Can an Olympic bid by Germany in 2040 pay off economically?

Professor Holtemöller, you have investigated the economic effects of major sporting events. What are your findings from this: can they be worthwhile in macroeconomic terms?

Oliver Holtemöller: Studies on previous Olympic Games have generally not found any significant positive macroeconomic effects. The positive effects in some sectors are offset by substitution and displacement effects in other sectors. Individual sectors such as the hospitality industry benefit above all from higher prices, while real (price-adjusted) turnover increases significantly less. In some cases, there are positive long-term effects because new infrastructure has been built or existing infrastructure has been expanded and is utilised accordingly in the long term. This was the case in Barcelona in 1992 and Salt Lake City in 2002, for example. In the long term, there are more tourists there than before the Games. In addition, there is increased construction activity at the venues in the one to two years before the Games, although this is not necessarily additional activity at national level either, but existing capacities are redirected accordingly. In terms of the overall balance, it should also be taken into account that the organisers considerably underestimate the costs of staging the event in advance.

You mention Barcelona: there are currently protests in this city against too much tourism, which has led to a sharp rise in rental costs, among other things.

I think that the Olympics are not the only reason for this development in Barcelona. The improvement in infrastructure there has also helped the locals in the long term. But you have to look carefully at which regions you want to promote by participating in major sporting events and what this means both in the event of success and in the event of failure. Such failures with empty stadiums etc. also exist. Olympic Games also depend on the enthusiasm of the locals: without broad support from the population, economic success is unlikely.

In economic terms, what is the difference between a football championship and the Olympic Games?

At a European Championship or World Cup, the effects are often spread across different venues, as is the case this year in Germany. In addition, due to the large number of different sports at the Olympic Games, global interest is even greater. Economically, however, essentially the same mechanisms come into play: increased local construction activity in the run-up to the event (with capacity being diverted), high prices and displacement effects during the event. Long-term level effects in retrospect only arise in exceptional cases, however.

Did the European Football Championships in Germany have such a positive effect on the level?

I think that Germany was a good host and we were largely able to convey a positive image of the country. Unfortunately, however, the country's weaknesses also became apparent once again, including poor internet connections and problems with local and long-distance transport. Internationally, such an infrastructure can act as a deterrent, as there are countries that do things better. Our economic analyses have not yet shown any measurable impact of the European Championship in figures. And this also becomes clear when you look at individual sectors. Take the railways, for example: although there was an increase in travel by football fans, they made a loss of billions in the first half of 2024. There were other reasons for this than passenger numbers - but it shows that structural problems cannot be solved with one-off events. Similarly in the retail sector: although the European Football Championship took place in Germany, the consumer climate in the retail sector deteriorated during this period. This also shows that there are far greater mechanisms than major sporting events, and a championship or Olympic Games cannot absolve people from doing their economic homework properly.

So would the German economy still not be able to benefit from the Olympic Games in the future?

Yes, on the whole, the benefits for the German economy from the Olympic Games would hardly be relevant. Firstly, only individual sectors such as hotels, catering and the construction industry would experience a special boom. Unlike a football championship, sporting goods manufacturers would hardly benefit either, as the Olympic Games and Paralympic Games are less about selling fan merchandise. Secondly, the Olympic Games only last a few weeks - that is only a small part of the entire economic year. Other factors such as the economy, employment or key interest rates play a much more important role. Thirdly, such major events also lead to displacement effects in which consumer spending is merely reallocated. For example, instead of families staying a little longer for a holiday in Germany, Olympic visitors tend to stay in the country for a shorter period of time. Organising the Olympic Games does not stimulate the economy as a whole. That's not the point, but perhaps that's one reason why the number of bids to host the Olympics has declined in recent rounds.

We have a pronounced housing shortage in Germany. Couldn't the Olympic Games be used as an opportunity to remedy the housing shortage in at least one region by building Olympic villages that could later be used as flats?

There is currently a shortage of between half a million and a million flats in Germany. The Olympic Village in Paris provides accommodation for just 10,000 people, so that's perhaps the equivalent of around 3,000 flats. So you would have to build 100 Olympic Villages in Paris to make a substantial difference. You can't really solve the glaring housing shortage that way. No, I think you can also see here that, firstly, you have to think in a more decentralised way and, secondly, you have to make the right adjustments. These include simpler and faster approval procedures, fewer building regulations, rezoning and rising net incomes. We should stop dreaming of one-off events such as major sporting events. Instead, macroeconomic analysis offers enough more promising policy approaches, for example in the areas of taxes, education and research.

The questions were asked by Wolfgang Sender.