The first three stages of the Tour of Spain were held in the Netherlands this year. Total costs: almost 15 million euros. Will it be limited to those costs? And are the hotel and restaurant revenues the only benefits of the Vuelta for the Dutch start and finish locations? The benefits of organizing a major sporting event are often broader than the direct economic benefits. But the budgeted costs are also often higher. Charles Kalshoven, macroeconomist and senior strategist at APG, explains why.
Organizers of major sporting events often tell a narrative that paints a rosy picture of the economic benefits, Kalshoven knows. “But that can’t always be substantiated. If there are any benefits at all, they go to the hospitality sector, for example, and not to the municipality or government.” According to the economist, the fact that a sporting event does not always bring in money for the host city is no reason not to organize one. “It can also just be fun, and it´s okay for fun things to cost money sometimes.”
Kalshoven acknowledges that this is a tricky message in these times, “because many people are currently struggling to pay their energy bills, so should you be spending 15 million on the Vuelta?” Incidentally, one third of the expenditure is provided by private parties, so it costs the national and municipal governments “only” 10 million euros (for comparison, the total expenditure of the municipality of Utrecht this year is budgeted at over 1.5 billion). Nevertheless, partly due to the high costs of the energy crisis, Utrecht will not be organizing any more major sporting events for the time being, Mayor Dijksma announced in Trouw.
“If you look at it from a purely economic perspective, the organizers of major sporting events usually don’t end up in the black afterwards,” Kalshoven said. VAT and excise duty on the beer sold, for example, do not go to the municipality but to central government. But the benefits, he says, are also broader. “In Barcelona, for example, for the 1992 Olympics, they refurbished the whole neighborhood of Barceloneta and the beach and developed Port Olímpic as an entertainment area. So the Games were used there to kick-start urban development.” And there may be more such indirect benefits. “If, like Utrecht, you’ve hosted all three major cycling tours, you may be playing into the hands of conference organizers. And companies working in the sustainable mobility sector may see Utrecht as a suitable location. It may also generate more tourism. The aerial images of the Dom and the canals are a kind of ‘free’ advertising for the city. It is a way for a city to show its best-kept secrets to the world.”
Costs incurred to organize a sporting event can also be seen as an investment in health or welfare policy. For example, Utrecht was recently named the most bicycle-friendly city in the world. “If people start cycling more often instead of taking the car or public transport, there will be fewer traffic jams. That saves society money. And perhaps in the longer term, healthcare costs as well, because a sporting event can encourage people to participate more in sport, thus keeping them healthier for longer,” Kalshoven says. “You shouldn’t exaggerate these indirect effects, but if you wait for scientific evidence of the economic benefits of a sporting event, you’ll never be able to organize anything.”