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.
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 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 and rails, 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.
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 games and 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 is resulting in supplies of medicine and other necessities being depleted. Additionally, scientists determined that the water being used for boating and swimming events is contaminated with raw sewage and superbacteria, adding to health concerns. Brazil already lost $7 billion in tourism due to the Zika virus and will most likely lose more before the end of 2016.
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.