It is essential to choose an appropriate model to handle the job and to be able to model the impact of the incident.
In the past major study of events – like KPMG’s study of the Sydney Olympics prior to it – employed models that were input and output models.
However, they are not without some limitations. This includes assuming that the availability of unlimited labor and capital at fixed costs, which means they can often provide unrealistically high advantages.
A better method of assessing the effects on the economy of any event is to utilize an approximate general equilibrium ( CGE) model like the one we used to analyze the results of the Olympics following the conclusion of the Olympics.
The Sydney Olympics haven’t helped tourism to the world. Mick Tsikas/AAP
The key to CGE modeling is constraints on supply and price-responsive behavior, which aren’t present in models that model input output.
Modern CGE models monitor the deviations from what would have occurred if the event had not happened, and the consequences of an event weave through the economic system.
The correct way to set the right simulation in order to accurately reflect the financial implications for an occasion is vital. For instance, studies in the past did not usually include all the expenses associated with the event, like taking people away from normal use.
The studies conducted prior to the event usually include anticipated legacy effects, like the huge boost in tourism after the event.
They are not often supported by post-event research. Our research discovered there was no evidence that the Sydney Olympics produced a boost in international tourism post-event.
No matter how you feel, however, the Sydney Games were a financial disaster. Sydney Games had a net cost
Net cost of direct costs of Sydney Olympics (Olympic costs not paid for through Olympics revenue) in the event of an update to prices for 2023 the figure was $4.5 billion.
However, our post-event modeling proved that, once the direct impacts of the Olympics took hold of economies, they led to an decrease by about $3.7 billion (again in 2023 dollars) in the real consumption of Australia’s consumption of both public and private as compared to the base case projections for the period from 1997-98 through 2005-06.
The most common argument made by those who advocate of major event is that demand stimulation of the event will outweigh its direct cost. But our real consumption report shows that the demand stimulus was only a fraction of the direct cost.
The loss was not surprising, as NSW households in NSW largely bore it.
While hosting the Olympics reduced real consumption in NSW however, it doesn’t indicate that it wasn’t worth the dollars.
Experiences, feelings, and other tangible benefits
Hosting the Olympics certainly brought pleasure, and many would have been willing to pay. But what was the cost?
The reduction in actual consumption (including the loss of government services) totaling $3.7 billion amounts to approximately $1,440 for each NSW household, at present prices, based on the population of the time.
It’s a substantial amount to cover the benefits that aren’t included in the price of tickets, broadcasting rights, as well as other selling rights of the organising committee.