Most of the published studies of events have tended to focus on mega-events, such as world expos (Monclus, 2006) and Olympics (Kasimati, 2003; Preuss, 2004; Humphreys and Plummer, 1995; KPMG, 1993). According to Matheson (2006), studies of mega-events has showed that economic benefits overestimate the actual ex-post benefits by wide margin. Authors such as Matheson (2004) and Bull (2005) contest the theory that hosting mega-events could have a significant economic impact for the host area. The debate about what is better between hosting more small events or a mega one has become one of the major topics at the centre of academic discussions.
According to Hall (1997) and by Malta et al (2004) mega-events require a significant investment, targeting an international market, and involving the extensive participation of mass media (cited in Bull, 2006). Yet, Getz (1999), Gratton et al (2005) and Roche (2001) define a mega event by its long-term economic benefits, impact on a destination’s image and identity, and effects on destination regeneration (cited in Bull, 2006). While Bowdin (2010) underlined that mega events are events which have enormous impact on economies in whole and that they are quite recognizable and influential in the world of a global media. According to Bull (2006) small events rely on local resource only, involve zero opportunity costs, but are less visible in term of marketing knowledge, because their small scale and interests.
A clarification of what the concept of economic impact includes and the various processes taken in determining, it is necessary to understand the common shortcomings done by many studies evaluating events economic impacts. According to Dwyer and Forsyth (1996, 1997) the economic impact of an event can be direct on the venue and its suppliers, or indirect on other local businesses (restaurants, local shop, and transport facilities) purchased by the direct suppliers who themselves pay for further inputs (cited in Lee, 2006, p.77). The direct and indirect income and expenditure can also produce an induced effect on the economy when the beneficiaries of the direct and indirect effects spend their increased incomes on local consumer goods and services (McCabe et al., 2000).
Various local and national governments have begun to give their support to the industry (doing bid for large events) according to this so extensive impact, as demonstrated above (McCabe et al., 2000). In return, governments could earn in terms of tax revenue – either direct, or indirect (Davidson and Rogers, 2006), political benefits, namely, risen image for politicians, especially if the event going well or has given benefits to the population (Bowdin et al., 2006; Van der Vagen, 2005). Quite often, as already underlined by Matheson (2006) and supported by Kasimati (2003), more studies and reports are sponsored by local governments to justify the large public expenditure and for this reason tend to be based on an overoptimistic “ex-ante” analysis. Furthermore, “ex-ante” multiplier analysis may be inaccurate, because researchers assume that the usual multipliers applied on estimated direct spending are the same during mega-events (Matheson, 2006). The common shortcomings of these ex-ante methods are that they do not include crowding out and displacement effects already underlined by Getz (1999), which are often caused by mega-events (Matheson, 2006). Yet, Kasimati (2009) added that researchers, erroneously, tend to borrow evaluation systems and multipliers from other similar cases translating them onto their own. Finally, Mondello and Rishe (2004) underlined that the most common violation among mega-events analysis was the use of gross rather than net impacts, with other studies using inflated multipliers.
Matheson (2006), analysing just the research of Mondello and Rishe (2004), pointed out that smaller event may have not these problems when evaluated. More precisely, economic evaluations of small events are more accurate, because without the crowding out and displacement effects which could cause errors in calculating direct expenditures. Yet, they are more objectives, because they do not have to justify a large amount of public expenditure. While, Bull (2006) affirms that finding reliable data on small events could be difficult, because statistical institutes less investigate them, and few data are available about them.
According to some reports on huge-events and Olympics in particular, such as Preuss (2004), Humphreys and Plummer (1995), several are the identifiable economic impacts in hosting huge events. The first of these is an increase in financial incomes (direct monetary costs and revenue derived from hosting an event), characterised by new expenditures into local businesses, which could turn into foreign exchange earnings if the attendees come from abroad (Matos, 2006). Revenues represent the organizations income; common of mega-sport events are the selling of tickets and merchandising, TV rights (Matos, 2006).
