The Olympics is dubbed as “The Greatest Show on Earth”. It is a sporting spectacle that has gained worldwide following. There are two main Olympics held in different locations: the Summer Olympics and the Winter Olympics. Both are quadrennial events held in various cities. Between the two games, the Summer Olympics is the most covered. It is participated by the most number of countries. In addition, it holds several events that are familiar to most sport aficionados. Most important, the Summer Olympics serves as an opportunity to gather nations and compete in the spirit of peace and sportsmanship.
Aside from participating, hosting the event is a goal of most countries. The ability to stage the Summer Olympics is a trophy that can serve as the host’s legacy. For years, the bidding wars over the rights of hosting the Olympics have been intense. The International Olympic Committee (IOC) has been stern in implementing its rules on the bidding process. There have been reports coming from insiders from the IOC that bribes are being offered to voting members. But the IOC has shrugged these controversies and has succeeded in maintaining the sacredness of the IOC votes.
Among the bidders for the 2012 Summer Olympics, it was London than gained the IOC’s approval. London is one of the most progressive cities in the world. It is home to some of the biggest businesses and has an income above most other cities in the world. London, as a host of the 2012 Summer Olympics is a challenging task. But the city has been consistent in presenting its upsides and capability to be at par with other successful cities that hosted the Olympics.
Background of the Study
The IOC has received 9 bids to host the 2012 Summer Olympics. The list was eventually cut to 5 cities that include: London, Madrid, Moscow, New York, and Paris. London’s selection as the 2012 Summer Olympics’ host is the third time for the city. The 2012 bidding was considered as the most intense lobbying in the history of the Olympics. During the early stages of the campaign, Paris was regarded as the favourite. Madrid also provided a strong competition with its aggressive bid. Eventually, the strong support coming from the entire British contingent finally nailed London the hosting rights (CNN.com, 2005).
Before the application is forwarded to the IOC, it is being reviewed by the National Olympic Committee (NOC). The Olympic charter is used to govern the voting for the final host. The process is divided into two segments. The first phase involves host cities answering questionnaires about the themes that can make the games successful. The second part is a most comprehensive process managed by the IOC Evaluation Commission. Both stages determine capacity of cities to fully host the games.
Because of the rigorous evaluation process, the leaders for the hosting rights were unpredictable. The early phase of the process showed that Paris and Madrid were clear favourites. But another round of evaluation revealed that London and Paris appear to rise above the competition. The final voting was done for four rounds in an IOC convention in Singapore. After three rounds, New York, Madrid, and Moscow were eliminated. The last round saw London edge Paris for the rights to host the Olympics by just 4 votes (BBC Sports, 2005).
Before the successful Olympic bid, the United Kingdom (UK) was unsuccessful during its three previous tries. The cities of Birmingham failed to win the 1992 biding and Manchester City was denied twice in 1996 and 2000. The decision to banner London as a host was a strategy to win UK the hosting rights (Keogh and Fraser, 2007). The Olympic Committee initially estimated the budget for the event will reach ÂŁ2 billion. But further evaluations revealed that UK will spend close to ÂŁ9 billion for the Olympics. The host plans to use the budget to finance massive redevelopment of various areas in London.
The date of the event, as identified in London’s bid was between July 12, 2012 and August 12, 2012. The organisers cited favourable weather and school holidays as the reason for choosing the specified date. The representatives of London in the bidding process noted the lack of utility use during the said period will make the event more fluid (HCTC, 2006). Students can also go to venues and boost the attendance of games. The organisers intend to improve existing sporting facilities and build other permanent structures. The venues are divided into the districts of Olympic Zone, River Zone, and Central Zone.
During the bidding period, London emphasised that 60% of the sporting venues are already completed. The Channel Tunnel/Stratford rail link has also been completed. Other venues being developed include Aquatics Centre, London Velopark, East London Line extension, Olympic Stadium, and Heathrow Airport. The Olympic Village will be setup in Lower Lea Valley. The organisers target at least 75% of the athletes will be 15 away from the Stadium. The cost for the village is estimated at around ÂŁ5.3 billion.
Among the aspects of London’s bid, the transport system is the most criticised. It provided the city the lowest score and is its biggest predicament. Since the IOC needed guarantees of transport stability, London has promised to create its biggest transportation infrastructure ever. The Crossrail is expected to be completed by the early part of 2012 (HCTC, 2006). The organisers’ transport system plan will enable athletes to arrive at their destinations within 30 minutes. The rail systems are expected to run approximately 240 trains per hour. This estimate will be increased as the demand arises.
The initial budget of the city was dedicated for several infrastructures, logistics, and security. ÂŁ560 million is allocated for new sporting facilities of which ÂŁ250 million is dedicated for the Olympic Stadium. The city is expected to send a minimum of ÂŁ650 for the Olympic Village. At least ÂŁ1.5 billion is needed to implement the games and ÂŁ200 million for security. The London Organising Committee has decided to manufacture 8 million tickets. The committee targets 65% or 6 million tickets will be sold. The average ticket cost is ÂŁ40 and spectators preferring big screens have to spend ÂŁ10.
