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Is it worth staging the Olympics?

By By Kathleen Brooks, Research Director, Forex.com The preparations have been going on for seven years, a whole area of London has been redeveloped to make way for the Olympic Park and the Athletes Village, the opening ceremony was a resounding success and the sport fest has begun. Oh, and I forgot to mention that GBP 10 billion was spent to make the Games the success they are meant to be.

As the first week gets under way, as a Londoner without tickets I found myself rather less interested in the Olympics than I probably should have been. However, after that spectacular opening ceremony even I have started to join in the fun even if it is from the comfort of my sofa in front of the TV.

But the as we digest the record breaking 19^th Olympic medal for US swimmer Michael Phelps, and the Queen's granddaughter winning silver for Team GB in the equestrian section, what about the long-term implications of the Games for the City of London? Have the Olympics been worth it?

The Olympics can help the host country in a couple of ways: One, by boosting growth through construction, tourism etc. And two, by raising a country's profile. The boost to London's construction sector from the Olympics has been huge, and worth about GBP 12 billion over the five years preceding the event and the five years afterwards, according to reports from Lloyds Banking Group. While this may not make a big difference to quarterly growth data in the UK, which is particularly dismal at the moment, it is still an important source of demand for a sector of the economy that creates thousands of jobs.

However, the benefit from the Olympics to tourism and raising London's profile are more questionable. Concerns that London would be gridlocked with Olympic traffic and that the public transport system couldn't cope with the teams and the tourists coming to watch the games don't seem to have come true. Yes, the trains are busier than normal for August - the height of holiday season - but they seem to me much less packed than they were for the Queen's Jubilee celebrations earlier this year.

Also, traffic hasn't been too bad, with road traffic officials opening Olympic lanes to all vehicles because they were so quiet. There are rumours of empty hotel rooms and there have been rows of empty seats at the Olympic venues, apparently because foreign delegations could not sell their allocation of tickets as people chose not to travel to London for the Games.

The second point is about whether the Olympics raise the profile of the host nation or City. London is the home of Buckingham Palace, the Crown Jewels, Big Ben, the Houses of Parliament, Westminster Abbey. I could go on, but you probably get the gist. London's profile is extremely high already so it's hard to justify that the Olympics will raise London's profile as it is already one of the most visited cities in the world and I believe that tourists are more likely to come to the capital to see our sites and architecture, maybe even try to catch a glimpse of the Royal Family, rather than because we hosted the Olympics Games.

This brings me on to my final point. The benefits of the Olympics could be more keenly felt in a region like the Middle East; somewhere not normally considered a big tourist attraction. By hosting the games and building lavish new stadiums, infrastructure and services it could use the games as a platform to promote its country as a tourist destination or a good place to do business.

It could help bring in long-term sources of new revenue that could feed economic growth well into the future. Hosting sporting events can also have a huge impact on reinforcing the image of these host nations: as an interesting, exciting, modern, well-resourced place to do business, go on holiday etc. This worked wonders for China in 2008 and South Africa at the World Cup in 2010.

For the UK the boost to construction can't be denied, but overall we have probably neither made nor lost money on the Olympics, and although they are a fantastic spectacle in the world's greatest City (in my biased view, of course) they probably won't have too many other benefits. In fact the rows of empty seats at some of the events are a bit of an embarrassment to London, the government and the event organisers.

The Olympics have marginal benefits for developed and well established cities; however, they could be a major boon for a less established country if managed properly. Istanbul, Madrid and Tokyo will fight it out to host the 2020 Olympics; however, officials in the Middle East should get planning for a bid for 2024.

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