Besides the Olympic competitors there will be plenty of other winners and losers from the London 2012 Olympics and some of them may be quite surprising.
One of the big losers will be the London “West End” theatres, at least according to Andrew Lloyd Webber, the musical impresario whose “Really Useful Group” owns seven London theatres. With advance bookings at 10 per cent of their normal level, he might just have a good point, but why is this so?
The explanation lies with the estimated drop off in regular tourists visiting London during the period of the Olympics. The European Tour Operators Association (ETOA) think there will be a slump in “sightseeing” tourists visiting London. Bookings for visits during the period of the Olympic Games are already much lower than for the equivalent period in 2011. Foreign tourists seem more reluctant to visit London. The fear of traffic congestion, high hotel prices, the value of currencies and the worry over the 2011 summer riots can all be added to the fact that many Europeans have experienced a reduction in real incomes exacerbated by the austerity measures introduced by European governments. The combination of these things means a reduction in potential tourist numbers to London.
However, the demand for tickets for most Olympic events was well oversubscribed and many applicants were left disappointed. The majority of the tickets were sold to British citizens so most of the visitors to the London Olympics will be from other parts of the United Kingdom rather than from abroad. Many of these will come for the day or be short stay visitors and may not take in a theatre visit.
The theatres will need to think carefully about what to do. The new musical “Sweeney Todd” will open in March and shut down for the two and a half week duration of the Games. Another option for theatres is to heavily discount tickets in an effort to boost demand. They will need to have a good idea of the price elasticity of demand for their shows.
If theatregoers are down in numbers during the Olympics then many West End restaurants will also see a decline in business as the inevitable knock on effect.
Facts on London’s Tourism Economy
- 30 million visitors a year
- Worth £15 billion
- Accounts for 10 per cent London economy
- Employs 13 per cent of the workforce
A financial thought. Theatres will be reluctant to disclose in detail their estimated revenue losses but none the less it is interesting to come up with some sort of figure in order to gauge the importance of the issue. Assume theatre ticket sales are 250 less per show with an average ticket price of £50 and additional spend of £10 on refreshments and programmes. How much revenue would be lost during the Games with 9 shows per week? How much revenue would the “Really Useful Group” with its seven theatres stand to lose?
Looking at more direct winners and losers it would seem at first glance that a definite winner of the 2012 games is Rio Tinto plc. Its mines will be supplying the gold, silver and copper for 4,700 medals. This is a great marketing opportunity for Rio Tinto in promoting its sustainability to a potential audience of 4 billion viewers. Rio Tinto can account for every gram of metal to specific mines and thereby assure stringent standards are met. In fact more than 99 per cent of the metal will come from Utah. Like Rio Tinto, other headline sponsors of the games such as BP, Dow and EDF seem a little at odds with the billing that these games will be the greenest ever and are seen as easy targets by various activist groups especially given that sustainability was a critical part of the initial bid.
Other sponsors include McDonald’s and Coca Cola providing food and drink to thousands of spectators inside the Olympic Park. Some would make the point that this hardly fits in with the idea of promoting healthy foods and lifestyles. One controversial way of looking at this is that some sponsors pay for monopoly style rights as preferred traders and so the big players win at the expense of smaller traders, therefore, lowering choice and raising prices. This view is supported by Games Monitor, which claims on its website that local businesses will not have access to the Olympic Park or the immediate neighbourhood to sell their products.
A financial thought. It would be interesting to contrast the price of food and drink from vendors in and close to the Olympic Park with the prices charged by these organizations elsewhere in London.
On a final note, not all the Olympic spirit has been lost or sold to the highest bidder and perhaps the estimated 70,000 volunteers, old and young, who will help best illustrate this.