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Strategic

transportation

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20 November 2002

2010 Olympic and2010 Olympic andParalympic Games:Paralympic Games:Economic Impact UpdateEconomic Impact Update

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BackgroundBackground

l January 2002

4 Original Economic Impact Studyof hosting 2010 Winter Olympics

4 Ministry of Competition Science & Enterprise

4 “What economic impacts funded by non-residents of could flow to BC as a consequenceof hosting the Games?”

l November 2002

4 Update of Economic Impact

4 InterVISTAS Consulting Inc.

The Province’s Olympic Bid minister, Ted Nebblingcommissioned The Ministry of Competition Science andEnterprise to conduct an economic impact study of hosting the2010 Winter Olympics. That study was dated January 2002.

Via a competitive process, InterVISTAS Consulting Inc. wasselected to review that study, make modifications as appropriate,and update the study with more recent data. InterVISTAS is aVancouver based consulting firm which has considerableexperience conducting and critiquing economic impact studies.

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Purpose Of UpdatePurpose Of Update

l Review and verify economic impactconcepts and methods

l Incorporate new information

l Identify only incremental impacts

4 Any benefits from spending by BC residentsand governments are excluded

4 Transport infrastructure excluded

We accomplished these things by:

•re-building the impact model, allowing a check of themathematics and logic of the model, also simplifyingthe model to allow future updates to it

•reviewing references used for preliminary report

•reviewing additional references collected since thepublication of the preliminary report, such as newinformation on impacts of other Olympics

We then made changes to the model and recomputed results

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What Is Economic Impact?What Is Economic Impact?

l A gross measure of

4 Employment and wages

4 Gross domestic product

4 Tax revenues

l Three categories of impacts

4 Direct (Construction, tourism, operations)

4 Indirect (e.g., supplier industries)

4 Induced (general economic stimulation)

Every dollar spent generates new employment and stimulateseconomic 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 andexecution of Games

Indirect impacts: felt in industries that supply the firms that getdirect spending

Induced impacts: consumption expenditures of direct andindirect

Economic impact methodology is not cost benefit analysis.

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GrossGross versus versusIncrementalIncremental Impacts Impacts

l Incremental benefits are thosegenerated by inbound spending

l Incremental impacts do not includetransportation investments

l This study only measuredincremental impacts

l This is not a net measure of benefits

l Could be considered a conservativeapproach

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 theimpact of spending financed from within BC

An economic impact study measures the size of employmentgenerated, GDP generated, etc. It does not weigh these positiveimpacts against the costs required to obtain them as a cost benefitstudy would do. An economic impact study simply measures impacts.A cost benefit study evaluates whether it is worthwhile. A cost benefitstudy of the Olympics would measure the dollar value of benefits fromthe Olympics and subtract from them the costs required to obtainthem, such as organising costs, marketing costs, facility costs, etc.We were only asked to do an economic impact measurement. A costbenefit study is a much more complex task.

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What Is IncrementalWhat Is IncrementalEconomic Impact?Economic Impact?

l It does not include normal growth

With Olympic tourism

Normal tourism growth

Economic impact is calculated on incremental tourism, notoverall level of tourism. Only ascribe small percentage of total toGames.

There is a very good chance that some of the displaced tourismincluded in the model (45,000 skiers in 2010) will be recapturedby other ski hills in the BC tourism market. The impact ofrecaptured visitors is not included in the study results.

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PotentialMeasuredNormal

Potential versus MeasuredPotential versus MeasuredImpactsImpacts

Impacts measured in this studyAre less than potential impacts

Our measure of incremental tourism impact must bedifferentiated from potential impact. The medium-high scenariowhich is the focus of the presentation, does not include potentialtourism impacts for both earlier and later periods. For example,based on results from some other Olympics, we truncatedOlympics induced tourism impacts at 2015. There is a potentialfor a lasting tourism legacy, but so as not to overstate theeconomic impact of the games, we did not include it in ourmeasure. Of course, achieving the measured impacts or otherpotential impacts will required an effective marketing plan by thetourism industry.

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Adjustments and ImprovementsAdjustments and Improvements

l Updated expenditure data

l Revised visitor profiles

l Truncated visitor forecasts

l Addition of tourism from rest of Canada

l Excluded transport investments

l Addition ofBC Corporate Tax revenues

There were a number of adjustments and improvements made tothe economic impact measurement model.

