With 150,000 jobs created and revenues of up to 10.7 billion euros, this major international event represents an extraordinary chance for France and for the economy of this country, says Radu Puiu, financial analyst at XTB Romania.
Photo: The Truth Archive
The official communications of the organizers emphasized that the Olympic Games will create a long-term infrastructure and leave a “solid legacy, with a solid and citizen-friendly approach“. At the same time, Paris 2024 offers great opportunities for the business environment, considering that many companies will benefit from thousands of contracts worth a total of 5 billion euros.
This year’s Paris Games could increase business opportunities and benefits between 5.3 and 10.7 billion euros. The most important global sports event is, according to the organizers, and “an exceptional opportunity to encourage economic activity, to promote France, its territories and know-how, to develop tourism and increase its international influence. The companies will export their expertise, demonstrate it and put it into practice during the Games. Indeed, the entire economic sector of the country will fully benefit from the effect of the Olympic Games: jobs, investments, consumption“.
How big is, in fact, the economic impact of the Olympic Games? However, should that really be the case?
As we approach the Olympic and Paralympic Games in Paris, more and more questions are emerging that revolve around the real economic impact. One of them is whether major sporting events really bring an economic boost to the host city and country, or whether they will make all the costs higher. It has been argued that the Olympics should provide a much-needed boost to the French economy in times of inflation and a cost-of-living crisis, as tourists and investors flock to the capital.
According to Radu Puiu, financial analyst at XTB Romania, history shows us that the Olympic Games came to represent, most of the time, a “financial hole“. This is because many of the host countries end up spending a lot of money on specialized infrastructure that has limited utility after the event. In many cases, “underestimating costs and overpromising benefits” result in host cities rarely breaking even.
“Granted, the upsides have proven possible in the history of the modern Olympics, but they don’t compare to the downsides. When politicians promote hosting the Olympics, they often bring up the job opportunities, especially in the construction and hospitality industries. For its part, the Paris 2024 organizing committee claims that the event will be “a lever to stimulate activity and employment”, thanks to the more than 181,000 mobilized jobs. This figure includes both the jobs created specifically for this occasion and the positions that already exist, but which will be involved in the running of the sporting event“, explains Radu Puiu.
In order to run in the best conditions, the Olympic committees rely a lot on volunteers – there will be 45,000 this summer in Paris, and they, by definition of the position they occupy, are not paid. In addition, some of these jobs opened especially during the Olympic Games could, in fact, represent fixed-term employment opportunities that, subsequently, may turn into layoffs. Another common assumption is that such a large-scale event is favorable for tourism. In this sense, the opinions are mixed, emphasizes the XTB financial analyst. There are many examples in this regard: London, Beijing and Salt Lake City experienced decreases in tourism during the years in which the Olympic Games were held.
On the other hand, other cities experienced growth, such as Barcelona, in the early 1990s. In this regard, the historical and social context of the regions must also be taken into account. Europe was after the fall of the communist bloc, and a large part of the population could not even think about traveling. In addition, the global standard of living was much lower than today, and the infrastructure was not as developed. In addition, at that time, the Catalan city of Barcelona could not compare with the current popularity of Paris – the capital of the most visited country in the world. In the case of cities with a highly developed tourism – such as Paris -, the net effect of hosting such an event is not exact, because the tourists who come for the Olympics will largely replace the seasonal tourists, who would have visited the French capital anyway . Thus, the economic effect that the Olympic Games will have will probably be negligible.
According to studies, during the 2012 Olympic Games in London there were fewer tourists in the city than in previous summers, an argument that supports this hypothesis.
An impact study was carried out in 2016, before the Games were awarded to Paris, by the French Center for Sports Law and Economics. He estimated that the economic effect is expected to fall within a very wide range, from 5.3 billion euros to 10.7 billion euros, with a percentage between 25% and 34% generated by tourism. The wide range of oscillation shows us the high number of unknowns that can significantly change the data of this hypothesis. The inflationary crisis and the international context are just two examples of these.
Which companies associate their image with Paris 2024?
“In addition to the athletes who will take the podium this summer, the companies that sponsor the Olympic Games could join the winners. However, we cannot provide an exact estimate of the financial effect on companies. The gain is not a financial one for these companies, but rather, for the brand itself. These companies strengthen their position and image by associating with a global event with historical notoriety“, Radu Puiu also points out
.LVMH has agreed to become a premium sponsor of the 2024 Summer Olympics in Paris, the first such deal for the luxury conglomerate. The contract invests 150 million euros in the Olympic and Paralympic Games, the largest sponsorship commitment of a company. LVMH is the only luxury player among Paris 2024’s premium partners – the others are French bank BPCE, telecommunications company Orange, French energy group EDF, French hypermarket group Carrefour and French pharmaceutical group Sanofi. In parallel, the international partners at the level of the International Olympic Committee include the Swiss watch manufacturer Omega and the e-commerce giant Alibaba.
“What do we notice from this list? Numerous French companies were interested in getting involved in this event, supporting the organization of one of the most important sports events on French soil. Some LVMH Moet Hennessy Louis Vuitton SE brands have been official partners of global competitions, including watchmaker Hublot, which was the official timekeeper of the soccer World Cup. But this is the first sponsorship of the luxury conglomerate led by Bernard Arnault“, emphasizes the XTB financial analyst.
Agreement “will contribute to increasing France’s attractiveness throughout the world” said the company’s CEO Bernard Arnault in an official post. Berluti is also expected to dress the French delegation for the various ceremonies. Chaumet, a jeweler owned by LVMH, will design the Olympic and Paralympic medals; the wine houses and Moët Hennessy spirits will offer their products as part of the hospitality programs during the event, and Sephora will be a partner for the Olympic torch relay. Air France has entered into an agreement to become a so-called Tier 2 sponsor, which will contribute to a greater brand visibility and winning new customers, as the group’s managing director, Ben Smith, said in an interview: “It’s a great way for Air France to showcase its best and help showcase the strengths of France and Paris. We believe that the risk of a negative investment return is almost zero“.
The patriotic character of these initiatives was clearly emphasized in the official statements of the representatives of the French companies, being a handy book that arouses emotion on a national level.
Another example of the importance that big brands give to this type of events is Coca Cola’s long-term partnership with the Olympic Games. This relationship began in 1928 and, since then, the giant has become the longest-lasting partner, with a constant presence. This is thus a 96-year association that continues to thrive.
According to Radu Puiu, the companies understood that in today’s society, an association with a global event like the Olympic Games would be a decision that benefits them – each with their own reasons. “Thus, hosting the Games might not even represent the “Olympic gold” as expected, but rather the states should be satisfied with “catch the podium”. The real winners could, in fact, be some of the sponsors, who consolidate their position internationally and use this opportunity to develop their brand“, says Radu Puiu, financial analyst of XTB.