Thursday, February 4, 2010

The Olympics are Almost Here

Like it or not, the Olympics are almost upon us. Roads are closing, buses are crowded, and the costs have escalated. So you have to wonder if it's all really worth it.

My wife asked me the other night whether I thought the Vancouver Olympics were going to make money or not. So I figured I'd be remiss to not write about it.

I guess the first part is determining how you actually calculate a profit or loss when you're looking at the Olympic games. I read an interesting article in this months CGA magazine that said things like the road improvements and increased security won't be included in the costs for the Olympic committee (VANOC). In other words, these costs are going to be coming from us, the tax payers.

The article also mentioned that costs have increased while sales were lower than expected due to the recession. However, it is yet to be seen if this will result in a loss or not. Even though there have been a lot of games recorded to have made a profit, there has been a lot surrounding these games that have made things more difficult for VANOC. My personal feeling is that the games will probably be around the break-even point. I guess we'll have to wait and see though.

I think more importantly, the benefits will go far beyond the actual events. Athletes, crews, officials, family members, and fans will all be crowding our streets. More people means increased revenues for surrounding businesses. For example, I talked to an employee at a local McDonald restaurant and she told me they already noticed a large increase in business and had to actually change some of their processes to account for it. Hopefully when people see how beautiful it is here tourism and immigration will increase bringing higher than expected future profits.

Also, while a lot of these projects were done specifically for the Olympics, they're not going anywhere after the Olympics is over. If planned well these new facilities will be able to bring in future profits. Plus we all get to enjoy the new roads to Whistler.

The timing for a lot of construction workers probably couldn't have been any better considering the slow down in the housing market and the recession. These projects all mean lower unemployment. This leads to less employment insurance payouts and more income tax revenue for the government. These workers then spend the money they earn which gets taxed and gives another business more money. In economic terms this is called an economic multiplier. Government spending increases income, which people spend, which increases income, etc, etc.

Of course the government will tax this increase in income, for both individuals and businesses. This of course brings in more revenue for the government and allows them to recoup the cost surrounding the games. Even the worst case predictions that I read expect this money to be recouped in no more than 10 years in tax revenue alone.

I know one complaint was that the money was not spent on the homeless or health care. While I think these are noble expenses I don't think these things would have paid for themselves like the Olympics will be able to. To me this is like saying paying down the mortgage is the most important expense. That doesn't mean you don't buy groceries or keep your eyes and ears open for investment opportunities.

So while this is going to be inconvenient for us for the next little while, I do think its going to be a good thing for this city, province and country. As always I'd love to hear your thoughts? Don't be shy!


  1. Right now I feel MEH? about the Olympics. I started out excited, lost the excitement but is anticipating the excitement to return when the games begin! I'm not too sure about making money. I suppose it will...but I wonder...really? for whom? it obviously won't effect a lot of software development or house painting. And I wonder if it will change much where I live in Langley. I wonder if my lack of excitement is b/c we are so far removed from all the events. ...but then again, do I really want to mingle with thousands others at Holland Park? So those are my thoughts! lol

  2. Thanks for sharing! I agree I'm not overly excited about it either. Maybe that will change if the Canadian Metal count reaches the highs some people expect. I've never been a fan of crowds myself, so thinking of even getting away.

    As for the money, it trickles down to everyone even software development and house painting. Constructions workers, restaurant owners, reporters, hotel owners, etc are obviously the first wave. Then they buy food, clothes, scrap booking supplies, get their houses painted, etc. The businesses that provide these services decide they have more money to spend on new software or software changes, accounting services, and so forth. The developers and accountants then buy more and the cycle continues.

    Always love hearing from you and everyone else!