Mega events such as the Olympic Games and major concerts have been known to cause a surge in prices across various industries. These events lead to an increased demand for hotel rooms, airline tickets, and other goods and services needed by the influx of visitors. However, the impact of these price surges on French consumers may not be as significant as one might think. According to UBS, the method used to calculate consumer price changes may distort the actual impact of these events on the economy.
UBS’s chief economist, Paul Donovan, wrote in a recent note that events like the Olympic Games and concerts by popular artists like Taylor Swift create a sudden demand shock. The method used to measure prices in industries associated with tourism, such as hotels, may capture the temporary spike in demand, leading to an increase in consumer price inflation. For example, the recent Taylor Swift Eras Tour caused a boost in hotel revenue in cities across the U.S. where Swift performed, leading to an increase in hotel prices.
The ongoing Summer Olympic Games in Paris have similarly caused a surge in hotel prices and occupancy rates. While initially, hotels in the City of Light struggled with a drop in occupancy rates, the trend has reversed during the Games. However, it is important to note that the tourists flocking to Paris for the Olympics are not representative of the average French consumer. Most French consumers are unlikely to be affected by the surge in prices unless they are attending the Games.
Despite the surge in prices and demand for accommodations, the Paris tourist office reported a significant increase in the number of visitors during the Games. International tourists visiting Greater Paris increased by about 14% compared to the previous year, with the largest number of visitors coming from the U.S. French tourists visiting the city also saw a significant rise. Overall, the tourist office estimated a total of 15.3 million visitors for the Olympic and Paralympic Games.
While the long-term economic impact of the Paris Olympics remains uncertain, analysts expect it to be overall positive. Past Games, such as Barcelona in 1992, have seen tourism booms and positive economic outcomes. The Paris 2024 Olympics are projected to generate as much as $12 billion in long-term economic impact, according to a study from the Centre for Law and Economics of Sport.
Sustainability and Cost-Efficiency
The International Olympic Committee’s Agenda 2020 reforms have focused on making the events more economically sustainable. The Paris 2024 Olympics are projected to cost under $10 billion, with 95% of the venues being preexisting or temporary. This cost-efficient strategy marks a turning point for the Olympic movement, as it reduces the need to build expensive permanent venues for the Games.
Mega events like the Olympic Games can have a substantial impact on the economy, leading to a surge in prices and demand for various goods and services. While these events may not directly affect the average French consumer, they can still have long-term economic benefits for the host city and country. By implementing cost-efficient strategies and focusing on sustainability, future Olympic Games can generate positive economic outcomes and leave a lasting impact on the local economy.