Economic Benefits of Hosting the Commonwealth Games

Economic benefits that Manchester gained by hosting the Commonwealth Games 2002

Abstract

This paper discusses Manchester’s hosting of the 2002 Commonwealth games, and how it was used as a catalyst for urban regeneration. It discusses the theory and history behind hosting Mega events.

The rational behind cities bidding for mega events has shifted. They bid not only to raise the image of their city on the world stage, but to use the new facilities as a catalyst for urban regeneration.

The Manchester case study is drawn from the local council websites and reports published during and after the event. This gave an insight into the long term economic gains for the city.

The paper concludes that the hosting and the urban regeneration were successful for Manchester. This success has promoted other cities to bid for Mega events.

1.0 Contents

2.0 Introduction

There are three advents that are described as mega events, the Football world cup, the Olympic and Commonwealth games. These events are held every four years, with cities around the world bidding to host them. For the purpose of this paper the discussion will be on the Olympic and Commonwealth games. The main Focus will be on Manchester hosting of the 2002 Commonwealth games.

Mega events as steeped in tradition, they are a platform for host cities to show what they can do. Cities plan for them years in advance, putting their bid forward so they can succeed on the world’s stage. When a city is successful in a bid, there are other cities that are disappointed. This paper discusses Manchester’s successful Commonwealth games bid after two failed Olympic bids.

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When a city hosts a Mega event it is in the public eye, everybody remembers the spectacle of the opening and closing ceremonies. What is not so public is all the planning behind the scenes, committing resources to the success of the games. These resources are committed at an early stage; the bid has to be viable to be considered.

The rational for hosting games has shifted from the prestige associated with the attention of the world’s media, to a tool for regenerating run down areas of the host city. Therefore the planning of the venues has shifted from temporary buildings, to long term facilities for the local communities.

Some cities hosting mega events are looking at the long term usage for the new facilities after the event, in the past alot of these buildings were built as temporary structures and pulled down shortly after the closing ceremony. This is viewed by some commentators as a waste of resources, with prolonging the life of these buildings cities, can benefit long after the games are finished.

This shift has attracted new cities to bid for Mega events, with the justification that it will lead to economic growth both short and long term. The benefit can be two fold, raising the image of the city and regenerating a run down area. Although not all host cities have been successful at obtaining growth, some are still repaying the debt that was run up to host the games.

The resources that each city has ploughed into holding these prestige games are immense. To succeed they require the backing of local residents, council, sports providers, grants, the government and their agencies. This should be incorporate at the planning stage to increase the chance of a successful bid.

The value to local residents of a city hosting a mega event is immense in economic terms. It is not only the new facilities that can generate income, if the games are a success, the city can attract tourism long after the event.

The games cannot be viewed in isolation of the sporting stage, there is the build up to the bid, the planning of hosting the games and the long term value they van add to the city. All these factors make up a successful mega event bid.

Manchester spent a long time planning for the games. This is illustrated in the time line that appears in the appendices of this paper. This was not an easy ride, as financial problems affected the plans. Manchester overcame these and held the 2002 Commonwealth games.

3.0 Aims and objectives

The aim of this paper is to asses the economic impact of cities hosting a mega event; this will concentrate on the 2002 common wealth games held in Manchester.

The objectives are

• An in depth analysis of the history of mega events, with the resources and planning to host such an event

• An analysis of the economic benefits that can be gained and the disadvantages of hosting a major sporting event.

4.0 Methodology

This chapter discusses the research methods used for the project and the rationale for their choice. It discusses methods that were not used, with justification of why they were not included. Included is a critique of methods selected, and with hindsight identifies any changes that would have enhanced the research.

This paper critically evaluates the impact of the 2002 Commonwealth games on the city of Manchester. This paper will investigate the economic impact of a mega event and the subsequent urban regeneration. This will be compared to other host cities, both with the Commonwealth and Olympic games.

