Feature Article - The Sydney Olympic Games
This article was published in the September quarter 1999 issue of Balance of Payments and International Investment Position (ABS Cat NO. 5302.0, p17-20)
1 The awarding of the 2000 Olympic Games to Sydney has already had a significant economic impact on Australia and will continue to do for several years to come. Some of the impacts are direct, such as the construction of venues and other facilities prior to the Games, the sale of television broadcast rights during the Games, and the movement of athletes and tourists to participate in or watch the Games. Other impacts are indirect, such as the international tourism that is generated for Australia from the promotional aspects associated with the media coverage that Sydney and Australia receive through hosting the 2000 Games.
2 The treatment of the economic activity associated with the Sydney Olympic Games is consistent across all of the macro-economic statistics published by the Australian Bureau of Statistics. This article explains the major impacts on the balance of payments (BOP) and international investment position (IIP) statistics. The information used in this article to illustrate the BOP impacts has been drawn from: the annual reports published by the Sydney Organising Committee for the Olympic Games (SOCOG); and from the November 1998 issue of Forecast, the eighth report of the Tourism Forecasting Council, in which Chapter 4 was titled Tourism Impacts of the "Athletes' Games". There are a number of other reports, with varying estimates, also in the public arena. In the September quarter 1999 issue of Australian National Accounts, National Income, Expenditure and Product (Cat no. 5206.0), to be published on 15 December 1999, there will be an article which explains the treatment of the Olympic Games in the wider accounts for the whole economy. The statistical treatment of the Paralympic Games, to be held following the Olympic Games, is the same.
3 The Games will result in thousands of additional visitors to Australia - athletes, officials, sponsors and spectators. In addition, many more people will visit Australia before and after the Games because hosting the Games provides significantly increased coverage in the international media for Australia as a tourist destination. On the other hand there will be some decrease in the usual tourist and business traveller numbers at that time because of problems in obtaining air tickets and accommodation, and because of impacts on business activity in Sydney and elsewhere in Australia during the Games. There may also be some redirection of tourist arrivals to other areas in Australia, and more Australians may travel abroad during the Games.
4 The November 1998 issue of Forecast identified the direct, games-related number of international visitors at about 130,000 (mostly at the time of the Games). These visitors will acquire accommodation and other personal goods and services such as food, domestic transportation, and shopping while in Australia. The spectators will also attend the Games and pay for tickets to the various events.
5 The Forecast article also estimated that an extra 1.5 million tourists would visit Australia between 1998 and 2004 as a result of the promotional impact of the Games. These visitor numbers were forecast in that article to peak at about 353,000 in calendar year 2002.
6 In Australia's BOP, all personal goods and services acquired in Australia by travellers during visits of less than one year are recorded as travel credits. The travel expenditure in Australia by international visitors is estimated primarily from statistics on the number of visitors, as estimated in ABS overseas arrivals and departures (OAD) statistics, together with estimates of the average expenditure of these visitors, derived from the International Visitor Survey (IVS) conducted on behalf of the Bureau of Tourism Research. Forecasts of the monetary impact of the Games visitors vary depending on assumptions about the characteristics of a Games visitor. However, Games spectators will likely spend more per day than the average holiday visitor. Europe and North America are likely to be more heavily represented in Games spectator numbers than usual in total visitor numbers, and visitors from these sources stay longer than the average visitor, and spend more. Accommodation and other costs for these visitors in and around Sydney will be higher at the time of the Games, and expenditure on tickets will push the average Games tourist expenditure well above the average holiday visitor expenditure.
7 The promotional impact of the Games is spread across a number of years and will be reflected in the ongoing measurement of visitor numbers and average expenditures in the usual data sources. No separate BOP measurement will be needed. Most of the direct Games-related travel credits will be more concentrated, and will be recorded, in International Trade in Goods and Services, Australia (Cat no. 5368.0), in the reference months of September and October 2000, and in the BOP in the September and December quarters 2000. OAD statistics will capture the visitor numbers in time for BOP estimation. However, until IVS results are available, ABS estimates of the Games impact on average tourist expenditures will be included in published estimates. While this Games impact will be estimated at the time of the Games once source country and average stay data are available from OADs for all visitors, additional expenditures of about $600 million might be expected, with 80 per cent of this amount recorded in September 2000. This includes expenditure on Games tickets, regardless of when the tickets are paid for. See paragraph 15 below for the BOP and IIP treatment of revenue from ticket sales prior to the Games.
8 In addition to the travel expenditure within Australia by the direct and indirect Games-related visitors, these visitors may travel to or from Australia on Australian-operated aircraft. The Games-related earnings of these resident airlines will be included within the passenger services component of transportation in the BOP.
