Milan is getting a sinking feeling with Expo population explosion

Mext year, thanks to the Milan Expo, tourists will be pouring in, with at least one million people to be added to these numbers. Is this a dream or a nightmare?

High tide is a big problem in Venice, and many experts have been warning that the city is sinking. With about 170,000 people, this old Italian town that once ruled the waves in the Mediterranean Sea is already overstretched: to be sustainable the daily figure should not go beyond the threshold of 160,000 people.

But next year, thanks to Expo, tourists will be pouring in, with at least one million people to be added to these numbers. Is this a dream or a nightmare?

That’s the same question about the economic impact of Milan Expo 2015. Official figures show that it will be a boon, but not everyone agrees. From 2012 to 2020, the Expo is expected to bring €23.6 billion (Dh106bn) in additional production, with 191,000 people directly or indirectly involved.

“Tourism is certainly one of the market sectors that will witness the greatest benefits, estimated at €4.5 billion of added value” boasts the company overseeing Expo 2015. And a fifth of this €23.6bn will flow into companies’ balance sheets. The event is also expected to leave a €6.7bn heritage in properties and infrastructure. These results emerged from a study of the direct economic impact of Expo Milano 2015 carried out by the SDA Bocconi School of Management. Yet, here comes the nightmare in the form of an economist from the university, Roberto Perotti, who has questioned these figures on Lavoce.it, a think tank.

“The problem of Expo 2015”, he argues, “it’s not corruption or delays but the fact that it should not be there. When, because of a form of collective drunkenness one gives up on a serious costs analysis, then it’s the community who is losing out”. The problem, he explains, is the method used to work out these numbers. “This methodology ignores that all used resources have a cost. Thereby, it always, anyway, provides positive figures.”

And he mentions the example of the Turin Olympic Games in 2006 where forecasts on tourists’ flows proved to be too optimistic.

Only with hindsight will we be able to see who’s right. But the lesson is clear: without a proper cost analysis, the danger is that the real return will be in political, rather business, terms.

Another thing that is clear is that the accommodation business is changing. And if hotels push prices too high, as happens every time in these occasions, people could turn to the sharing economy. Sites such as Airbnb are expected to play a major role and many in Milan and in the surrounding areas are reorganising their houses to host Expo tourists. In just one year the amount of visitors who have decided to stay in privates houses has increased by three times.

“Expo is a big challenge,” said Matteo Stifanelli, Airbnb Italy’s country manager. “We could offer a sustainable answer to the hospitality needs, without building new hotels that, after Expo, could end up empty.”

Hospitality is no longer a monopoly in the hands of hoteliers, who complain that the sharing economy does not pay taxes and are pushing for stricter rules for sites such as Airbnb. But the same problem could soon apply to restaurants – websites such as Bookalokal work in a similar way to Airbnb, but offering meals instead of rooms.

Bookalokal does not have many hosts in Milan yet, but its intentions are clear. "We definitely have plans to expand in Italy and will be looking for more hosts in Milan and across Italy very soon," Evelyne White, the founder and chief executive at Bookalokal, told The National.

So the second lesson to learn from what is going in Milan is to take into full account the rising dimension of the sharing economy – the expected 20 million tourists should spend something in the region of €3.5bn, and €1.2bn only in restaurants, but now also private citizens will have their piece of cake. So among the business winners of this Expo 2015 for the first time on the podium there may be the average citizen who can offset in this way the inevitable problems stemming from the sudden arrival in town of 20 million people.

In the next column we’ll see in detail how it’s working out for the real estate market: where, despite the economic crisis, there could be a few positive surprises even in sinking Italy.

Jacopo Barigazzi is a former Newsweek contributor and Reuters journalist. Based in Milan, he is writing a monthly column for these pages on the build-up to Expo 2015

Follow The National's Business section on Twitter