This paper explores the nature of social capital arising from engagement in local festivals and the implications of this for the social sustainability of an emerging destination. Two case studies are developed from a longitudinal research project which investigates local festivals staged in the Hackney Wick and Fish Island area adjacent to Queen Elizabeth Olympic Park in East London, UK between 2008 and 2014. This area has been directly affected by extensive development and regeneration efforts associated with the staging of the London 2012 Olympic Games. The two festivals considered here respond to the challenges and opportunities arising for local people as the area changes. One festival aims to foster a sense of community by creating shared experiences and improving communication across diverse groups. The other draws together the cultural community, links them to the opportunities arising as the area emerges as a destination, and attracts visitors. These festivals increase social capital in the area, but its distribution is very uneven. The accrual of social capital exacerbates existing inequalities within the host community, favouring the “haves” at the expense of the “have nots”. There are tensions between the development of social capital and social sustainability in this emerging destination.