July saw Ozzy the giant mechanical bull and symbol of the Birmingham 2022 Commonwealth Games unveiled in Birmingham New Street. The buzz about the station was high and served as a reminder of the success of last year’s Games. Almost at the same time we saw Victoria, Australia the planned hosts of the next Games in 2026 pulling out due to cost issues. Shortly thereafter Alberta pulled its plans to host the 2030 Games. After the apparent success of the Birmingham Games, Matt Lyons examines why no one wants to host future games. This blog was first posted on the Birmigham Business School blog.
Why is Victoria pulling out of hosting the 2026 Games?
Australia’s state of Victoria pulled out of hosting the 2026 Games citing cost concerns:
“Frankly A$6-A$7bn (£3.1- £3.6bn) for a 12-day sporting event, we’re not doing that,” – Victorian Premier Dan Andrews
Victoria isn’t alone in worrying about escalating costs; various estimates suggest that the average megaevent will overrun its budget by over 170%. Cost overruns on megaevents are so common they have spawned a massive academic literature with a quick search on Google Scholar showing 325 papers on the subject since 2019.
Looking back over the last few Commonwealth Games and sources to suggest the cost and benefit of hosting the Games we can see the costs involved with the Victoria Games appear especially high.
Like the UK, Australia is also living through a cost-of-living crisis. This tough economic environment makes justifying state spending all the more critical. The escalating cost during the construction phase of a megaevent that will deliver an economic boost followed by a tourism boost that is estimated to fall short of the costs is a tough sell.
Where economic impacts often fall short
The challenge for places hoping to estimate the potential economic impact of hosting a megaevent is that comprehensive evaluations are expensive and often overlook four key challenges:
- Opportunity cost – For example, how might the £3.6 billion investment to host the Victoria 2026 Games otherwise be spent (transport, skills, healthcare) and what impact would the counterfactual have?
- Displacement of activity – It is difficult to discern what is truly additional activity rather than activity displaced from somewhere else in the host country or the same place but at a later time, or on a different activity. For example, think of a family going to the Birmingham Commonwealth Games in 2022 for a weekend activity instead of a trip to the cinema in Coventry.
- Spending doesn’t stay in one place – Buying goods and services in a host city doesn’t mean the money stays there. The value chain may be such that a lot of the spending is happening on imported goods and services.
- Job years not jobs created – Often assessments don’t consider that a temporary boost in security and retail employment won’t endure when the event is over.
What has been the legacy of the Birmingham Games?
A year has passed since Birmingham hosted the 2022 games, but what has been the economic impact and how is the legacy unfolding?
- Economic impact – The economic benefit according to the UK Government is at least £870m against the cost of hosting £778m, so a net £100m benefit to the UK economy. But an estimated 90% of the impact fell within the West Midlands and with the region only footing half of the bill it was probably a big net boost to the region.
- Urban regeneration – The 2022 Games acted as a catalyst to accelerate the Perry Bar regeneration scheme. The scheme is long-term with plans out to 2040.
- International impacts FDI – The Business and Tourism Programme (BATP) was established ahead of the Games and involves evaluating the impact of the Games on attracting business investment.
- Softer impacts – There are many intangible and symbolic benefits to hosting megaevents, such as increased participation in sports, wellbeing impacts, pride in place, community cohesion and volunteer mobilisation. However, the evaluation of these impacts will take a long time if indeed they are being measured.
Overall, it is too soon to tell; to get a sense of legacy there must be consistent evaluation over time on a range of metrics.
Should Birmingham host 2026?
The aftermath of Victoria pulling out of the Games saw suggestions of Birmingham hosting the Games again in 2026 but would it be a good idea? Time for a list of pros and cons:
- Pro – Hosting the Games a second time would likely cost a lot less with the physical and intellectual capital still in place to get a megaevent off the ground again in the timeframe.
- Pro– It’s a chance to solidify legacy and reputation as a home of UK athletics, especially with Birmingham hosting the European Athletics Championships also in 2026.
- Pro – The analysis suggests it represents good value for money for the city, especially if the UK Government once again foots half of the bill.
On the other hand
- Con – There are probably diminishing returns to the reputational benefits of hosting a second Games.
- Con – The economic and time opportunity costs must be considered. This will take up a lot of public sector time that could be spent on other pressing issues in the region.
- Con – The city council is in deficit which may pose a problem in raising the funds to host for a second time.
What can the next host do to help ensure the Games present value for money?
Here are four ways the next host can seek to maximise the potential of the next games:
- Plan for displacement and prepare the wider region to absorb the activity displaced by the Games.
- Encourage local supply chains and procurement to benefit local businesses.
- Develop employability and skills programmes to enable local people to benefit from job opportunities during the Games.
- Invest in developing the brand of the host city for long-term income streams and future opportunities.
The costs of hosting megaevents seem to be escalating and pitted against a challenging global macroeconomic environment finding a host for the Commonwealth Games is likely to remain a challenge.
The assessment of Premier Dan Andrews, that a Victoria 2026 Games wouldn’t represent value for money, is likely to be correct – megaevents often don’t in narrow economic terms. For the next host to be successful the Games must be viewed as a catalyst to support holistic inclusive growth rather than focused on the short-term tourism uplift.
This blog was written by Dr Matt Lyons, Research Fellow, City-REDI / WMREDI, University of Birmingham.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI or the University of Birmingham.