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Main ResultsMain ResultsIncreases in magnitude of impacts due to:

4 Corrected error in use of discountedexpenditures used real expenditures

4 Increase in baseline (i.e., non-Olympic) tourism

Decreases in magnitude of impacts due to:4 Recognised some visitors are lower spenders

(day visitors, VFR)4 Truncated pre and post-Games tourism effects4 Excluded transport investments

The update decreased visitor spending by recognizing that somevisitors spend less. Our review of market research indicated thatlike Expo 86, an important portion of visitors will stay withfriends or relatives rather than in hotels, and thus we reducedimpacts due to their lowing spending rates. We also recognizedthe lower spending of same day visitors. These adjustmentsreduced impacts.

However, the correction to use of discounting in the preliminarystudy had a large positive impact on results. The previous studyeffectively made a double correction for inflation. We convertedall future spending to inflation adjusted 2002 dollars.

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How Are Impacts Estimated?How Are Impacts Estimated?

Incremental Games Expenditures

BC Stats Input Output Model

Gross Games Expenditures

IncrementalEconomic Impacts

Ex)excludes all BC-based spending

There are three broad types of Games expenditures that generateimpacts:

• Capital/Construction expenditures

• Operating expenditures

• Tourism/visitation expenditures

BC Stats multipliers are used to relate the values of purchases inthe province to employment, GDP and tax revenues on anindustry by industry basis.

Incremental impacts are the portion of the gross impacts that aregenerated by out of province dollars. E.g.:

•Federal dollars

•international tourists

•international broadcast rights

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Tourism ScenariosTourism Scenarios

Low Medium MediumHigh High

6 years 7 years 7 years 18 years

1.1 million 1.7 million 2.7 million 4.3 million

Incremental tourists - entire period

Australia and Salt Lake City produced numbers slightly lowerthan the Medium-High scenario.

•Australia Forecasting Council expected 1.7 million in7 years surrounding Games, we expect 2.7

•Salt Lake organisers expected 230,000 to Games, wethink we can induce 550,000 (same in high)

We think that the High scenario is achievable. Will depend oneffective and organised marketing.

We think that the Medium High scenario is without a doubtachievable. This scenario is used as the example today.

Long term, international visitation to BC has grown at roughly3% p.a.

Assuming only 2% growth p.a. in the future, with the 2010 Gameswe can expect an additional 2% growth in the low scenario, andan additional 5% growth in international visitation.

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Updated Updated Direct Direct Economic ImpactEconomic Impact

Scenario DirectGDP

DirectPersonYears

DirectWages

DirectTax

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

These are the updated direct economic impacts.

The original study showed only total impacts, whereas theupdated study shows direct and total impacts. The difference isdue to the so-called multiplier impacts. The conditions for theachievement of such impacts do not always hold. ThusInterVISTAS prefers to focus on the direct impacts. However, inorder to compare the current updated study with the previousstudy we have to use total impacts. This comparison is done onthe next slide.

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Updated Updated Total Total Economic ImpactEconomic Impact

Scenario DirectGDP

DirectPersonYears

DirectWages

DirectTax

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

These are the updated total economic impacts - includingindirect and induced (multiplier) impacts on the provincialeconomy.

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Comparison of Preliminary andComparison of Preliminary andUpdated Updated Total Total Economic ImpactsEconomic Impacts

Source: IVC 2010 Olympic Economic Impact Update

Scenario GDPPersonYears

TaxRevenues

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

Overall effect of adjustments was positive.

Negative effects of:

•shortening tourism projections

•increasing level of tourism displacement in Gamesyear

•lowering tourism spend profile

•assuming higher import content for constructionsector

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… With VCEC Expansion Impacts

Sources: The Economic Impact of the Winter Olympic and Paralympic Games: InitialEstimates (BCTIO, Jan 2002) and The Economic Impact of the 2010 Winter Olympicand Paralympic Games: An Update (InterVISTAS Consulting Inc., Nov 2002)

Scenario GDP PersonYears

TaxRevenues

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

If we add the VCEC expansion economic impact…. Whosefunding may be linked to hosting the Olympics...

Note that the VCEC impacts are greater with the Olympics thanwithout.

Synergy is created by host-city status. Convention “wins” tendto increase with host-city status. Sydney is an example - bid:winratio went up 34% in pre-Games years. There has not been asufficient lapse of time to judge the lasting impact of Sydney onwin rates.

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2010 Impacts With2010 Impacts WithOnly VCEC Expansion ImpactsOnly VCEC Expansion Impacts

Attributable to 2010 GamesAttributable to 2010 Games

Scenario GDP PersonYears

TaxRevenues

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

Sources: The Economic Impact of the Winter Olympic and Paralympic Games: InitialEstimates (BCTIO, Jan 2002) and The Economic Impact of the 2010 Winter Olympicand Paralympic Games: An Update (InterVISTAS Consulting Inc., Nov 2002)

If the VCEC is expanded, then the tourism impacts associatedwith the 2010 Games will be greater. This is due to:

1) the greater capacity of Vancouver to accommodateconvention delegates and

2) because winning the bid for the 2010 Games will increaseVancouver’s success rate in bidding for future conventions.

