Strategic transportation business solutions
2010 Olympic and Paralympic Games:
Economic Impact Update
20 November 2002
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Background l
January 2002 4
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Original Economic Impact Study of hosting 2010 Winter Olympics Ministry of Competition Science & Enterprise “What economic impacts funded by nonresidents of could flow to BC as a consequence of hosting the Games?”
November 2002 4
Update of Economic Impact
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InterVISTAS Consulting Inc.
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The Province’s Olympic Bid minister, Ted Nebbling commissioned The Ministry of Competition Science and Enterprise to conduct an economic impact study of hosting the 2010 Winter Olympics. That study was dated January 2002. Via a competitive process, InterVISTAS Consulting Inc. was selected to review that study, make modifications as appropriate, and update the study with more recent data. InterVISTAS is a Vancouver based consulting firm which has considerable experience conducting and critiquing economic impact studies.
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Purpose Of Update l
Review and verify economic impact concepts and methods
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Incorporate new information
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Identify only incremental impacts 4
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Any benefits from spending by BC residents and governments are excluded Transport infrastructure excluded
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We accomplished these things by: •re-building the impact model, allowing a check of the mathematics and logic of the model, also simplifying the model to allow future updates to it •reviewing references used for preliminary report •reviewing additional references collected since the publication of the preliminary report, such as new information on impacts of other Olympics We then made changes to the model and recomputed results
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What Is Economic Impact? l
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A gross measure of 4
Employment and wages
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Gross domestic product
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Tax revenues
Three categories of impacts 4
Direct
(Construction, tourism, operations)
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Indirect (e.g., supplier industries)
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Induced (general economic stimulation) 4
Every dollar spent generates new employment and stimulates economic activity. Employment: in terms of FTEs, not jobs GDP: aka “value added� is the value of labour, capital, profits, depreciation. Federal taxes: personal and corporate income taxes, sales taxes Provincial taxes: ditto Direct impacts: attributed to spending in preparation and execution of Games Indirect impacts: felt in industries that supply the firms that get direct spending Induced impacts: consumption expenditures of direct and indirect Economic impact methodology is not cost benefit analysis.
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Gross versus Incremental Impacts l
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Incremental benefits are those generated by inbound spending Incremental impacts do not include transportation investments This study only measured incremental impacts This is not a net measure of benefits Could be considered a conservative approach
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This report focuses on incremental economic impact. •Not a standard practice •Only impacts of dollars from out of province sources •Could be considered a conservative approach •Gross economic impacts would be larger, due to the impact of spending financed from within BC An economic impact study measures the size of employment generated, GDP generated, etc. It does not weigh these positive impacts against the costs required to obtain them as a cost benefit study would do. An economic impact study simply measures impacts. A cost benefit study evaluates whether it is worthwhile. A cost benefit study of the Olympics would measure the dollar value of benefits from the Olympics and subtract from them the costs required to obtain them, such as organising costs, marketing costs, facility costs, etc. We were only asked to do an economic impact measurement. A cost benefit study is a much more complex task.
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What Is Incremental Economic Impact? It does not include normal growth
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With Olympic tourism
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Normal tourism growth
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Economic impact is calculated on incremental tourism, not overall level of tourism. Only ascribe small percentage of total to Games. There is a very good chance that some of the displaced tourism included in the model (45,000 skiers in 2010) will be recaptured by other ski hills in the BC tourism market. The impact of recaptured visitors is not included in the study results.
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Potential versus Measured Impacts
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Potential Measured Normal
Impacts measured in this study Are less than potential impacts
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Our measure of incremental tourism impact must be differentiated from potential impact. The medium-high scenario which is the focus of the presentation, does not include potential tourism impacts for both earlier and later periods. For example, based on results from some other Olympics, we truncated Olympics induced tourism impacts at 2015. There is a potential for a lasting tourism legacy, but so as not to overstate the economic impact of the games, we did not include it in our measure. Of course, achieving the measured impacts or other potential impacts will required an effective marketing plan by the tourism industry.
