Mega-events “crowding out effect”

One reason economist frequently cite when arguing that the economic impact of mega-events like the rugby world cup or the Olympics is lower than advertised is the “crowding out effect.” According to the UK’s Guardian newspaper,

The Really Useful Group, Andrew Lloyd Webber’s production company, is reportedly considering closing West End shows including The Phantom of the Opera and The Wizard of Oz, with tourist bookings predicted to slide in July and August.

The European Tour Operations Association (ETOA) has announced that its members are facing a 95% decrease on London bookings for the period, while the managing director of Encore Tickets, John Wales, said the company was bracing itself for “sales from tourists to be at least 40 per cent down on last year”.

While it will be true that London will have more that its fair share of Olympics tourists next summer, it has to be remembered that London is normally overrun with all sorts of other tourists in the summer including those who go to musicals. Sports fans, rugby or Olympic, don't always add to the tourist base, rather they simply displace other visitors leading to lower than expected increases in net tourism.