This table adds to the 2010 Games impact determined inInterVISTAS’s report, only the increase in VCEC expansionimpacts attributable to the 2010 Games.

This table does not include the economic impact of the VCECexpansion generated by construction or tourism without the 2010Games.

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Timing Of ImpactsTiming Of Impacts

Gross Expenditures

0

500

1,000

1,500

2,000

2,500

2002

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2002

$ m

illio

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Construction Costs Operating Costs Visitor Spending

Construction+

Operations+

Tourism

CombinedImpact

This chart shows how construction impacts occur in the earlyyears with tourism impacts beginning a few years prior to 2010and then lasting for a period thereafter.

A long term increase in tourism is certainly possible, but to beconservative we truncated impacts after 2015 in this scenario.

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0

5,000

10,000

15,000

20,000

2002

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Empl

oym

ent Low

MediumMed HighHigh

Timing of Direct ImpactsTiming of Direct Impacts

Construction+

Operations+

Tourism

CombinedImpact

Tourism causes the deviation in employment impacts.

Construction and operating expenditures do not change.

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Direct Construction ImpactsDirect Construction Impacts

Construction of facilitiesand transportation improvements

Construction occurs between 2003 and 2009

Construction+

Operations+

Tourism

CombinedImpact

DirectImpacts GDP Person

Years Wages Taxes

GrossIncludingtransportInvestments

$1.1 Billion 25,000 $843 Million $123 Million

IncrementalNot includingtransportinvestments

$148 Million 3,000 $115 Million $9 Million

Set at medium-high scenario.

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Construction ImpactsConstruction Impacts

l 91% of total construction dollarsNOT included- only 9% are incremental

l Spending on transportation investmentsnot included in incremental

l Spending on VCEC expansionnot included in gross or incremental

Construction+

Operations+

Tourism

CombinedImpact

91% of construction dollars are BC private sector or BCgovernment. Only that portion of construction spendingfunded from outside of BC (excluding federal contribution totransport investments) is included.

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Direct Tourism ImpactsDirect Tourism Impacts

Two-thirds of direct incremental impactsaccrue to tourism sector

DirectImpacts 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

Construction+

Operations+

Tourism

CombinedImpact

Set at medium-high scenario.

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Tourism ImpactsTourism Impacts

l 2008-2015 with normal tourism growth

4 100 million total international visitorscumulative between 2008-2015

l 2008-2015 with induced Games tourism

4 additional 1.0 million (low scenario) to4.3 million (high scenario) cumulative visitors

Construction+

Operations+

Tourism

CombinedImpact

Average annual growth of international visitation to BCbetween 1972 and 2000 is calculated at 3%.

Assuming only 2% average annual growth from 2000 onwardsgives an expected 100 million international visitors to BCbetween 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 addabout 3% to the expected level of international tourism in theseyears without the Games.

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Direct Operational ImpactsDirect Operational Impacts

One quarter of direct incremental impactsare generated by operation expenditures

l ex) Policing,event timing, government services

DirectImpacts GDP Person

Years Wages Taxes

Gross $689 Million 16,000 $531 Million $75 Million

Incremental $537 Million 12,000 $416 Million $60 Million

Construction+

Operations+

Tourism

CombinedImpact

Set at medium-high scenario.

In addition to construction and tourism there are alsosignificant impacts from operating the Olympics.

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Un-quantified Impacts -Un-quantified Impacts -Not Measured in This StudyNot Measured in This Study

l Increased trade and investmentfor business community

l User benefits or construction impacts oftransportation improvements

l User benefitsof Olympic Legacy facilities

Olympics create an opportunity to promote home brands andcompetitive advantages. Can increase exports and businessinvestment.

User benefits of Transporation improvements will be in theform of:

•travel time savings

•vehicle operating cost savings

•accident cost reductions

•parking cost reductions.

Rapid transit benefit estimated at between $600 million and $1.5billion

Use of Olympic facilities:

•resident use

•other competitions

•training for Canadian and foreign athletes

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2010 Economic Impact Summary2010 Economic Impact SummaryMedium-High ScenarioMedium-High Scenario

Total Impacts 2010 GamesOnly

2010 GamesWith VCEC

Impact Due toGames

2010 GamesWith Total

VCEC Impact

GDP $3.3 Billion $4.1 Billion $8.4 Billion

Person Years 77,000 100,000 187,000

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