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Adjustments and Improvements l
Updated expenditure data
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Revised visitor profiles
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Truncated visitor forecasts
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Addition of tourism from rest of Canada
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Excluded transport investments
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Addition of BC Corporate Tax revenues 8
There were a number of adjustments and improvements made to the economic impact measurement model.
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Main Results Increases in magnitude of impacts due to: 4 4
Corrected error in use of discounted expenditures used real expenditures Increase in baseline (i.e., non-Olympic) tourism
Decreases in magnitude of impacts due to: 4 4 4
Recognised some visitors are lower spenders (day visitors, VFR) Truncated pre and post-Games tourism effects Excluded transport investments
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The update decreased visitor spending by recognizing that some visitors spend less. Our review of market research indicated that like Expo 86, an important portion of visitors will stay with friends or relatives rather than in hotels, and thus we reduced impacts due to their lowing spending rates. We also recognized the lower spending of same day visitors. These adjustments reduced impacts. However, the correction to use of discounting in the preliminary study had a large positive impact on results. The previous study effectively made a double correction for inflation. We converted all future spending to inflation adjusted 2002 dollars.
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How Are Impacts Estimated? Gross Games Expenditures
Incremental Games Expenditures
Ex) excludes all BCbased spending
BC Stats Input Output Model Incremental Economic Impacts
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There are three broad types of Games expenditures that generate impacts: • Capital/Construction expenditures • Operating expenditures • Tourism/visitation expenditures BC Stats multipliers are used to relate the values of purchases in the province to employment, GDP and tax revenues on an industry by industry basis. Incremental impacts are the portion of the gross impacts that are generated by out of province dollars. E.g.: •Federal dollars •international tourists •international broadcast rights 10
Tourism Scenarios Incremental tourists - entire period Low
Medium
Medium High
High
6 years
7 years
7 years
18 years
1.1 million
1.7 million
2.7 million
4.3 million
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Australia and Salt Lake City produced numbers slightly lower than the Medium-High scenario. •Australia Forecasting Council expected 1.7 million in 7 years surrounding Games, we expect 2.7 •Salt Lake organisers expected 230,000 to Games, we think we can induce 550,000 (same in high) We think that the High scenario is achievable. Will depend on effective and organised marketing. We think that the Medium High scenario is without a doubt achievable. This scenario is used as the example today. Long term, international visitation to BC has grown at roughly 3% p.a. Assuming only 2% growth p.a. in the future, with the 2010 Games we can expect an additional 2% growth in the low scenario, and an additional 5% growth in international visitation. 11
Updated Direct Economic Impact Direct GDP
Direct Person Years
Direct Wages
Direct Tax Revenues
Low – Updated
$1.3 Billion
32,000
$1.1 Billion
$291 Million
Med – Update
$1.5 Billion
39,000
$1.3 Billion
$379 Million
Med-High – Update
$2.1 Billion
55,000
$1.9 Billion
$606 Million
High – Update
$2.7 Billion
71,000
$2.4 Billion
$819 Million
Scenario
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These are the updated direct economic impacts. The original study showed only total impacts, whereas the updated study shows direct and total impacts. The difference is due to the so-called multiplier impacts. The conditions for the achievement of such impacts do not always hold. Thus InterVISTAS prefers to focus on the direct impacts. However, in order to compare the current updated study with the previous study we have to use total impacts. This comparison is done on the next slide.
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Updated Total Economic Impact Direct GDP
Direct Person Years
Direct Wages
Direct Tax Revenues
Low – Updated
$2.0 Billion
45,000
$1.5 Billion
$444 Million
Med – Update
$2.4 Billion
54,000
$1.8 Billion
$562 Million
Med-High – Update
$3.3 Billion
77,000
$2.5 Billion
$863 Million
High – Update
$4.2 Billion
99,000
$3.3 Billion
$1,150 Million
Scenario
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These are the updated total economic impacts - including indirect and induced (multiplier) impacts on the provincial economy.
