The Economic Impacts of Hosting the Olympics

In 1896, the first modern Olympic games had approximately 280 athletes competing from 12 different countries. This year, the Summer Olympic Games will host over 10,000 athletes from more than 200 countries who compete in about 300 events. The Winter Games are smaller, but still host almost 3,000 athletes from 92 countries, competing in about 100 events.

As the Games have increased in scope and size, so too has the cost of hosting. According to The Associated Press, Paris has spent at least $9.7 billion on Olympic expenses, of which $3.25 billion is estimated to come from French taxpayers. Cities take on these astronomical costs in the hopes that new developments (railways, upgraded roads, airports, etc.) benefit the city long-term. However, a growing number of economists argue that the benefits of hosting the Games are at best exaggerated and at worst nonexistent - leaving many host countries with large debts and maintenance liabilities.

For much of the twentieth century, the staging of the Olympic Games was a manageable burden for the host cities. The events were held in developed countries, either in Europe or the United States, and, in the era before television broadcasting, hosts did not expect to make a profit. Instead, the games were publicly funded, with advanced countries better positioned to bear the costs due to their larger economies and more advanced infrastructure. In 1972, Denver became the first and only chosen host city to reject its Olympics bid, after voters passed a referendum refusing additional public spending for the games.

The 1976 Summer Olympics in Montreal has come to symbolize the fiscal risks of hosting. The projected cost of $124 million was millions below the actual cost, largely due to construction delays and cost overruns for a new stadium, saddling the city's taxpayers with around $1.5 billion in debt. As a result, in 1979 Los Angeles was the only city to bid for the 1984 Summer Olympics, allowing it to negotiate exceptionally favorable terms with the International Olympic Committee (IOC). More importantly, Los Angeles was able to rely almost entirely on existing stadiums and other infrastructure rather than promise lavish new facilities to entice the IOC selection committee. That, combined with a sharp jump in television broadcast revenue, saw Los Angeles finish the Games with a $215 million operating surplus.

Los Angeles's success led to more and more cities bidding to host future Olympics. This allowed the IOC to choose the cities with the most ambitious - and expensive - plans. Bidding by developing countries more than tripled after 1988 with countries such as China, Russia, and Brazil eager to use the Games to demonstrate their progress on the world stage. Once a city wins a bid for hosting the Olympics, they commonly add roads, build or enhance airports, and construct rail lines to accommodate the large influx of people. Housing for the athletes in the Olympic village, as well as at least 40,000 available hotel rooms and specific facilities for the events, must be created or updated as well.

Because many sports require specialized infrastructure that will both need to be constructed specifically for the Olympics, they have limited use after the Games. In many cases, the enduring legacy of hosting the Olympics has been nothing more than a slew of abandoned and overgrown venues - many known as "white elephants." These are "expensive facilities that, because of their size or specialized nature, have limited post-Olympics use," the Council on Foreign Relations (CFR) said. But just because an arena isn't being used doesn't mean it isn't costing its city money. For example, Beijing's famous Bird's Nest stadium "cost $460 million to build, requires $10 million a year to maintain, and has sat mostly unused since the 2008 games," while "almost all of the facilities built for the 2004 Athens Olympics, whose costs contributed to the Greek debt crisis, are now derelict."

Oxford economist Bent Flyvbjerg found that "every Olympics since 1960 has run over budget, at an average of 172 percent in real terms, the highest overrun on record for any type of megaproject." Revenues cover only a fraction of expenditures. For example, Beijing's 2008 Summer Olympics generated $3.6 billion in revenue, compared with over $40 billion in costs, and London's Summer Games in 2012 generated $5.2 billion compared with $18 billion in costs. What's more, much of the revenue does not go to the host city or country; the IOC keeps more than half of all television revenue, which is typically the single largest chunk of money generated by the games.

Impact studies commissioned by host governments before the games often argue that hosting the event will provide a major economic lift by creating jobs, drawing tourists, and boosting overall economic output. However, research conducted after the games shows that these reported benefits are questionable. As a study by the European Bank for Reconstruction and Development explains, the jobs created by Olympics construction are often temporary, and unless the host region is suffering from high unemployment, the jobs mostly go to workers who are already employed, which blunts the impact on the broader economy.

In 2017, the International Olympic Committee (IOC) did the unthinkable: it awarded the 2028 Summer Games to Los Angeles without even making a call for other bidders - effectively conceding the point that finding willing and capable Olympics hosts has become exceedingly difficult. The competition among cities for the honor of hosting the world's premier sporting event used to be as vigorous as the competition among the athletes themselves. The modern Olympics has become an exceptionally expensive affair; but even the explosion of international sponsorship deals and global media rights has not been able to keep up with the skyrocketing costs of the event.