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Tuesday, February 28, 2006

Topsy-Turvy Euro Cycling

World's greatest cycle race comes to London (tfl.gov.uk)
Tour to start in Whitehall in '07 (bbc.co.uk)

Are the French still upset about the battle at Waterloo; or that Lord Admiral Nelson crushing their fleet awhile back? Not at all, and to prove it they are sending their beloved cycling race across the channel to start in London in 2007. That does seem a bit far fetched but it is true; as reported on the London Transport Authority web site:
The Grand Depart, the start of the Tour, will come to London and Kent over three days during the weekend 6-8 July 2007 and is expected to attract more than a million visitors to London, providing a significant economic benefit. (tfl.gov.uk).
Isn’t that amazing; two countries that have long held animosities for each other coming together in a celebration of athletic excellence. According to the BBC there is a very specific reason for London hosting the start of the tour, which was explained by the:
Mayor of London Ken Livingstone revealed the two stages would be used to commemorate the victims of the 7 July 2005 bombings. Livingstone said: "Having the Grand Depart on the seventh of July will broadcast to the world that terrorism does not shake our city. “There can be no better way of celebrating the unity of humanity than this great sporting event coming to us on that day and being seen by millions, safety and happily.” (bbc.co.uk)
That’s a great emotional reason, but getting back to more professional analysis, wasn’t there something about benefits of some economic sort? Going back to the first article, where again the mayor of London was kind enough to provide a quote which was, “it will also generate a significant economic benefit to London—anticipated to be £56m—from spectators, race officials and media staying in the capital in the build up to and during the event" (tfl.gov.uk).

Something seems odd about that figure. Either the Tour de France is an amazingly successful tourist generating machine or we have some bad economic benefit cost analysis going on here. To answer this question, more information is needed about London’s tourist revenue, and on how much of an influence does the Tour de France upon a local economy. Thankfully the London Transport Authority does provide a useful figure: the annual tourist revenue. In 2005, visitors spent £9.5 billion, or £26 million—on average—each day. It doesn’t bode well for the Mayor’s claim. Since this will be a three day event the city of London is expect to have generated about £78 million (and no I’m not going to convert that into dollars just know it’s a lot more in dollar terms). Of course the economic benefit quoted won’t include every tourist to London (if it did the Mayor’s success would look more like a fantastic loss), but it will displace a tourist that would have gone to London. That is for the Mayor’s claim to be accurate the total tourist revenue for those three days would have to be £134 million, or a 72% increase in tourist revenue as a result from the Tour de France invading England. That seems to be a feat not even Lance Armstrong could pull off. Yet their might be more to this story.

While this event is hailed as a great benefit to London are their costs being ignored? Their certainly could be. Both stages will be held in the heart of London, and will force many roads to be closed for much of the day. Wouldn’t this be a cost that the citizens of London must bear? Would they be willing to pay to not have this incontinence? This is just one possible cost that might have been ignored when the economic benefit of this event was analyzed.

Yet, before they are condemned completely there is something to be said about the reason stated about the commemoration of the lives lost. After those attacks, London would logically be perceived as a more risky city in which events would be hosted. Thus events such as the beginning of the Tour de France would be a very good way to prove that London is a city that is no riskier (maybe even safer) than any other world city. This justification though doesn’t have a very well defined benefit and thus is rather suspect.

What can be concluded from this rather bizarre news story? For one, bureaucrats in Europe are not much (if at all) better in their use of economics and/or economic analysis than their brethren across the pond. Without knowing the costs (or acknowledgement that costs were considered in the benefit amount) no definitive answer can be given as to whether or not this would enhance London’s welfare, but given the evidence available this seems to be another project that bureaucrats want and taxpayers must bear. Seems the French found a way to have the English foot the bill for their race.

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