Other games-related Balance of Payments activity
9 There are a range of cross-border goods, services and financial investment transactions associated with the Games. To explain the BOP and IIP treatments of these it is useful to start with SOCOG's published income and expenditure information. The following table is an extract from the 1998 revised Games budget that is presented on page 59 of SOCOG's 1998 Annual Report. (At the time of writing the 1999 Annual Report was not available.)
10 Most of the $1 billion in television rights to be earned from the Games will be earned from non-residents. The fees paid for these rights will be classified in the balance of payments as audio-visual and related services exports within the broader item 'Personal, cultural, and recreational services'.
11 From a macro-economic accounting perspective, the time of recording of the TV rights should be when the associated service is provided. The presumption for these rights is that the service provision coincides with when the economic benefit will be received by the broadcasters, i.e., at the time the Games are conducted in September and October 2000. However, payments for these rights are being made on a progressive basis. As shown in the table above, by 30 June 1998, $213 million had already been received. These payments are refundable, and are treated in the BOP and IIP as prepayments for a service that will be delivered to the TV networks in September and October 2000. At the time of the Games, the prepayment liability (recorded in 'other investment') will be extinguished, and exports of the audio-visual services will be recorded in September and October 2000.
12 A significant proportion of the Games sponsorship revenue will also be earned from non-resident sponsors. These sponsorship fees will be classified in the BOP as franchise and similar trademark rights exports within the broader item 'Royalties and licence fees'. As with TV royalties, these sponsorship services should be recorded when the service is provided. However, it is not straight forward to estimate the flow of economic benefit to the sponsors. It commences when the sponsors begin to be associated with the Games and use the sponsorship arrangement for image enhancement, recognition and similar benefits, and may continue well after the conduct of the 2000 Games. As a practical approximation, sponsorship services exports are being progressively recorded when the payments for the services are made, although a significant proportion of the payments are expected to be received in the September quarter 2000.
13 Some of the consumer products revenue will be earned from non-residents. Games visitors may purchase Games merchandise, and these expenditures will be included in the travel credits estimates discussed above. If any of the merchandise is shipped directly abroad, it will be classified as merchandise exports in the balance of payments when shipped.
14 Some of the ticketing revenue will also be earned from non-residents, and these expenditures will be included in the travel credits estimates at the time of the Games, as discussed above. Any receipts for ticket sales prior to the Games will be recorded in the BOP and IIP as pre-payment liabilities, to be extinguished by the delivery of the service at the Games in September and October 2000.
Payments to the IOC
15 The International Olympic Committee (IOC) is entitled to a royalty of 5% of the value of the consideration of all contracts pertaining to the Sydney Olympic Marketing Program, payable one month after the quarter in which SOCOG receives the cash, or in the case of value in kind consideration, payable by 1 June 2000. These royalties are payable regardless of whether SOCOG receives the consideration from residents or non-residents. In addition, the IOC will be paid $11 million in October 2000. These payments are classified in the BOP as 'other' royalty services debits, and are recorded when payable under the terms of the Host City Contract and the Marketing Programme Agreement. See note 17 to the Financial Statements in SOCOG's 1998 Annual Report for more details of the IOC payments.
Other international transactions
16 There are a number of other international transactions associated with the Games.
|F2:1 EXTRACT FROM SOCOG'S GAMES BUDGET|
|From Inception to||Revised games|
|30 June 1998||budget|
|Television rights||212,657||1 032 000|
|Sponsorship||183 394||873 700|
|Consumer products||7 813||65 200|
|Ticketing||73 094||600 900|
|Other revenue||nil||25 000|
|Total income||476 958||2 597 000|
- SOCOG has committed to pay the various National Olympic Committees, prior to the Games, a cash amount equivalent to the cost of return airfares to Sydney for all competitors, team officials and other team personnel up to a maximum 15,000 travellers. Any such payments to non-residents, which will be in the tens of millions of dollars, are recorded in the BOP as current transfers debits;
- goods have been imported to support the conduct of the Games, such as fleet transport, timing equipment and other facilities. These are recorded in the
BOP indistinguishably with all other merchandise goods imports;
- sporting equipment brought in by visiting teams will be classified as temporary imports, and excluded from the BOP. It will be assumed to be either subsequently taken out again (recorded as a re-export after temporary importation), or if left in Australia, that it has no commercial value (swapped with other athletes or given away);
For further information
17 For enquiries about the BOP and IIP treatment of Games-related transactions contact Bob McColl by phone (02 6252 6688), fax (02 6252 7219) or email to email@example.com.
- all other types of international cross-border goods and services acquired or supplied by SOCOG and other entities in regard to the Sydney Games will be incorporated indistinguishably in the relevant goods or services commodity groups as appropriate.
This page last updated 8 December 2006