Selection of the topic was stimulated and formed out of heightened publicity on the topic. The aim of holding the games was not only publicity for the city but to use it as a tool of urban regeneration. The nature of the research was discussed with colleagues and fellow students this not only added practical ideas and suggestions, it opened new avenues of thought. This was the discussed with lecturers sounding out ideas, gauging opinions and clarifying the question. Focusing in on the question was obtained by employing relevance trees, narrowing the research area. This gave direction to the research, although with reviewing the literature this changed several times (Buzan, J. 1995).

Next, a research proposal was compiled, with the benefit of organising ideas and setting a time-scale for research. Theoretically, the proposal would highlight any difficulties with the research question and access to data. Creating a time-scale would focus on targets and meet deadlines in the completion of the paper.

The literature review, discussing theories and ideas that exist on the topic formed the foundation of the paper. The findings from the research are then tested on theories for validity (Saunders, M. et al 1997). The literature review was challenging, there is very little academic research on the topic area. Most of the literature focused on individual’s performances at the games, and the impact of hosting the Olympic Games. This information proved relevant in understanding the justification for bidding for mega events. Journals and newspaper articles were the back bone for the review, together with internet sites and reports.

Tertiary data sources, such as library catalogues and indexes were used to scan for secondary data. This produced journals and newspaper articles, and Internet addresses. With the amount of literature, it took time to sort out relevant material to the research. Narrowing down the search Bell’s (1993) six point’s parameters was applied. Applying key words that were identified in the first search produced relevant and up-to-date material (Bell, J.1993). A limitation on the literature search was the amount of time to read all articles and books on the subject. Whilst reviewing the literature references to other publications were followed and reviewed. Bells checklist on identifying the relevance of literature found was a practical method to reduce the amount of reading (Bell, J. 1993).

A case study on the impact on the city of Manchester of the 2002 Commonwealth games was chose to replace primary research. This would report the actual benefits gained by staging such a major event. There is a lot of information presented in articles on the benefits of hosting Mega games, but little on the problems. Therefore a lot of information was rejected due to the bias of the content. Articles and web cites were used to form a picture of the impact. This would then be compared with the literature and previous host cities

To produce primary data the success of a mega event proved to be a vast task, taking a lot of time to produce results. Internal and external operations of several organisations, providers, spectators and competitors would have to be compared to reach any level of validity. Instead it was decide to review a case study. This was then compared to the literature review.

5.0 Literature Review

This section will review all the relevant literature on mega events, including cities that have bid and hosted them together with the history of the games. The review will also discus the rationale behind bidding and the benefits it can bring to a City who hosts an mega event.

5.1 Mega Events

Mega events are regularly defined as special events, these have a unique status. Hamilton, (1997) characterise these events containing similar features, including “international dimensions, short-termed, and may be either a one-off occurrence or conducted on a regular cycle”. From the literature, size emerges as a dominant distinguishing feature separating mega from non-mega events. Both the Olympics and the commonwealth games fall into this category, they are international, short termed and held on a regular cycle. They are held every four years, at different locations (Hamilton, L 1997:124).

Sporting events are rapidly increasing in popularity as a means of attracting attention to particular geographic locations (Getz, 1998). Increasingly, cities are basing their marketing around Mega events (e.g. Manchester and the Commonwealth Games), in order to maximise the benefits to be achieved from event-driven tourism, sponsorship, and media exposure. Sporting events make up an important part of the overall Mega event industry. In reality there are a limited number of Mega sporting events that exist. This has led to fierce competition among cities to be successful in “winning the business” of playing event host (Getz, (1998) cited in Westerbeek, H et al 2002:303).

5.2 Resources Required

The size of an event can be discussed in four different ways. First is determined by the noticeable involvement of national and regional government authorities. Government agencies provide an event with the development of policies, infrastructure or making resources available supporting the attraction of events to major cities (Westerbeek, H et al 2002).

