowds that are more interested in the real-life drama of sports.  Theatre owners say they are “bleeding,” and a number of long-running plays will be closing due to lack of advance-ticket demand.

Jolly good show! Not!

Restaurants have been hit particularly hard, having lost both tourist traffic and the business of many Londoners, who have fled to the seaside or stayed home during the Games amid warnings from the mayor that the transit system would be overcrowded. (London Underground traffic has increased by only 4 per cent during the Olympics.)

Thanks Mayor! That was blooming stupid!

There has been a marked fall in restaurant bookings … London restaurants have seen a double-digit fall, sometimes considerably more. Covent Garden restaurant, Porters, had seen a 72-per-cent fall in earnings.

I say, old chap! What a turn of events!

And the cash registers aren’t ringing as loudly. Customer levels in central-London shops last Saturday were almost 12 per cent below their level a year before. Even in East London, where the Olympics are located, shopping was down by 7.5 per cent.

According to the tourism experts the Olympic tourist doesn’t act like a normal tourist. They tend not to go to theater and other attractions. Their Olympic-based itineraries are usually so prescriptive they have to be at venues at specific times.

Well now you would think that this should be a big surprise to the Brits but it is not.

This devastation of the tourist market is experienced by virtually every city that holds the Olympic Games – the organizers – usually sports nuts or former athletes including Olympians who are well connected to the government in power predict great tourism benefits which never materialize.  (It’s no wonder politicians want to attach themselves to the Olympics and their country’s Olympic team. They give politicians a chance to show off their patriotism, tie themselves to athletes and games that are more popular than politics, and get seen on the boob tube.)

In any city that already has substantial levels of tourism – that is, virtually any city that could qualify to host an Olympics like Toronto, Montreal, New York and Chicago  – there is a lot more to be lost than gained from the Games. But the promoters of these sports events either do no not do their homework or are dishonest –take your choice. Source

While Winter Games don’t always fit the pattern, as they take place in smaller cities with fewer hotels and entertainment venues, Vancouver did fail to experience a gain in tourism in the year following its 2010 Winter Olympics. I can still hear the BC politicians and their minions telling the voters that the Olympics were going to be a “windfall” for Vancouver and BC. Well it never happened.

In 2000, in Aussie land, Sydney hoped to see 132,000 tourists during the Games, but saw only 97,000, and experienced no growth in tourism in the years afterward. I can remember being in Sydney in December 1999 being told by the folks who I met with in the Prime Minister’s Office that the Olympics were going to put Sydney and Australia on the map and bring a ton of tourist dollars . It didn’t.

Four years later, Athens had an even worse experience: Its organizers had hoped for 105,000 hotel guests a night, but received only 14,000. Not saying that the Olympics contributed to Greece’s bankruptcy but it sure didn’t help.

Well what about Olympic sponsors?

Recent news has drummed into us that Olympic sponsorship may in fact not be worth the investment. (Things the IOC never discuss)

Big brands have invested up to 80 million pounds (125 million US/Canadian dollars) just to be criticised – not to mention confused with non-sponsors. The London Organising Committee of the Olympic Games and Paralympic Games (LOCOG) vehemently defends its strict regulations on the grounds that official sponsors must be protected and allowed a ‘clear run’, especially around the Olympic venues. On one hand, what LOCOG overlooks is a basic tenet of branding: it’s all about the consumer.

While they may believe they are in fact protecting the official sponsors by harshly regulating marketing and advertising, they may in fact be pushing consumers away from the very brands they are striving to help. Visa, for example, is struggling to put a positive spin on the “greedy” label it has received after any other brand was blocked from becoming an online credit or debit card ticket payment option at the Games, as well as the only acceptable card at Olympic events.

Thanks to a situation in which brands are essentially shoved down consumers’ throats inside official Olympic venues, Coca-Cola and McDonald’s are feeling similar effects. Only last week, news broke that McDonald’s has told the organisers to ban 800 food retailers at 40 Olympic sites from serving chips with their meals. The sponsorship obligations meant that only fish and chips have been spared the prohibition.

But what has not been taken into account are the post-game effects of such pushing. Will consumers use Visa during the games? Without a doubt – because there’s no alternative. Will they resent Visa once they return home? They just might. Source

So the Olympics are great to watch and like most people  am enjoying them but as a marketer I have to say when you look at the impact to sponsors and countries who organize these massive sporting events you have to wonder is this a good marketing investment or boardroom vanity.

About jimmintz

Managing Partner, CEPSM Jim Mintz is a veteran marketing professional with many years of experience as a practioner and academic. He is presently Managing Partner at CEPSM and Program Director of the “Professional Certificate in Public Sector and Non-Profit Marketing” at Sprott School ... Specialty Areas: Social Marketing, Integrated Marketing Communications, Public Sector and Non Profit Marketing
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