The good impression made by the destination to people attending an event, could motivate them to extend the permanence or to return privately and, in the end, the destination could have a large number of people as unpaid ambassadors (Bowdin et al. 2006; Davidson and Cope, 2006). Preuss (2004) pointed out that the announcement of the Olympic Games alone will not attract additional tourists to visit the city. However, the most of the expenditure is made during coordination and planning phase, because the organizers of the Olympics are the largest and more spending group of pre-Olympic visitors together with athletes, judges, and guest of test events (Preuss, 2004). Positive findings underlined by some researches on Olympics’ impacts, has shown that the pre-Olympic effect is not marginal.
Yet, according to Kasimati (2003) and Preuss (2004) mega-events legacy is largely positive, because the media coverage increases the desire of potential tourists to visit the country after the event, due to a change in perception. As already mentioned, mega-events are become powerful tools to re-image and brand a city in order to put it on the touristic map. Marketing and PR benefit significantly from the huge media exposure given by mega-events (Bull, 2006). More precisely, in the case of the Olympics, host country of the Games has opportunity to improve their own image in general (Preuss, 2004).
However, Dwyer (2002) affirm that we have to take into account the leakage phenomenon consisting in the fact that not all the expenditures related to an event remain within the host destination (cited in Davidson and Rogers, 2006, p.22). This occurs, for example, when a host destination has to purchase services abroad, because it is unable to produce themselves or are not present within the local area. This is often the case of the less developed nations. (Davidson and Rogers 2006).
Another two hidden and negative aspects are switched and transferred expenditures. An example, the “time switched effect”, occurs when an attendee combines his holiday with a conference (Davidson and Rogers 2006).
According to Bowdin et al. (2006) another important tangible benefit is the increase in employment, although often made by existing staff or by temporary jobs related to short term events. Many authors concordant that hosting mega events could attract new investments. That is because, for example, the great exposure given by the media coverage or new infrastructures built for the event. (Bowdin et al. 2006; Davidson and Rogers, 2006; Getz, 2005; McCabe et al., 2000). However, Kasimati (2009) underlined that there is possibility of increasing the supply of jobs being met by workers from other countries, especially if domestic markets is tight, because of the pressure to complete the infrastructure. Yet, Baade and Matheson (2002), in their ex-post approach to estimate the level of employment in the Olympics held in Los Angeles and Atlanta, found that the coefficient for the both Olympics was insignificant.
Although the economic benefits of mega events are undeniable, some authors warned that a little attention has been dedicated on their negative impacts and costs (Getz, 1999). While economic benefits are often highlighted and proclaimed, and the numerous literatures on Olympics’ economic impacts are a clear example, tangible costs are frequently hidden (Davidson and Rogers, 2006).
Promoting and hosting an event require high costs, especially in new infrastructures, for security, especially after 9/11, and in facilitation for VIPs (Matheson, 2004). These huge costs are often public (Kasimati, 2003). Namely, new infrastructures means more taxes and may represent less investment by the governments in other critical areas (e.g. health or education); the so-called opportunity costs). In the case of a mega sport event, according to Matos (2006), huge are the costs for new infrastructures, with a possible risk of over indebtedness. Yet, there are also bidding costs to secure the right to host the mega event (Matos, 2006).
Some events could adversely affect local business or caused private damages (Davidson and Rogers, 2006; Getz, 2005). In fact, referring to “displacement” effect caused by mega-events, Getz (2005) pointed out that some activities associated with mega- events, as traffic congestions, closed roads, higher security or restricted access to some public areas in the city could seriously distract “normal business” activities (non-touristic). Yet, displacement effects could lead residents (runaways or changers) to avoid the area or even to leave the town. For example, Hultkrantz’ (1998) review of the economic impact of the Athletics Championship noted that while Goteberg’s visitor arrivals were boosted by the event that overall Sweden arrivals fell as travelers avoided the country as a reaction to the Games (named “avoiders” by Preuss, 2004). Similarly, in Carlton’s (2002) discussion of the Salt Lake City Olympics, it is noted that while Salt Lake City hotel rooms were full with Olympic visitors and participants, that the area’s ski resorts suffered significantly as skiers avoided the destination due to the presence of the Games. This is supported by Leeds (2008) study which highlighted how 2002 Winter Olympic Games has suffered of high displacements by showing that expenditure at ski resorts in Colorado rose as a result of the Games.