Higher technical competencies are required, such as advanced facilities, suitable event location and skilled personnel; these are directly related to size of the event. The demands placed on services provided by host cities to deliver an event is of superior quality when compared to other event types. The technical competencies must satisfy a number of requirements. This includes the technical standards set by international federations pertaining to competition, non-competition elements (accommodation and transport) and personnel issues competition management, and personnel issues (Westerbeek, H et al 2002).

The higher competencies are a requirement for the event management team, made up of both bid and operational teams, it is composed of expert people capable of carrying out professional relations with event owners and organisers prior to and throughout the event as well as having the technical expertise to stage the event (Westerbeek, H et al 2002).

The hosting City requires broad support from both direct and indirect stakeholders. Overall approval must come from the general public, government, (target) markets and other business sectors. The large amount of capital invested from the “public purse” in bidding for and staging an event, it is essential for strong community support for the process (Ernst & Young, (1992) cited in Westerbeek, H et al 2002:305).

5.3 Planning for the Games

International and worldwide events are more important now that ever before. In most countries major events are significant to all levels of society and institutions, whether at local or national level. Sporting events dominate large sections of the press, television and radio broadcasts. Therefore event management has become an industry in its own right, with both specialist organisations and individuals (Torkildson, G 2005).

The decision making process for the bid will develop a long term strategic plan (Johnson G, &, Scholes, K 2004). This strategy is the direction and capacity of an organisation, (i.e. the committee for the games) which achieves advantages through its configuration of resources within the changing environment. The strategy answers both the questions “where do you want to go?” and “how do you want to get there?” The first question is answered when the bid is accepted and the second is answered when the strategies are planned (Mullins L 2005).

Planning is the first stage of implementing the development of the city for the capacity to hold the games. Managers are required to step back to look at the environment, competitors, market place and review both the internal and external strengths and weaknesses. A SWOT analysis will focus the managers on both internal and external factors that can affect a new strategy. The host city must recognise its strengths and utilise them, and reduce weak areas through planning (Groucutt, J. et al 2004).

Managerial decisions are made to identify what is required to implement the new strategy. What are the new resources are required? I.e. property, finance or employees, and how will the city gain these resources? Then the risk should be assessed for its long term value to the host. Strategies should not only be considered on how they will affect existing resource capabilities, but also if needed new resources and how they will be controlled. The costs to the host should be weighed against the long term gains, and if needed it can be reviewed, accessed and amended accordingly (G, Johnson & K, Scholes, 2004).

Mega Events are a dynamic and multi dimensional phenomena, there are at the same time, urban events, tourist events, media events and international global events. They are the subject of collective corporate recourse, with action in each of the sections. Therefore a multi dimensional approach is required in the planning and managing of the games. This requires multi disciplinary team based approach (Torkildson, G 2005).

5.4 Marketing

Kotler et al (1993) identify several target markets to which place marketers direct their attention. These include visitors’ athletes, officials, spectators and the media, residents and workers, business and industry, and export markets. The focus of sporting events is on the visitor segment, including business and non-business visitors. Business visitors include persons who travel to a place for meetings, conventions, to inspect sites or to buy or sell a product. Non-business visitors include tourists who travel to see the place and travellers who are visiting family and friends. Individuals travelling to a particular destination to attend the event or teams and participants attending events as well as organizing committees and such can also be categorized as non-business visitors (Kotler, P et al 1993).

The increase in the competition and the globalisation has not only saturated the extent of competition in the markets but mainly saturated the target markets itself as argued by Brassington and Pettit (2003). This is mainly because of the fact that the high level of competition among the participating organisations in a given market segment has increased the product range leaving the customers with an endless variety of products to choose for satisfying their requirements. This level of saturation has also increased the need for further development in the market in order to achieve competitive advantage as well as sustainable growth in the business (Brassington, F and Pettit, S 2003).

Therefore mega events will if correctly marketed stand alone as a once only product. This product offers a unique entry into a market, there is little comparative competition, although all sport and leisure will compete for their market share. Although a Mega event is no normally at the same level as the existing competition. This approach is accomplished through the geographical spread either nationally or internationally by the host (Lynch, R 2003).

