The economic impact of hosting the Olympics tends to be less positive than anticipated. Because most cities have ended up falling massively in debt after hosting the games, cities without the necessary infrastructure may be better off not submitting bids.
- Many countries and the cities within them bid tens of millions of dollars for the chance to host the Olympic games.
- Many believe that the level of tourism and foreign investment that result from hosting the games can be an economic boon.
- Others see the games as overly expensive, leaving cities and nations with massive debts and economic woes.
Costs Incurred When Hosting the Olympics
Submitting a bid to the International Olympic Committee (IOC) to host the Olympics costs millions of dollars. Cities typically spend $50 million to $100 million in fees for consultants, event organizers, and travel related to hosting duties. 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 costly than the bidding process. For example, London paid $14.6 billion for hosting the Olympics and Paralympics in 2012. Of that amount, $4.4 billion came from taxpayers. Beijing spent $42 billion on hosting in 2008. Athens spent $15 billion hosting the 2004 Olympics. Taxpayers in Athens will continue to be assessed payments of approximately $56,635 annually until the debt is paid in full. Sydney paid $4.6 billion hosting the Olympics in 2000. Of that total, taxpayers covered $11.4 million. Rio de Janeiro is expected to pay over $20 billion by the end of the 2016 Olympics.
Once a city wins a bid for hosting the Olympics, cities 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. Overall, infrastructure costs may be $5 billion to $50 billion.
Benefits of Hosting the Olympics
Cities hosting the Olympics gain temporary jobs due to infrastructure improvements that continue benefiting the cities into the future. For example, Rio constructed 15,000 new hotel rooms to accommodate tourists. Sochi invested approximately $42.5 billion in constructing nonsports infrastructure for the 2014 Olympics.
Beijing spent over $22.5 billion constructing roads, airports, subways, and rail lines, as well as almost $11.25 billion on environmental cleanup. Additionally, thousands of sponsors, media, athletes, and spectators typically visit a host city for six months before and six months after the Olympics, which brings in additional revenue.
Drawbacks of Hosting the Olympics
The boost in job creation for cities hosting the Olympics is not always as beneficial as initially perceived. For example, Salt Lake City added only 7,000 jobs, about 10% of the number that officials had mentioned, when the city hosted the 2002 Olympics. Also, most jobs went to workers who were already employed, which did not help the number of unemployed workers. Furthermore, many of the profits realized by construction companies, hotels, and restaurants go to international companies rather than to the host city’s economy.
Also, income from the games often covers only a portion of expenses. For example, London brought in $5.2 billion and spent $18 billion on the 2012 Summer Olympics. Vancouver brought in $2.8 billion, after spending $7.6 billion on the Winter Games in 2010. Beijing generated $3.6 billion and spent more than $40 billion for the Summer Olympics in 2008. As of 2016, Los Angeles is the only host city that realized a profit from the games, mostly because the required infrastructure already existed.
Additionally, it is difficult ascertaining exactly which benefits come from hosting the Olympics. For example, Vancouver had planned many infrastructure projects before winning the bid for hosting the 2010 games.
Debt Resulting From Creating Olympic Arenas
Many of the arenas constructed for the Olympics remain expensive due to their size or specific nature. For example, Sydney’s stadium costs $30 million annually in maintenance. Similarly, Beijing’s Bird’s Nest arena costs $10 million in annual maintenance.
It was 2006 before Montreal finished paying off its debt from the 1976 games, and Russian taxpayers will pay almost $1 billion annually for many years to come to pay off the debt from the 2014 Winter Games in Sochi. Furthermore, note that most of the facilities created for the Athens Olympics in 2004 contributed to Greece’s debt crisis and remain empty.
Examples of Olympics Cost
The 1976 Olympics in Montreal
At the time of the event, Montreal was undergoing a dramatic surge in terms of its global profile. In conjunction with the Expo '67 World Fair, held was held to celebrate the nation's centenary, the Games helped to transform the city into a world-renowned location. The governing body soon ran into the familiar budgetary issues, as their estimated costs of $360 million fell drastically short of the final $1.6 billion bill.
The Montreal Games ended up leaving a 30-year legacy of debt and financial disaster for the city, the decaying, custom-built venues remaining a forlorn eyesore for decades.
The 2004 Olympics in Athens
Some economists trace the beginning of Greece's ongoing economic woes to the Olympic Games held in Athens in 2004. The event stands as the embodiment of excess and irresponsible spending. To begin with, the total cost – an estimated $15 billion – far surpassed the original budgeted amount, though to be fair, the overrun was due in part to additional security costs incurred in the aftermath of 9/11 (which were unforeseen when Greece bid for the Games in 1997).
While this is an understandable expense, the building of unnecessary and ill-conceived permanent sporting venues was extremely difficult to comprehend. A number of these venues remain idle to this day. This lack of foresight and planning left the nation with a shortfall of 50,000 euros per Greek household, which has been shared among the taxpayers ever since.
The 2016 Olympics in Rio de Janeiro
Health concerns over the Zika virus that has been spreading in Brazil caused many athletes to withdraw from the 2016 games and many spectators to not enter the country. Although the Brazilian government added 2,000 healthcare professionals to help during the Olympics, the country’s debt crisis put additional strain on the healthcare system. Additionally, scientists determined that the water being used for boating and swimming events was contaminated with raw sewage and "superbacteria", adding to health concerns. Brazil had already lost an estimated $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 mix of public and private money. The hoped for economic benefit of hosting the games did not occur in Rio. According to AP, the state of Rio de Janeiro is late in paying teachers, hospital workers, and pensions, and crime in the city has risen to almost record-breaking levels.
The 2020 (2021) Olympics in Tokyo
Japan won the 2020 games by bidding $12 billion, pushing out rival Italy to win the hosting spot. But then the COVID-19 pandemic hit in the Spring of 2020, and the decision was made to postpone the Olympics to the summer of 2021. The postponement added an additional $2.8 billion to the total outlay, which is estimated to be in excess of $26 billion.
With a summer surge of COVID-19 in many parts of the world, including in Japan, the decision was made to bar spectators. Without fans, international tourism will not provide the spending needed to make up for the costs incurred by the Japanese government. While the economic cost will be substantial, the health cost could be even higher. As of July 20, 2021, days before the opening ceremonies, 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 over the previous week.
The Bottom Line
Hosting the Olympics tends to result in severe economic deficiencies for cities. Unless a city already has the existing infrastructure to support the excess crowds pouring in, not hosting the Olympics may be the best option.