In the aftermath of the 2012 Olympic Games, host city London and its residents rightfully basked in the glory of what proved to be a momentous and extremely successful event. While all the talk prior to the Games was of the financial costs involved, and whether Britain could survive such an expensive outlay, the discussion afterward was filled with the positive social ramifications of the event, and its empowering influence on U.K. youth.
While this switch was partly due to the goodwill the Games generated, it also reflected to the financially sound approach that the London authorities took in organizing and hosting the event. Although the stock market loves the Olympics, individual economies often don't. Nations have long had a history of bad financial repercussions following their hosting of the Games.
A Greek Tragedy
Many economists trace the beginning of Greece's current economic issues 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 contrast between the success of an Olympic event and its economic impact can be sizable, and this was certainly the case with regards to the Sydney Olympics in 2000. Heralded as one of the most positive and well-organized Olympics of all time, the Sydney Games were a triumph for outstanding infrastructure and immense sporting achievement. Despite receiving almost unanimous praise from viewers across the globe, though, a lack of forward-thinking and legacy planning has left the citizens of Sydney debating if Olympic economics means boom or doom.
As is often the case with hosting the Olympic Games, the New South Wales government was forced to spend a great deal more than it initially budgeted for the event. The total investment had risen to approximately $6 billion AUD by the time the first medals were awarded, $1.5 billion AUD of which were covered by public funds. Then, as a portent of what was to befall Athens four years later, the much-vaunted Olympic Park became dormant as the government struggled to implement its plan of redeveloping the site as a residential suburb. This did not materialize until 2005, by that time it had become little more than a sightseeing highlight for tourists.
In fact, it is the Montreal Games of 1976 that remain synonymous with economic decline.
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.
What Britain Did Right
Heeding the numerous lessons of previous countries that have suffered long-term financial issues after hosting the Games, London chose to invest as part of a sustainable fiscal plan. Most of the sporting venues it built were dynamic but temporary. In addition to these temporary venues, the London authorities have also ensured that itself can be utilized fully as a long-term sporting venue. Although the Olympic Stadium itself was a permanent structure, it was designed to be utilized as a versatile sports arena: Its seating capacity can be reduced to just 25,000. The venue has already attracted interest from a host of English sports teams.
The Bottom Line
When you look at the experiences of Athens, Sydney, and Montreal as Olympics hosts, there are clear factors that unite them in their hardships. Unforeseen spending, a lack of long-term planning and an inability to maximize the use of venues have all contributed heavily to each city's economic decline. But they taught important financial lessons. The London Olympics actually bucked the trend and established a template for future hosts to follow. (For related reading, see "The Economic Impact of Hosting the Olympics")