The domestic and/or international media, coupled with the selling of broadcasting rights, are important characteristics of mega events The support of the media prior to or during an event guarantees exposure and consequently raises world-wide awareness of the event and host city. The 2000 Olympics in Sydney generated in excess of $1.3 billion in revenue from broadcasting the Games, indicating the substantial financial returns for event owners, organisers and the host city brought about by media support for the event ( Westerbeek, H et al 2002).

5.5 Sponsorship

Corporate sponsorship of sports and other events is one of the fastest growing forms of marketing communications used to reach target audiences. The rate of growth in sponsorship expenditures is greater than for traditional media advertising and sales promotion. Corporate spending on sponsorship worldwide was estimated to grow 12 percent in 2001 (Roy, D and Cornwell, T 2003).

Sponsorship is viewed as a means of avoiding this clutter by enabling sponsors to identify and target well-defined audiences in terms of demographics and lifestyles. Linking a brand with an event via sponsorship enables firms to gain consumers’ attention and interest by associating with events that are important to them. Despite the increased use of sponsorship to reach market segments there has been little research on the impact of sponsorship on consumer behaviour (Roy, D and Cornwell, T 2003).

While sports sponsorship activities range from providing athletes with uniforms to funding entire stadiums, the basic principle behind such sponsor ships appears to be their proposed ability to increase brand equity by means of enhancing brand image. There are several key goals associated with corporate sponsorship of events such as (1) enhanced brand image via associations with positively perceived events; (2) increased goodwill via perceptions of corporate generosity; and (3) elevated brand awareness due to increased exposure (Miyazaki, A and Morgan, A 2001).

The high prices paid for Olympic sponsorships reveals that at least some organisations find these efforts to be worthwhile. This is illustrated by comments from top corporate officials that the Olympics are “the most important marketing opportunity of the decade” and management suggestions that this investment will heighten global recognition and increase revenue (Miyazaki, A and Morgan, A 2001:9).

5.6 Tourism

In the 1980s and 1990s, political, economic, and technological developments that led to the global economy became a feature of the environment within which cities compete for economic growth. This trade in goods and services has become increasingly open and internationally competitive; cities had to compete with cities from around the world for investment capital, businesses, and tourists. Cities such as New York, London, and Tokyo have become “global or world” cities in the urban hierarchy. These cities contain the largest variety of cultural and entertainment facilities of the highest quality, such as museums, galleries, opera houses, theatres, and concert halls (Burbank, J et al 2002)

Therefore other cities are a disadvantage when competing for tourism. The pursuit of hosting a mega-event is a mechanism for economic growth. This strategy relies on obtaining a single event large enough to be seen as a way to generate future economic growth. Many events can bring tourists and attention to a city, but the mega-event is sufficiently large that it creates a single focal point and time frame for completing event-related development. It is also noted that stadiums and sports teams are luxuries that financially strapped cities can ill afford; therefore holding a mega event can provide the city with these facilities for the future (Burbank, J et al 2002)

The number of tourists to an area where a mega event is due to take place increases. Individuals are drawn to destinations because of a mega (sporting) event rather than the region itself. For example, tourism estimates of visits to Sydney between 1997 and 2004, as a direct response to the Olympic Games, have been set at 1.7 million. Actual visits for the period during 2000 have been estimated to be 20 percent of this total (Forecast, 2001).

Arising from the growth of the tourism industry has been an emphasis on place (or city) marketing and promotion and the emergence of mega sporting events to support and enhance this promotion. Place marketing represents the techniques utilised by certain organisations to raise the awareness of their particular destination to specified target markets. Promotional objectives relate to capturing the attention of international visitors and to providing information in an endeavour to entice them to travel to a specific destination (Moutinho, L and Witt, S 1994).

