China Olympics: Cost Versus Reward

With China’s Olympic Games coming next month I thought it would be fitting to look at the cost they have paid, and compare that to the potential rewards which come from hosting this prestigious event. There has been a debate for sometime about whether or not hosting the Olympic Games is good or bad for the city’s economy, and this year’s games are no different. Beijing will spend an estimated $42 billion on the Olympic Games, according to the Wall Street Journal, a number that far surpasses any other city’s previous commitment, but will they receive value from this investment?

Sure, $42 billion is a ridiculous number to think about, and on the surface one could say that there was no way the Olympics could generate that much money for a city. However, we must also consider what that $42 billion went towards. A good majority of these funds went towards infrastructure improvements, as well as environmental cleanup. In the rapidly growing economy of China, infrastructure is in high demand, and many of these improvements were badly needed. The bigger question is whether they got a little too extravagant with the improvements, and whether those additional funds could have been put to better use elsewhere. Not all of the improvements have been of the extravagant type, however; in some cases, residential areas now feature streets lined with port-a-potties.

In addition, the almost $10.5 billion spent on environmental cleanup--while not providing immediate economic benefits, per se--is hard to argue with. I’ve heard horror stories about the pollution in Beijing, as I’m sure most people have. In fact, the pollution is so bad that many Olympic athletes will be staying in South Korea or Japan and flying in solely for their events. So the fact that the government is finally trying to clean it up is probably a good thing. Now, if they can just keep the pollution under control once the Games are over, that would be the next step.

On the other hand, some of that $42 billion has seemingly been spent on extravagances and items which will be of little lasting value. For example, there really aren’t any plans for the bird's nest stadium after the Games, and it doesn’t offer protection from Beijing’s harsh winters and hot, rainy summers, according to the Wall Street Journal. If we want to see how the Olympic Games can adversely affect a city’s economy, we need to look no further than Athens. The $15 billion Athens spent readying itself for the last Olympic Games--ranging from building a light rail system to kenneling all the city's stray dogs for the duration of the event--sent the city into debt, and they have yet to recover. In addition, according to Tourism-Review, the Olympic Games don’t always result in increased tourism. They point out that during the Barcelona and Sydney games, for example, while they did see Olympic Games-specific tourism, the regular tourists stayed home. They ended up in the same place, tourism-wise, as they would have been without the games.

Increased tourism to China is unlikely, as the country is making it more difficult to obtain visas to visit the country. Many people who have already purchased tickets to the Olympics will not be able to attend because the country won't allow them in. Further, the city will be shutting down shops and restaurants that are near Olympic venues because they don't want crowds to form. The city is so paranoid about crowds that, on the 11th day of each month, the city's residents practice lining up (this is done on the 11th because the number 11 looks like two people standing in line).

When all is said and done, I think on the books, at least, this spending spree in Beijing will appear to be a loser. I also think that China knows this, but is willing to put up with a loss on paper in order to cement their image across the globe. They want to be seen as a modern world power, and what better stage on which to make this statement than the Olympics? They are being smart with a lot of the budget, putting it towards things such as infrastructure, however at the same time, they are building this infrastructure in a manner that is probably not the best long-term. One example of this is that they build brick buildings quickly and cheaply, then encase them in glass so that they look modern. They are being a tad more extravagant then they really need to be, and the infrastructure they are building is likely being maximized for Olympic venues. China is a growing world power; they know it, and they want the world to know it. The Olympic Games will likely prove this point, and for that, China is willing to waste a few billion dollars.

Gas Prices Causing 23 Percent Of Americans To Change Memorial Day Plans

23 percent of Americans cut back, or abandoned altogether, their weekend travel plans because of gas prices, a survey by consulting firm Deloitte & Touche found, according to Bloomberg. High gas prices coupled with worries about the economy will likely have a big impact on this year’s travel season and beyond. Investors should consider the implications of such changes.

People are always going to need vacations and time off, so one way or another they are going to get it. The question is, where are they going to go? Obviously with gas prices so high traveling long distances, either by car or plane, becomes more expensive. Thus we can conclude that people are going to be taking their vacations closer to home than they normally would. Instead of driving 400 miles to a lake resort in a neighboring state, maybe families will settle for the one 50 miles away, whether or not it is as nice. Resorts, camp grounds and other recreational and vacation-type places close to urban centers will in all likelihood see increased business. These naturally will become the places people from the city turn to instead of further out locations. Owners of vacation and recreational properties that are far out but get most of their business from in-city travelers could be in for some rough times.