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Comparison of Preliminary and Updated Total Economic Impacts GDP
Person Years
Tax Revenues
Low – prelim
$1.6 Billion
37,000
$376 Million
Low – Update
$2.0 Billion
45,000
$444 Million
Med – prelim
$2.4 Billion
55,000
$610 Million
Med – Update
$2.4 Billion
54,000
$562 Million
Med-High – prelim
$2.8 Billion
67,000
$774 Million
Med-High – Update
$3.3 Billion
77,000
$863 Million
High – Prelim
$3.5 Billion
83,000
$982 Million
High – Update
$4.2 Billion
99,000
$1,150 Million
Scenario
Source: IVC 2010 Olympic Economic Impact Update 14
Overall effect of adjustments was positive. Negative effects of: •shortening tourism projections •increasing level of tourism displacement in Games year •lowering tourism spend profile •assuming higher import content for construction sector Were more than offset by: •eliminating the incorrect use of a discount factor •using TBC’s recommended baseline tourism number
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… With VCEC Expansion Impacts GDP
Person Years
Tax Revenues
Low – prelim
$5.7 Billion
118,000
$1.3 Billion
Low – Update
$6.1 Billion
126,000
$1.4 Billion
Med – prelim
$8.1 Billion
182,000
$2.0 Billion
Med – Update
$8.4 Billion
187,000
$2.0 Billion
High – Prelim
$10.0 Billion
228,000
$2.5 Billion
High – Update
$10.7 Billion
244,000
$2.7 Billion
Scenario
Sources: The Economic Impact of the Winter Olympic and Paralympic Games: Initial Estimates (BCTIO, Jan 2002) and The Economic Impact of the 2010 Winter Olympic and Paralympic Games: An Update (InterVISTAS Consulting Inc., Nov 2002) 15
If we add the VCEC expansion economic impact…. Whose funding may be linked to hosting the Olympics... Note that the VCEC impacts are greater with the Olympics than without. Synergy is created by host-city status. Convention “wins” tend to increase with host-city status. Sydney is an example - bid:win ratio went up 34% in pre-Games years. There has not been a sufficient lapse of time to judge the lasting impact of Sydney on win rates.
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2010 Impacts With Only VCEC Expansion Impacts Attributable to 2010 Games GDP
Person Years
Tax Revenues
Low – prelim
$2.2 Billion
53,000
$521 Million
Low – Update
$2.6 Billion
61,000
$589 Billion
Med – prelim
$3.8 Billion
95,000
$1.0 Billion
Med – Update
$4.1 Billion
100,000
$1.0 Billion
High – Prelim
$4.9 Billion
117,000
$1.3 Billion
High – Update
$5.6 Billion
133,000
$1.5 Billion
Scenario
Sources: The Economic Impact of the Winter Olympic and Paralympic Games: Initial Estimates (BCTIO, Jan 2002) and The Economic Impact of the 2010 Winter Olympic and Paralympic Games: An Update (InterVISTAS Consulting Inc., Nov 2002) 16
If the VCEC is expanded, then the tourism impacts associated with the 2010 Games will be greater. This is due to: 1) the greater capacity of Vancouver to accommodate convention delegates and 2) because winning the bid for the 2010 Games will increase Vancouver’s success rate in bidding for future conventions. This table adds to the 2010 Games impact determined in InterVISTAS’s report, only the increase in VCEC expansion impacts attributable to the 2010 Games. This table does not include the economic impact of the VCEC expansion generated by construction or tourism without the 2010 Games.
