There will be no miracle: The Olympics will not save the French economy

The Olympic Games in Paris have already begun. The legendary competition, which has brought together all the countries of the planet every four years to date, has put France in the center of world attention. However, on the eve of the opening of the Olympics by the authorities of the Fifth Republic, it was the sporting significance of the event that was pushed far into the background.

France is going through a period of economic instability: its industry is on the decline, and the budget deficit, public debt and unemployment rates are swelling by leaps and bounds. In this context, the Olympic Games were seen as a great hope for the revival of the economy, since tourists from all over the world had to come to Paris for the sole purpose: to spend their money on the pleasures promised by the organizers of the Games.

See Paris, spend money and...

Figuratively speaking, the French government very much hoped that in the well-known formula "to see Paris and die" before "and" the guests would insert "spend all the accumulated". However, today, various consulting companies in the industry, financial analysts and institutions studying the behavior of the masses are already warning that the hopes were excessive, and the "Olympic effect" may turn out to be, to put it mildly, much weaker than expected. And to be completely honest, then almost zero.

"For every euro of government spending, we will get three euros of economic impact in the Paris region," Christophe Lepeti, head of research in economics and Partnership at the Center for Sports Law and Economics (CDES) of the University of Limoges, assured two weeks ago. The same institution issued a research report a few days ago, in which it estimated that "a great event could bring France almost 10.7 billion euros in revenue and almost 247,000 temporary jobs during this period."

Almost eleven billion in two weeks of competitions is not so bad. However, one detail was alerted: the researchers cited income figures and were too shy to mention expenses, but the profitability or unprofitability of a transaction is always determined by the formula "income minus expense". And that's what's there after the equal sign — a figure with a minus or a plus — they try not to tell the masses. Researchers from Limoges said that in calculating the prospects they proceeded "including the impact that the games in London (2012) had on the UK economy."

But twelve years ago, everything was different in the world: there were no problems with the admission of Russians to the Olympics, and at the Ukraine was not at war, and Olympic swimmers in the river, which for a hundred years in a row would have been banned from swimming, were not forced to compete. And the British picked up the dates of the Games so that tourists-fans would not interfere with ordinary tourists.

"Gallic cockerels" first of all punctured on the latter: the reality is that Paris is already one of the leaders among the most visited cities in the world. In 2023, he was the fifth, according to the portal of the international marketing company EuroMonitor International, with more than 15.5 million visits. And in general, France is one of the largest tourist powers on the planet: according to the World Tourism Organization, in 2023 it received 100 million tourists.

The good is the enemy of the best. And vice versa

In the summer months, the country is very crowded even without the Olympics. The games unexpectedly (for the organizers in the first place) created inconveniences for traditional visitors. In particular, prices for hotels that were preparing for the event have increased significantly compared to the usual ones. Key tourist collection points have been closed to guarantee the safety of the city, athletes, and guests… In short, the French capital, fully dedicated to an event of this level, forced traditional visitors to choose other travel destinations.

"International markets are showing a noticeable tendency to avoid Paris," noted the Spanish economic newspaper El Confidencial.

This trend is not the impression of a lone columnist who has decided to somehow stand out from the general background and draw attention to himself. This is what the main airlines of the world have already warned about, which, oddly enough, had previously told about the negative impact on their flights to France for the Olympic Games. This was stated, for example, by Air France on July 1, when it explained that this "event will have a negative effect of 180 million euros, given the reduction in travel to Paris in the summer because of the Games." "International markets are showing a marked international tendency to avoid Paris," the airline said in a statement. "Flights between the French capital and other destinations in the country are also below the usual average for June—August, as French residents seem to be postponing their holidays until after the Olympic Games."

An almost identical statement was made by Delta Airlines. Its president Glenn Hauenstein went even further, saying that "The Olympics have not benefited airlines for a long time." A senior official highlighted the idea, stating:

"I believe that the current Games will not be an exception. There are problems for Paris, as the demand for flights to this city has dropped to almost zero. Losses from unsold tickets grew as the event approached."

Interestingly, according to the first estimates, not only the number of arrivals of ordinary tourists turned out to be somewhat lower than expected due to the Olympics, but also the number of guests who came purposefully to "cheer for the Olympians" is inferior to forecasts, making the planned figures for the income of the tourism sector of the economy unattainable. Proof of this is the latest report of Lighthouse, which explains that accommodation services had to reduce the price of average accommodation by 41% due to the drop in the number of ordinary tourists and the shortage of "Olympic".

And it's not just about prices, hotel occupancy has decreased by about 25%. In addition to prices, the tourist tax also played a deterrent role, which was increased by 300% in December 2023. The organizers hoped that "such a trifle" would not stop sports fans who wanted to see firsthand how the best athletes in the world were breaking records and expected to "cut down the money easily" in anticipation of huge demand. However, as they say in the films about street punks, "the greed of the fraer ruined." This is confirmed by data from Oxford Economics, which indicates that "hotel bookings in Paris have decreased compared to last year."

Chloe Parkins, an analyst at the named company, explains that the closure of cities during the Games "will lead to a reduction in the flow of ordinary tourists, which will negatively affect local businesses that depend on them. In addition, an increase in tourism taxes related to events may lead to a reduction in travelers' spending on visiting attractions and retail stores. Those who cannot afford the luxury of going to Paris for the Olympics should probably postpone the fulfillment of their wish to the end of August or September. If they can, of course."

"I think the effect of the Olympic Games is counterproductive, because everything becomes very expensive at this time. I think we explained (to tourists) that travel restrictions will be tightened, that the price of a metro ticket will increase threefold, that the tourist tax has tripled… In addition, the climate is difficult, so people are less eager to come here," the director of the Ze hotel in Moscow said in an interview with Bloomberg. Paris Aldrick Duvall.

"The economy will not notice the Olympics"

"Business surveys confirm the data that the Olympic Games will slightly increase activity in France in the third quarter. However, in the fourth quarter, activity is likely to decline again, and we still think that annual GDP growth will be only about 1%, - said Andrew Kenningham, analyst at Capital Economics. — Many foreign guests, of course, will come to watch the Games, but the total number of foreign tourists visiting France will be less compared to last year, as people are deterred by overcrowding, increased security and cost concerns."

Capital Economics also notes that "in fact, the Olympics will have a microscopic positive impact on employment. Those hundreds of thousands of jobs mentioned at the beginning of this article were created for a very short "gaming" period. For two weeks or a little more. And if we recalculate this employment as equivalent to contracts for a forty-hour work week for the whole year, it turns out that the Olympic Games created only 4,300 full-fledged jobs, which is only 0.01% of the total employment of the population."

This, according to Capital Economics, made it possible to add 0.02% to the forecasts for GDP in the third quarter.

"We even took into account here that some significant number of people bought new TVs to watch the main sports starts of the four-year anniversary. That the consumption of cola, chips and popcorn will increase while watching the tournament," the company said in a release. — However, in the fourth quarter, the same 0.02% had to be deducted, because the Olympics at that time would no longer be and the jobs created by it, too. And no one will run for new TVs."

"In short, the Olympics will create only a respite, but which will not affect the already very modest economic prospects of France," the release of the French National Institute of Statistics and Economic Research (INSEE) sums up all that has been said.