While the above scenarios focus mainly on weekend-type vacation, there will also be impact on international travel. Vacationing in Europe was already becoming prohibitively expensive thanks to the falling dollar, but now with airlines raising ticket prices to cover the cost of fuel, the dream of a European vacation is now out of reach for most people. Instead of traveling to Europe those vacationers looking for a more exotic local might turn to Mexico or a Central American country. The flights to Mexico and Central America are still affordable, and the cost of goods and services in Latin America are cheap.

High gas prices are changing more than just the thickness of our wallets, they are changing our lifestyles. It used to be that gas was an afterthought; now it is on the forefront of everyone’s mind. Instead of the big SUV, more people are opting for the fuel efficient sedan; instead of buying a home in a far out suburb, people are opting for the close in condo or smaller home; instead of traveling long distances for our vacations, we are now staying closer to home. High gas prices are changing the way we live, and since they are unlikely to go away any time soon investors should take note of these trends and act accordingly.

Thailand Medical Tourism

Thailand’s medical tourism industry is one of the strongest in the world, so why didn’t it make the cut for NuWire’s recently published list of the Top 5 Medical Tourism Destinations? We received an e-mail from a reader asking why Thailand was not included on our Top 5, which was a valid question. Here is some background on Thailand’s medical tourism industry:.

The main medical tourism hospital in Thailand is Bumrungrad International Hospital in Bangkok. The hospital is state-of-the-art, equipped with top-of-the-line technology and a well-trained staff. According to Bumrungrad’s website, more than 200 of their doctors are U.S. board certified. The only difference between the care patients receive there and the care they receive in the U.S. is that it is much cheaper in Thailand. Bumrungrad serves more than 400,000 international patients annually. It is one of the biggest medical tourism hospitals in the world.

As a medical tourism destination, Thailand indisputably ranks as one of the top countries in the world, but it did not make our list because we were also considering each country’s investment potential. Thailand has been a great place for investors for years, but recent political turmoil there has been cause for worry. The military ousted the former prime minister and the new prime minister is friendly with him, so another military coup seems possible. If Thailand can prove its long-term stability, it could once again be a great place for investment as well as medical tourism.

Investment Opportunities From “The Tourism Time Bomb”

International tourism is ready to explode with investment opportunities, according to an article published in the Harvard Business Review titled “The Tourism Time Bomb.” The writers--Paul F. Nunes, a research fellow at the Accenture Institute, and Mark Spelman, global managing director of Accenture’s strategy practice--state that international tourism is growing exponentially, and that this growth will soon lead to dramatic changes in major tourism destinations as well other locations which are likely to benefit from the resulting overflow

The following are important excerpts from the article:

“According to the United Nations World Tourism Organization, international tourist visits are expected to double soon, from roughly 800 million in 2008 to 1.6 billion by 2020.”

“First, most tourism-related prices, such as hotel room rates in popular cities, will continue to escalate as demand outstrips supply.”

“Second, rationing, and the resulting waiting lists, will become commonplace. Some groups, for example, are already calling for limits on traffic to ecologically sensitive destinations, such as the Incan ruins at Peru's Machu Picchu.”

“Finally, jaw-dropping prices and decades-long waiting lists will prompt the creation and the expansion of destinations in both developed and developing economies. The Chinese, for example, are developing Hawaii-like Hainan island and Macao, a gaming paradise on China's southern coast.”

“Companies and governments are also creating facsimiles of popular destinations.” (for an example read The Brink Tank’s post: How Do You Say Rocco In Arabic?)

“Just as sites and structures can be successfully replicated in new locations, so can institutions. If the swelling ranks of global travelers can't all come to you, you can go to them.”

“As the scarcity of places grows, many companies will find opportunities to profit by meeting new levels of demand for authentic, and inauthentic, experiences.”

“A billion or two additional international travelers represent both a massive potential headache and an opportunity for business.”

Real estate in both urban and suburban areas is one of many investments that may benefit from this explosion. As demand increases, tourism and hospitality businesses should also perform well, and there are many new businesses that could be created to cater to international tourists. An entrepreneur’s imagination is the only limit.