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2010 Commerce Centre

ECONOMIC IMPACT OF THE 2010 WINTER GAMES

Winning the bid for the 2010 Winter Olympic Games and Paralympic Games would create both an opportunity and a challenge for the 2010 Organising Committee and the province at large. The opportunity is to structure a Games which could generate in the region of three billion dollars in incremental economic activity and sixty-seven thousand direct and indirect jobs across the province. These benefits would be built up over an extended period, beginning as early as the formal announcement of the bidding cities in 2002, and extending well beyond the Games year of 2010.

The challenge, beyond winning the bid, is to construct and host a well-executed Olympic event which is substantially financed through international broadcast fees, sponsorships and other Games-related revenue collected from individuals and corporations outside British Columbia. Contracts negotiated by the International Olympic Committee (IOC) for international broadcast rights and major corporate sponsors of recent Olympic Games have demonstrated that a 2010 Olympic Games financed substantially by private sector contributions and Games-generated foreign tourist spending is a realistic goal for British Columbia.

One substantial piece of ancillary infrastructure that would materially contribute to the long-term incremental benefits from the Games project is the proposed Vancouver Convention and Exhibition Centre (VCEC) expansion. The Games require a media centre of approximately 250,000 square feet to house the activities of about 7,000 national and international media representatives during the Games. As yet, no alternative to the convention centre expansion has been identified to house this media requirement. Because the VCEC expansion is a viable project with or without the Games, the costs of the expansion are not included in the Games model. The incremental impact of the expansion project has been modeled separately from the 2010 model and its results are summarized separately below.

While the incremental tax benefits from both the Games and the VCEC expansion may offset a large portion of the cost of other infrastructure improvements, (including transportation systems), the federal, provincial or municipal governments may undertake in support of the Games, those infrastructure projects may also be expected to generate other real, long-term public benefits such as lower demand for medical services. This paper describes a number of such benefits expected to arise from these other ancillary infrastructure projects but they are not quantified in this paper.

Like Expo 86, the 2010 Games provide a unique opportunity to raise international awareness of British Columbia to a higher plateau, and in doing so to increase the volume of international tourism to British Columbia and investment in British Columbia on a long-term basis for the benefit of all British Columbians.

There are a variety of risks to be identified, evaluated and managed in the course of hosting the Games ranging from those conventionally inherent in the construction management process to more exotic external risks such as a boycott of the Games. The potentially most damaging risk to the economic impact of the Games is that of a prolonged, ill-timed USA or global recession which might significantly diminish both the value of key revenue contracts and expansion of international visitor volumes.

The economic model which generates the results reported in this paper segregates the incremental economic impact, in a sense the net profit to the provincial and federal treasuries uniquely attributable to the Games event, from the gross economic impact. Because the costs of the Games will be incurred over a protracted period between 2003 and 2010, and the tourism impacts of the Games will be felt over an even longer period, the model examines these impacts over an extended period.

The following tables summarise the initial results of the model given the cost and revenue data available to date and several tourism impact scenarios which reflect the experience at the Calgary'88 Winter Games, the Sydney 2000 Summer Games, and Expo 86 among others. The model outputs will change as the 2010 Bid Office finalises sites, programs, schedules and costs of the necessary facilities and services required to host the Games.

The impacts are bracketed at the low end by a conservative scenario, referred to as the low effort/low response outcome in the summary impact tables, and an aggressive scenario (best effort/best response) at the high end of possible outcomes. The conservative scenario reflects our projected worst case outlook for tourism impact, based on a minimal marketing effort and a minimal response from foreign visitors. The aggressive scenario reflects our projected best case outlook for tourism impact, based on a highly effective, coordinated, focused, high impact long-term international marketing campaign built around the Games' host city selection, the construction progress and the Games event itself. Between these scenarios are an average effort/average response and a better effort/better response scenario. Each scenario in the summary tables records the combined impacts of the Games-related revenue and expenditures and the tourism expenditures induced by the media exposure surrounding the Games development program.

Based on the cost and revenue information available to date, the first table below summarises the projected gross impact of hosting the Games in 2010. This table recognises that every dollar spent in preparing for and hosting the Games will have an economic impact, regardless of who spends the dollar. The second table summarises the projected incremental economic impact. This incremental impact is smaller because it ignores the impact of dollars spent by residents or by the provincial or local governments which would still be spent in the province in the absence of this project. The incremental federal tax captures the impact only of spending originating outside Canada.

The additional impacts associated with higher levels of effort in the following tables arise not from additional capital spending, rather from increased tourism. The increased tourism is principally a result of working smarter within existing marketing budgets through increasing levels of cooperation, coordination and sophistication amongst the national, provincial and local marketing organisations which would be involved in the Games.

The tax revenue impacts for senior governments, as recorded in the following tables, are conservatively stated under all scenarios in so far as they do not include any provision for corporate income tax, as explained in the main text.

3 Note: Dollars are Net Present Value of the benefit stream over the 30 year economic life of the asset.

4 Note: Aggregate of person-years of employment over the 30 year period. See Appendix A for description.

Expansion of the Vancouver Convention and Exhibition Centre as part of the 2010 Games would be highly beneficial to both projects, meeting a critical facility need for the Games while accelerating the rate of growth in international convention delegate attendance that would otherwise be expected. The combined incremental impact results of these two projects would be expected to fall within the range set out below.

5 Note: Dollar Values are Net Present Value of the respective benefit streams, in 2001 dollars.

6 Note: Aggregate of person-years of employment over the observation period. See Appendix A for description.

As the model and the experience of former host cities illustrates, hosting the 2010 Winter Olympic Games can be a very rewarding exercise for the host communities and the province under appropriate circumstances. The economic rewards are largely dependent on striking an appropriate balance between the all-in cost of hosting the Games, and the visitor volumes that can be generated before, during and following the Games. As Expo 86, Calgary'88 and other hallmark events have demonstrated, a long-term boost in visitor volumes can be achieved with a combination of well-executed Games delivery and a media campaign carefully designed to integrate with and take full advantage of, the international broadcast coverage before and during the Games.

If the success of Expo 86 is any indication of the skill, commitment and volunteerism British Columbia would bring to an Olympic Games, and taking into account the inherent differences between an Olympic event and an exposition, a well-executed campaign around the 2010 Games should be expected to generate incremental benefits for Canada and British Columbia in the range represented by the Better Effort/Better Response and Best Effort/Best Response lines in the preceding table.

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