5.7 Attendance of Events

A standard set of economic factors would be expected to affect demand for attendance. Price of admission and, more generally, the opportunity cost of attendance (including cost of travel, car parking, food and beverages at the venue, and programme), would be predicted to be negatively related to attendance. Income of the potential audience at a sporting contest, and size of population in the potential market for a contest, would be expected to be related positively to attendance. Availability and price of substitutes would also influence attendance. Some substitutes might be considered “direct”, such as the live broadcast of the event. Other substitutes will be “indirect”, for example, attending a different sporting event or contest; or other types of entertainment alternatives such as theatre or movies (Borland, J and Macdonald, R 2003)

Macroeconomic factors could have an impact on attendance such as the rate of unemployment. Although it has been suggested that attendance at sporting events may constitute a social outlet for unemployed persons, therefore the attendance is higher as the rate of unemployment increases (Borland, J and Macdonald, R 2003)

The infrastructure of the venue has a direct impact on attendance to the events. The quality of viewing, the facilities at the stadium, the quality of seating; the impact of adverse weather conditions; distance from contest and extent of vision to different parts of the sporting field. Catering and bathroom facilities can also have an impact (Borland, J and Macdonald, R 2003)

5.8 Economic Benefits

The national government’s involvement in bringing events to a city is on the increase. The level of spending dedicated to biding for an event demonstrates the strength of governments backing. This is to the detriment of the competition with other (cultural) activities undertaken by government and other interest groups. Openly supporting a bid increases the pressure of accountability to the public and hence support will only be given, if it is clear that justifiable and measurable benefits for all stakeholders are generated by hosting the event (Westerbeek, H et al 2002).

The economic activity associated with staging mega sporting event can create significant economic benefits for the host destination. Howard and Crompton (1995) defined the economic impact as “the net economic change in a host economy that results from spending attributed to a sports event or facility”. Economic impact studies enable the quantification of the benefits to a community to be ascertained in order to justify the investment in the event (Howard, D and Crompton, J 1995:55).

The Olympic Games provide an obvious example of significant economic contribution by a mega sporting event. The 1984 Los Angeles Olympics made a profit of US$125 million with the Seoul Olympics exceeding that profit by a further US$50 million. Outcomes of this magnitude serve to encourage cities to bid for high status events (Law, C 1993).

In September 1990, Atlanta won the bid to host the 1996 Summer Olympic Games. In spite of the approximately $2.5 billion price tag, the benefits derived from hosting the Olympic Games were expected to outweigh the costs. Positive media attention, construction of facilities and infrastructure, and employment increases were identified as the primary beneficial output of this massive endeavour. The cash inflow during mega games is relatively easy to identify, the “legacy” of the games in terms of long-term benefits is more difficult to measure. The positive employment impact of the 1996 Summer Olympic Games, led to a 17% increase in long term employment in the surrounding area (Hotchkiss, J et al 2003).

It must be noted at this point that not all events are successful financially. While focusing on the economic benefits presented by mega sporting events, there are significant financial burdens that such events place on host communities. This financial commitment to events often requires a degree of community assistance through public funding. The external benefits associated with mega sporting events enable this financial assistance to be classified as an investment, with clear reciprocal benefits to the host community (Westerbeek, H et al 2002).

Once the mega-event policy is underway, extra-local interests become increasingly vital to a successful outcome. Hosting modern games requires the authority and cooperation of not only the host city, but other state and local governments and agencies as well. Moreover, the financial demands of the games require support from local public and private sources, but are increasingly dependent on multinational corporations and the government (Burbank, J et al 2002).

Several global cities have had their fingers burned by over ambitious sports development plans. Sydney found itself in trouble finding a permanent use for Stadium Australia. The Manchester bid, while ambitious, was also realistic. It already had the G-Mex Centre and MEN arena, Old Trafford and Maine Road football grounds. It has added to this the velodrome, an aquatics centre, Sport-city, and the City of Manchester stadium. These facilities are part of the long term regeneration, the aquatic centre has been appropriately sited for the city’s three universities; Sport-city is to become one of 10 regional centres of excellence in sport; and the stadium will be used jointly by Manchester City football club and community teams (Anonymous 2002).

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