Businesses to pay for 2012 Olympics

Are the London Olympic and Paralympic Games going to cost your business? Some in central London stand to benefit but the prospects are that most drinks producers, importers and retailers will suffer during July and August.

When London bid for the Games back in 2004, Lord Coe and his team stressed the tourism benefits that winning would bring to Britain, and to London in particular.

But now it is reckoned that the number of visitors to Britain this year will fall by up to 4% compared with 2011 despite the facts that it is also Diamond Jubilee year and that the government has recently authorised an extra £25 million of spending to promote the country abroad.

Visit Britain, the national tourism agency, expects 30.7m overseas tourists this year, spending some £17.6bn. That is the same as in 2011, but that forecast is subject to a degree of error that ranges from a rise of 2% to a fall of 4%.

Significantly, just before Christmas Visit Britain said that achieving flat growth would be a “major achievement”.

The worries stem not just from the effects of the Western economic woes, but also from a “displacement effect” created by hosting the Olympics.

Previous host nations have experienced a drop in tourist numbers of between 5% and 10% in the Olympic year as travel and accommodation prices rise.

The phenomenon normally takes a couple of years to erode following the Games, largely because “word of mouth” recommendation from visitors (who didn’t come to Britain) drops off.

Experts predict that the displacement effect on Britain, not just London, will be no different. Indeed, forecasting house Oxford Economics has reduced its prediction that 322,000 people will be directly attracted to Britain by the Games; now it says the figure will be 294,000.

So while London hotels and restaurants will be benefiting from charging premium prices in July and August, the national picture is likely to be one where a drop in visitor numbers outside the capital outweighs the benefits from hosting the Games, with obvious knock-on effects to hotels, restaurants and bars and their suppliers.

Many of those suppliers will also have to bear increased costs in London in July and August. Transport for London is working on a plan to reduce traffic during the Olympics and Paralympics.

There are almost 3m freight road journeys every day in London but a 109-mile Olympic Route network of fast-track lanes is being imposed to speed dignitaries and competitors between venues. This will mean heavy disruption to goods traffic inside much of the M25.

But TFL wants to impose night time deliveries in much of inner London, which, of course, implies a willingness by customers to accept them.

That will require changed working patterns for delivery staff and warehousemen, generating overtime and bonus payments that cannot be recouped from the retail customer.

Nor can pubs and clubs expect the increased trade associated with major international sporting events.

In the first place, they are banned from promoting “Olympic” events unless they pay heavy licence fees.

But even if they pay up, will customers be attracted? World Cup competitions generate concentrated TV viewing “windows” when big matches are being played.

But there will be almost 24/7 TV coverage of the Olympics, the focal points being the opening ceremony and (unpredictable) British successes.

So it is more likely that viewing will take place at home and concentrate on “highlights”, bringing any benefits to off-licences and supermarkets rather than on-trade outlets.