Finally, during the Democratic convention, not only was every hotel room in the city full, but cruise ships were used to house the overflow. However, as noted by Blanton and Caffrey (2004), Boston restaurants and shops fared poorly, as non-delegate tourists avoided the city due to the lack of hotel rooms and locals stayed far away from downtown Boston due to the crowds and heavily restricted driving and parking.
Opportunity and displacement costs, together with time switchers, defined by Getz (1999) those people who wanted to travel to the city but at another time, contribute to reduce the net expenditure in a destination caused by the event (Bull, 2006). Paradoxically, this value is higher for small event rather than for mega-events; that is the consequence of the above mentioned disruption costs often not included into multiplier analysis (Kasimati, 2003, Matheson, 2004). Some investigation “ex-ante” on mega-events’ economic impacts are done without considering such elements underlined by Getz (2005).
Nevertheless, according to Getz (2005), there is a question that could be raised are the intangible costs are sufficient to neutralize the economic benefits? However, Baade and Matheson (2002) disagree asserting that the economy virtually returned to its normal pattern afterwards and any increase in economy activity attributable to the Olympics of Los Angeles and Atlanta was temporary. Mount and Leroux (1994) and Spilling (1998) have supported this view affirming that ‘one-time’ events have no lasting post-event effects in new business activities or employment. Nevertheless, Kasimati (2003) underlined that the findings of these researches are limited because their short-term focus and inaccuracy.
This paper has already mentioned about the habit of overestimating economic impacts to justify the large amount of public money spent to organize the event. But, according to authors such as Getz (1999) and Matheson (2004), some are the common shortcomings among researches evaluating mega-events’ economic impacts. A brief overview of the common evaluations methods is now necessary to understand those mistakes.
Realizing that existing data on economic impact of mega events do not permit accurate determination of the income and employment, researchers have developed theoretical framework to estimate the economic impact (Lee, 2006). Almost every of these models are based on an ex-ante approach and, according to Kasimati (2003), have shown economic growth, increased tourism and additional employment.
According to Dwyer et al., (2005), the I-O models evaluate the overall impact of injected new money, as they floating across different sectors of economy. Then, various multipliers (coefficients) are used to gain the event’s endowment to destination output, value added, and employment. Johnson (1999) recommends the use of input-output analysis to summarize the impact of a project at a regional or community level, in the economy of which there is unlikely to be long-term structural change. Unfortunately, this model is based on historical data and on the use of standard multiplies; yet, it does not consider inflation effects of increased demand. Houghton et al., (2005) added that the I-O model assumes that exchange rate; labour market and prices are constant. In addition, tend not to consider the supply side restrictions such as investment extrusion, prices increases owing to resource scarcity and infrastructure expenditures, which are of great importance in the analysis of mega events.
CGE models are well suited to modelling crowding out effects and structural change in the economy, including labour markets, at national or state level and, instead I-O models, prices are allowed to vary (Hodur and Leistritz, 2006). However, with the availability of excess capacity within organizations or casual labour, and in the short-term context, the complexity and difficulty in applying and interpreting CGE models in a regional context may not be warranted (Houghton et al., 2005, p.361).
Cost – Benefits Analysis is most suitable where impacts such as social or environmental issues or opportunity costs of events are of particular interest (Hunn and Mangan 1999). However, in the absence of full information, the difficulty in valuation of social or welfare costs and benefits makes this model too complex for application by small regional festival organizers in determining festival economic impacts (cited in Houghton et al., 2005, p.361). Quantifiable data on the main economic impacts of mega events are based almost exclusively on secondary research and the studies did not provide any predictions using a form of modelling (Kasimati, 2003). This brief review of the models has underlined that these frameworks often used to evaluate Olympics usually ignored supply side constraints.
Authors like Matheson (2004), Getz (1999), Mondello (2004) and Bull (2006) has stressed the vantage of small events compared with mega-events, because almost devoid of that “hidden” costs. Small events may get more visitors spending without cost of displacement, because require only local management, rely on small-scale promotion, and involve zero opportunity costs (Burgan and Mules, 2001; Matheson, 2004). Yet, they are less likely to cause deviations from normal business patterns make multiplier analysis more accurate (Mondello and Rishe (2004). While Bull (2006) asserted that few data are available on small events, because their little importance. Moreover, Bull (2007) pointed out that compared with the high visibility and exposure of the mega events, the small ones have a little long-term PR, less visibility, and marketing and PR costs are quick dissipated.
