The economic impact of hosting the Olympics

The economic impact of hosting the Olympics tends to be less positive than anticipated. Because most cities ended up going into huge debt after hosting the games, cities without the necessary infrastructure may be better off if they don’t submit bids.

Key takeaways

  • Many countries and cities within them bid tens of millions of dollars for the opportunity to host the Olympics.
  • Many believe that the level of tourism and foreign investment that results from hosting the games can be an economic boon.
  • Others see the games as too expensive, leaving cities and nations with huge debts and financial problems.

Costs incurred in hosting the Olympic Games

Submitting an offer to the International Olympic Committee (IOC) to host the Olympic Games costs millions of dollars. Cities typically spend between $ 50 million and $ 100 million on consultant fees, event planners, and travel related to accommodation tasks. For example, Tokyo lost approximately $ 150 million on its bid for the 2016 Olympics and spent approximately $ 75 million on its successful 2020 bid.

Hosting the games is even more expensive than the bidding process. For example, London paid $ 14.6 billion to host the Olympic and Paralympic Games in 2012. Of that amount, $ 4.4 billion came from taxpayers. Beijing spent $ 42 billion to host in 2008. Athens spent $ 15 billion to host the 2004 Olympics. Taxpayers in Athens will continue to receive payments of approximately $ 56,635 annually until the debt is paid in full. Sydney paid $ 4.6 billion to host the Olympics in 2000. Of that total, taxpayers covered $ 11.4 million. Rio de Janeiro is expected to pay out more than $ 20 billion by the end of the 2016 Olympics.

Once a city wins a bid to host the Olympics, cities commonly add roads, build or upgrade airports, and build rail lines to accommodate the large influx of people. Housing for athletes must also be created or updated in the Olympic Village, as well as at least 40,000 available hotel rooms and specific facilities for events. Overall, infrastructure costs can be $ 5 billion to $ 50 billion.

Benefits of hosting the Olympic Games

Cities hosting the Olympics gain temporary jobs due to infrastructure improvements that continue to benefit cities in the future. For example, Rio built 15,000 new hotel rooms to accommodate tourists. Sochi invested approximately $ 42.5 billion in building non-sports infrastructure for the 2014 Olympics.

Beijing spent more than $ 22.5 billion on building roads, airports, subways, and rail lines, as well as nearly $ 11.25 billion on environmental cleanup. Additionally, thousands of sponsors, media, athletes and spectators often visit a host city for six months before and six months after the Olympics, generating additional revenue.

Disadvantages of hosting the Olympic Games

Boosting job creation for cities hosting the Olympics is not always as beneficial as initially perceived. For example, Salt Lake City added just 7,000 jobs, about 10% of the number officials had mentioned, when the city hosted the 2002 Olympics. Also, most of the jobs were for workers who were already employed, which did not help the number of unemployed workers. In addition, many of the profits made by construction companies, hotels and restaurants go to international companies rather than the economy of the host city.

Also, income from games often covers only a portion of expenses. For example, London raised $ 5.2 billion and spent $ 18 billion on the 2012 Summer Olympics. Vancouver raised $ 2.8 billion, after spending $ 7.6 billion on the 2010 Winter Games. Beijing generated $ 3.6 billion and spent more than $ 40 billion for the 2008 Summer Olympics. As of 2016, Los Angeles is the only host city to make a profit from the games, mostly because the necessary infrastructure already existed.

Furthermore, it is difficult to determine exactly what benefits are to be gained from hosting the Olympics. For example, Vancouver had planned many infrastructure projects before winning the bid to host the 2010 games.

Debt resulting from the creation of Olympic arenas

Many of the arenas built for the Olympic Games remain expensive due to their size or specific nature. For example, the Sydney stadium costs $ 30 million a year to maintain. Similarly, Beijing’s Bird’s Nest arena costs $ 10 million in annual maintenance.

It was in 2006 before Montreal finished paying off its debt from the 1976 games, and Russian taxpayers will pay nearly a billion dollars annually over many years to pay off debt from the 2014 Winter Games in Sochi. Also, note that most of the facilities created for the 2004 Athens Olympics contributed to Greece’s debt crisis and remain empty.

Olympic Games cost examples

The 1976 Olympics in Montreal

At the time of the event, Montreal was experiencing a dramatic increase in terms of its global profile. In conjunction with the World’s Fair of 67, held to celebrate the nation’s centennial, the Games helped transform the city into a world-renowned venue. The governing body soon ran into family budget problems, as its estimated costs of $ 360 million were slashed to the final bill of $ 1.6 billion.

The Montreal Games ended up leaving a 30-year legacy of debt and financial disaster for the city, the decaying and bespoke venues remaining a desolate monstrosity for decades.

The 2004 Olympics in Athens

Some economists trace the beginning of Greece’s continuing economic troubles to the Olympic Games in Athens in 2004. The event stands as the embodiment of irresponsible overspending. For starters, the total cost, an estimated $ 15 billion, far exceeded the original budgeted amount, although to be fair, the excess was partly due to additional security costs incurred after 9/11 (which were unforeseen when Greece submitted an offer). for the 1997 Games).

While this is an understandable expense, the construction of unnecessary and ill-conceived permanent sports facilities was extremely difficult to understand. Several of these places remain inactive to this day. This lack of foresight and planning left the nation with a deficit of 50,000 euros per Greek household, which has been spread among taxpayers ever since.

The 2016 Olympic Games in Rio de Janeiro

Health concerns about the Zika virus that has been spreading in Brazil caused many athletes to withdraw from the 2016 games and many spectators did not enter the country. Although the Brazilian government added 2,000 health professionals to help during the Olympics, the country’s debt crisis put additional pressure on the health system. In addition, the scientists determined that the water used for boating and swimming events was contaminated with raw sewage and “superbugs,” adding to health problems. Brazil had already lost approximately $ 7 billion in tourism due to the Zika virus before the Olympics were taken into consideration.

The 2016 Olympics cost the Brazilian government approximately $ 13.1 billion to host ($ 3.5 billion over budget), plus an additional $ 8.2 billion in infrastructure upgrades and renovations paid for with a combination of public and private money. The expected financial benefit of hosting the games did not come in Rio. According to AP, the state of Rio de Janeiro is behind in paying teachers, hospital workers and pensions, and crime in the city has risen to near record levels.

The 2020 Olympics (2021) in Tokyo

Japan won the 2020 games with a bid of $ 12 billion, pushing rival Italy to win the host spot. But then the COVID-19 pandemic struck in the spring of 2020, and the decision was made to postpone the Olympics until the summer of 2021. The postponement added an additional $ 2.8 billion to the total outlay, which is estimated at more than $ 26. billion.

With a COVID-19 surge in the summer in many parts of the world, including Japan, the decision was made to ban viewers. Without fans, international tourism will not provide the expense necessary to offset the costs incurred by the Japanese government. While the financial cost will be substantial, the health cost could be even higher. As of July 20, 2021, days before the opening ceremony, 71 athletes had tested positive for COVID-19.. That same week, Japan reported an increase in cases of more than 1,700 cases, a 26% increase from the previous week..

The bottom line

Hosting the Olympics tends to result in serious financial shortcomings for cities. Unless a city already has the infrastructure in place to handle excess crowds, not hosting the Olympics may be the best option.

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Mark Holland

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