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Timing Of Impacts Gross Expenditures Construction Costs
Operating Costs
Visitor Spending
2,500
2,000 2002 $ millions
Construction + Operations + Tourism
1,500 1,000
500
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
0 2002
Combined Impact
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This chart shows how construction impacts occur in the early years with tourism impacts beginning a few years prior to 2010 and then lasting for a period thereafter. A long term increase in tourism is certainly possible, but to be conservative we truncated impacts after 2015 in this scenario.
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Timing of Direct Impacts
Construction + Operations + Tourism
Employment
20,000 Low Medium Med High High
15,000 10,000 5,000
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05 20
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Combined Impact
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0
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Tourism causes the deviation in employment impacts. Construction and operating expenditures do not change.
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Direct Construction Impacts Construction of facilities and transportation improvements Construction + Operations + Tourism
Combined Impact
Direct Impacts
GDP
Person Years
Wages
Taxes
$1.1 Billion
25,000
$843 Million
$123 Million
$148 Million
3,000
$115 Million
$9 Million
Gross
Including transport Investments
Incremental Not including transport investments
Construction occurs between 2003 and 2009 19
Set at medium-high scenario.
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Construction Impacts l
Construction + Operations + Tourism
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Combined Impact
91% of total construction dollars NOT included - only 9% are incremental Spending on transportation investments not included in incremental Spending on VCEC expansion not included in gross or incremental 20
91% of construction dollars are BC private sector or BC government. Only that portion of construction spending funded from outside of BC (excluding federal contribution to transport investments) is included.
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Direct Tourism Impacts Two-thirds of direct incremental impacts accrue to tourism sector Construction + Operations +
Tourism
Direct Impacts
GDP
Person Years
Wages
Taxes
Gross
$1.5 Billion
40,000
$1.4 Billion
$541 Million
Incremental
$1.4 Billion
39,000
$1.3 Billion
$537 Million
Combined Impact 21
Set at medium-high scenario.
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Tourism Impacts l
2008-2015 with normal tourism growth 4
Construction + Operations +
Tourism
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100 million total international visitors cumulative between 2008-2015
2008-2015 with induced Games tourism 4
additional 1.0 million (low scenario) to 4.3 million (high scenario) cumulative visitors
Combined Impact 22
Average annual growth of international visitation to BC between 1972 and 2000 is calculated at 3%. Assuming only 2% average annual growth from 2000 onwards gives an expected 100 million international visitors to BC between 2008 and 2015. Low: 1.0 million additional Med: 1.7 million additional Med-High: 2.7 million additional High: 4.3 million additional The Olympic-induced tourists in the medium-high scenario add about 3% to the expected level of international tourism in these years without the Games.
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Direct Operational Impacts One quarter of direct incremental impacts are generated by operation expenditures Direct Impacts
Construction +
Operations + Tourism
Combined Impact
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GDP
Person Years
Wages
Taxes
Gross
$689 Million
16,000
$531 Million
$75 Million
Incremental
$537 Million
12,000
$416 Million
$60 Million
ex) Policing, event timing, government services 23
Set at medium-high scenario. In addition to construction and tourism there are also significant impacts from operating the Olympics.
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Un-quantified Impacts Not Measured in This Study l
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Increased trade and investment for business community User benefits or construction impacts of transportation improvements User benefits of Olympic Legacy facilities
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Olympics create an opportunity to promote home brands and competitive advantages. Can increase exports and business investment. User benefits of Transporation improvements will be in the form of: •travel time savings •vehicle operating cost savings •accident cost reductions •parking cost reductions. Rapid transit benefit estimated at between $600 million and $1.5 billion Use of Olympic facilities: •resident use •other competitions •training for Canadian and foreign athletes 24
2010 Economic Impact Summary Medium-High Scenario Total Impacts GDP Person Years
2010 Games Only
2010 Games With VCEC Impact Due to Games
2010 Games With Total VCEC Impact
$3.3 Billion
$4.1 Billion
$8.4 Billion
77,000
100,000
187,000
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Strategic transportation business solutions
Thank you!
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