"It’s the best possible news we could have,” Hodgson said in his pre-Arsenal press conference. “I had been concerned – it’s always concerning when a club of Chelsea’s stature take interest in a player, and people will suggest that a move to them might be the best bet.
“I had always hoped that wouldn’t be the case and that Michael would realise that at such a young age his future here is very bright, and we can help him move very quickly on to another level. The decision has been his.
“I am delighted for the club, and I must congratulate Steve Parish and Dougie Freedman on the fantastic job they have done in persuading him that, with this pressure from outside, 'this is your place and this is where we think you will progress in the right way and develop in the right way'.”
Hodgson says Olise’s continued commitment to Palace is a particular boost to his plans for the season, after enjoying working with the squad in the final 10 games of last season.
“As a coach it is perfect because I really enjoyed the 10 games last year,” the manager said. “I thought the squad was looking really very interesting, so when the Chairman asked me to come back and do another year I had that in mind.
“To lose a player like Wilfried Zaha and then Olise, that would have changed, to some extent, my perception of it all.
“For me, it is a red letter day.”
Hodgson has stayed in constant contact with Olise during his decision-making process, but says he was careful never to try to apply too much pressure.
“I had a long chat with him when the subject was first broached, but that’s a long time ago – pretty much in the pre-season after we got back,” Hodgson explained. “I had a long chat to him, and I made it clear of course how much I enjoyed working with him, the respect I have for him and how much potential he has as a player.
“I suggested, of course, that being at Crystal Palace and playing here would be the best option, but I also made it clear to him I wouldn’t put him under unnecessary pressure.
“He was under pressure from all sides. I can only tell you: from my side, ‘I'm always here if you want to speak to me to discuss it further’.
“We spoke every day, but I shied away from asking: 'What are you going to do?' and giving further advice. He knew what I was going to say, so we just hoped we would get the answer we wanted. That's what it's been like."
Hodgson’s delight at Olise’s new deal comes as he reiterates the difficulty for clubs to retain talent against the backdrop of heavy spending at the top of the table.
“Its very difficult. We've got quite a big group of players .There’s a very wealthy group at top of our league spending enormous sums of money – hundreds of millions even pushing up towards the billions,” he explained. “That is not something Crystal Palace are capable of doing.
“Of course, when you do get a team like the one that did so well at end of last year and you see that potential it is frustrating to realise that sometimes these clubs are going to come in with their wealth, even with the prestige and glamour, to try to tempt your player away.
“But it is a fact of life, and we can only deal with it in best way. We’re very fortunate here in our Chairman and Sporting Director that we have two Palace people, who understand what it is to be Crystal Palace, and who are consistently trying to improve the team.
“They have been capable of making certain when we have lost players that that money is reinvested or we have found new ones. This particular group of players came around the same time. They have done wonderful work for the club and really shown how good the recruitment has been here.”
Olise is still unable to play after sustaining an injury on international duty, but Hodgson says he is working hard to regain fitness.
“It was a nasty injury. Wilfried [Zaha] had same injury and has returned to playing again. We are fortunate in that he will be lower end of scale.
“He has kept himself very fit and worked very hard on his rehabilitation, and he wants to get back on field as quickly as possible. Whatever timescale it was, I'm certain he will shave a bit off.
“It won’t be for a while yet unfortunately because of the severity of the injury.”