However, in contrast, Spoleto, though a festival, had the potential to fill but a relatively small portion of the city’s available hotel rooms. The “displacement effect” should not have been the factor that it seemed to be (Litvin and Fetter, 2006). According to the authors the success of the Spoleto Festival has become an obstacle. O’Sullivan and Jackson (2002) results on the contribution of festival tourism to a sustainable local economic development showed that festivals may have the potential to make a valuable contribution to a locality. Nevertheless they do not make a significant support to sustainable local economic development. Vararos (2004) added that the economic impact depend on the size and the develop status of the economy of the host destination. Surveys to determine the local economic impact of the three leading arts festivals in South Africa indicate that the location and size of the town is an important factor in the impact of the event on the town and the region (Saayman and Saayman, 2006).
Another small events’ advantage, arisen from the literature, is the capacity to satisfy more niches than one big (Bull, 2006). This leads local governments to achieve a range of objectives rather than a single specific promo-tool. Many small towns host short-term festivals for profit, and some communities use festivals as a boost to tourism for the off-season (Goldblatt, 2002). When the unique attractions of communities meet tourists’ satisfaction, a festival simultaneously gets the most effective profit from the festival itself as well as tourists. A festival gives residents experiences of a local culture, and at the same time, gives tourists a chance to experience different cultures between themselves and a tourism destination (University of Minnesota, 1998).
Getz (1999) support this view affirming that event visitors will spend much more and stay longer, if they had a desire to visit the event and its destination, from those who may have been less attracted by the host region. Yet, Getz (1999) underlined that stressing the volume is often a mistake; instead, attracting higher-yield, quality visitors, rather than large volumes could be a successful strategy for a destination. However, the same author affirms that may arisen problems of incompatibility within the mix of event target segments (Getz, 1999).
Findings from a study of Cela et al. (2007) on the local food festivals in Northeast Iowa communities support the existing literature focusing on the impacts and outcomes of small events. Local food festivals in Northeast Iowa contributed economically in the area by generating more output, income and jobs (Cela et al., 2007). Interestingly, the economic impacts of local festivals, in terms of the multiplier, were similar to heritage sites (O’Sullivan and Jackson, 2002). Findings also revealed some practical implications for festival organizers. More precisely, advertisements should be put in place to attract more women and younger generations. This view is supported by Mondello and Rishe (2004) who affirmed that women and young generations attending amateur sport events tend to spend more than men and agers respectively.
The paper has showed the high capacity in re-branding and positioning a destination owned by mega-events thanks to their huge media exposure and allure. While, those events required high staging costs and unclear are the real economic benefits they induced. Organizing multi-mini events has demonstrated to be an optimum instrument for destination managers to diversify and spread the target markets. Yet, avoiding transposition costs, it is often assumed that they may have the same economic impacts of a large or mega-event, unfortunately lacking in media exposure.
All these facts may induce to think that the event type could be chosen according to the main objective of a destination. For example, if the objective is to put a city on the touristic map, staging a mega-event to enhance the awareness of the brand internationally, following by a series of small events to target dedicate niches or to enlarge the mega event effect, could be a successful strategy.
The response on the London Olympic Games and Paralympic Games Act (2006) was mostly positive and supportive. One of the most important reasons was that East London, greater London and whole United Kingdom would prosper from it. This progress would be reflected in the fact that Games will bring benefit to tourism and hospitality in general. One of the factors that stood against London Olympic Games was the existing problem of lack of a land for construction, as well as identifying ways in which those questions and problems would be answered and solved. In addition to that, of course, was the fact of the possibility of a terroristic attack was and still is a big concern for both the people and authorities. Even the fact that 2012 Olympic Games will be held in London is very important and serious matter, and that it will bring multiple business opportunities to a broad range of companies, as well as a country as a whole. This means that the competition among the companies is surely going to rise, it is obvious that the new Act could bring many existing opportunities to the corporate world, it is commercial and business success is yet to be shown.