The UK government has been supportive of this monumental event. The parliament has installed a Minister of Olympics to generally monitor the events and all proceedings. Other offices created for the games include the Olympic Security Committee and Olympic Delivery Authority. It is expected that 135,000 rooms will be available for spectators. During the bidding period, London has stated that more than 40,000 rooms will be available for the event. The increase has been motivated by the hype of the Olympics.
The London Organising Committee for the Olympic Games (LOCOG) is tasked to oversee the activities related to the 2012 Summer Olympics. The committee is following is master schedule coined after the IOC Executive Director for the Olympic Games (HCTC, 2006). The initial stages of the planning involved preparation for the sites. Most of the initiative is the first year focused of marketing and sponsorship deals. In the second year, the master plan has included budget finalisation and determination of transport needs. The Olympic logo and brand was also launched during the year.
In the third year, the market schedule highlighted the need to complete the building plans. The Wembley Stadium was also set to be completed. Specific infrastructures include the Channel Tunnel/Stratford rail link, Velodrome, and the Olympic Village. During the fourth year, the master plan will be in the advanced construction phase. Above-ground construction in all venues needs to be started. By the fifth year, the Millennium Dome will undergo changes and will be transformed into the O2 Arena. This renewed venue is slated to hold the World Gymnastics Championship.
The sixth year will be provided for the organising team to complete the construction of sites in the Western part of London. The East London line extension is also expected to be done. The LOCOG will also start hiring volunteers for the sport events. One year before the event, the Olympic Stadium, Olympic Village, and Media Centre are completed. In addition, the organisers will start selling tickets. During the early parts of 2012, the finishing activities will be implemented including all security details.
Objectives of the Study
The main goal of the study is to evaluate the financial feasibility of the 2012 London Summer Olympics. The entire revenue projection will be scrutinised and assessed. Aside from the entire financial value projection, the study will also provide financial analysis to the most vital sectors affected by the event. These include businesses, employment, tourism, and hospitality. Specific revenue targets include ticket sales, broadcasting, advertising, and licensing. These aspects are considered as the vital components of London’s decision to host the 2012 Summer Olympics.
In order to achieve this general objective, there are specific goals that need to be reached. First, the study will determine the total cost of the event and equate it with the financial returns. This method will use financial techniques and other methods. Second, the study will also focus on the impact of the event to relocating households. Because of the magnitude of the 2012 Summer Olympics, some houses will be moved. Aside from the relocating cost, there are also other expenses related to this.
Significance of the Study
The most pressing issue about hosting the Olympics is related to the event’s economic gain. Specifically, the revenues gained from this venture will be tracked. More than just a sporting event, the Olympics serves as an opportunity for cities to take advantage of its perceived economic benefits. Hosting the Olympics means ticket sales, advertising revenues, broadcasting rights, business expansions, and employment opportunities.
There were several studies made related to the 2012 London Summer Olympics. But only a few have concentrated on the financial side of the event. Indeed, the analysis extends beyond the revenues of London. There are other financial issues that can be derived from the event. It is imperative for the government to determine the benefits of the Olympics. This is an investment that can serve as the driver for the city’s progress. Financial issues are rarely discussed because most of the targets are estimates. But analysing these expectations will serve as preview for London’s resurgence.
Hosting the Olympics is a benchmark of economic progress. History suggests that only progressive cities have hosted the event. For London, this is an opportunity to return to the top of the world. Most critics will emphasise on attendance as the determinant of success. But revenues provide a more compelling picture of hosting success. Minimal gains will never make London in the headlines. It is imperative for the host to surpass previous hosts in terms of earnings over expenses. This is a basic requirement that is stressed in the London’s bid to host the Olympics.
Another importance of this study is that it will allow future hosts to focus on financials. Through the years, the Olympics have evolved into a fuel that starts progress. Some hosts have been working on the sporting events and venues. Other hosts have also valued the budget as the most important. Perhaps future hosts will earn from this study about equating costs and revenues. The balance between these two general accounts will serve as the figure that will eventually spell success.
Scope and Limitations
The research will centre on the financial aspects of the event. The specific elements involved are the sectors and revenue sources affected by the Olympics. The study will only concentrate on elements that are quantified through financial means. In addition, the study will discuss the costs of the project. Most of the data that will be used are taken from secondary research. As stated, the discussion will centre on estimates. Aside from the information on secondary sources, the study will also make reference to previous researches. These studies will guide the process in making conclusions.
The study will also make use primary research. In particular, a survey will be conducted among selected individuals in London. The goal of this process is to determine the pulse of constituents affected by the project. The gathered results will be analysed. The respondents will be chosen among individuals who will be affected by the proposed relocation. The questions that the respondents will answer are related to the financial analysis. Respondents will be selected based on a random sampling method.
Rationale of the Study
There are two important notions that this study attempts to discuss. As stated in previous writings, the event is used a tool that can be used to fuel financial stability. Most important, there are several financial exchanges that occur in the Olympics. This study also supports the notion that comprehensive financial analysis will allow the organisers to accurately determine the financial benefits of staging the Olympics.