Writer: Jason Luo
Editor: David Han
Billions in cash; arenas springing up seemingly everywhere; the global spotlight shining for weeks on end. To many cities, snagging the Olympics feels like winning life’s lottery. Olympic supporters rave about paychecks and visitors flocking in, and leaders pose with oversized scissors, ready to cut tape—folks at home hear promises that their city will never be forgotten. But the trouble is, once runners leave and smoke clears from flares, one thought lingers: was it worth it?
The City as the Client: Expectations VS Reality
The way cities go after the Olympics is like chasing a big contract, hoping to attract tourists, create jobs, or get noticed worldwide. Even if the benefits seem nice, officials mostly care about what they can actually measure, not just wishful talk. Sometimes, cities have landed the Games by tossing out cheerful, if stretched, figures on cash flow and employment. Think Salt Lake in 2002 or London twelve years later. Lowball cost guesses and big job promises mattered more for votes than accuracy. But once plans roll out, spending tends to blow up fast, showing how steep the real tab is.
The Price Tag Nobody Wants to Talk About
Since 1960, every single Olympics has exceeded projected costs. In fact, no Olympics have stayed within budget. The average cost overrun is about 172%. It’s not a small amount; it’s a financial sinkhole. When cities bid to be an Olympic host city, they’re usually looking at building a shiny new stadium. However, when the bidding process is complete, the city is left to deal with the bill for decades of debt payments. For example, Montreal did not pay off its 1976 Olympics until 2006, and that was after paying debt for 30 years for just two weeks of the Olympics. In a recent study on the cost of holding Olympic Games conducted by researchers at Oxford, they concluded that there is such a consistent pattern of cost overruns that the overruns become part of the DNA of the Games.
The amount of money spent above budget on the Olympics is enormous. The 2008 Olympics held in Beijing had an estimated cost overrun of over $40 Billion. Due to the COVID-19 pandemic, the 2020 Olympics were delayed to 2021 and still had a cost overrun of approximately 128%, with associated expenses adding billions to the already existing costs for the city. The costs that are normally included in the overall cost of the Olympics (such as the large amounts of money that will need to be spent to upgrade the city’s transportation system, and/or urban renewal, and/or provide new security systems) can range from $5 billion to over $50 billion. Even if cities implement all of the proposed reforms and build sustainable venues and/or temporary venues and/or reduce the size of the budget and/or implement other cost-saving measures, the trend does not appear to be changing.
Short Sugar Highs: The Crowding-Out Effect
Indeed, there is much hype around the Games. Research suggests that each year an Olympics is hosted, regional GDP slightly increases, along with other regional economic indicators, by a couple of percent. For example, hotel rooms are filled, contractors are hired to build venues, and then people come in to watch the events. However, how do these events translate into long-term economic gains?
Typically, post-Games analysis indicates that the projected wage hikes and tourism increases do not occur consistently. The economic boom seen immediately before the games is usually offset, or “crowded out” by the high cost of attending, the large numbers of visitors, and the disruptions caused by increased security measures at airports, etc. In essence, the Olympic Games replace one type of visitor (the high-spending, long-stay tourist) with another (the low-spending, short-stay Olympic fan), resulting in little to no positive impact on local tourism. Additionally, although temporary construction jobs are created, research has indicated, i.e., a study concerning the 2002 Olympic Games in Salt Lake City, that the number of new permanent jobs created is typically only a small fraction of those projected, and many of the temporary positions are given to already employed workers instead of unemployed ones. Thus, after the games have concluded and the torch has been extinguished, the host city is left with the financial burden of hosting the games, and the promised sustainable economic benefits have evaporated; the “sugar rush” has passed.
Image Source (y-axis: total number of international tourists (millions); positive = more visitors than expected; negative = fewer visitors than expected)
The Legacy Mirage: Outliers and Social Cost
There is generally significant hype surrounding “legacy” from Cities during the bidding process for the Olympics. New Parks! Affordable Housing! Improved Public Transportation! There is no question that sometimes legacy is just a nice way to say white elephant. It has been nearly two decades since the Athens 2004 Summer Olympics, and yet the city still has some old, rusted venues. Similarly, many of the stadiums built in Rio de Janeiro remain empty. The Bird’s Nest Stadium in Beijing costs approximately $10 million per year to maintain, with little to no use.
While the construction process of the Olympics is short-lived, the maintenance is forever. While there may be instances where cities are able to successfully repurpose or reuse the existing infrastructure, the social costs of hosting the Olympics are almost always extreme and irreversible. Historically, the Games have been used by governments to further gentrify and displace people. Before the 1988 Seoul Olympics, an estimated 720,000 people were displaced from their homes. Recently, Rio de Janeiro saw thousands of families displaced from favelas to make room for new roads and Olympic-related infrastructure. These cases illustrate how often the Olympics benefit the wealthy developers and construction companies rather than the vulnerable population of the city.
While there are exceptions, such as the revitalization of the East End area in London from the 2012 Olympics and Los Angeles’ relatively inexpensive 1984 Olympics (which utilized college dormitories as the Olympic Village), these are rare cases rather than the norm. Los Angeles was able to succeed in 1984 because they reused existing infrastructure, a practice that is rarely done when the Olympic Games are hosted today.
Who Actually Wins?
There are a few major issues with how the Olympics cost cities money. Even when the Olympics are losing money for the city, someone has to be making money. Host cities paid large amounts to construction companies that built the venues. Then there are the developers who are paid huge sums of money for land they owned before the Olympics arrived. Plus, all the media outlets and all the sponsors—the Olympics are a cash cow for them.
The International Olympic Committee (IOC) also makes billions of dollars from broadcasting the Olympics. They keep most of those millions and give some of them back to countries around the world so they can help fund other sports projects, but none of the money goes to the city that hosted the Olympics to help cover the cost of building everything. Cities have to use their own tax dollars to build the venues, provide security, and create an efficient transportation system for the Olympics, while the IOC gets rich off of advertising. In a scenario where revenues for the 2016 Rio Games totaled less than $9 billion, a substantial portion was kept by the IOC, leaving Rio to shoulder its billions in debt.
It seems like, usually, the people who lose are the citizens of the city that hosted the Olympics, either through years of higher taxes, or the government taking over their neighborhoods with “Olympic Zones,” or gentrification as they are priced out of their own communities. Ultimately, the problem is that Olympic development, and the way cities plan for the Olympics, are primarily driven by a city wanting to gain prestige and a short-term economic stimulus caused by the construction process, rather than being based on long-term market viability.
Graphic By: Meredith Whitcher
So… Should a City Host?
Unless you’re able to build the majority of your city’s needed infrastructure, put in place tight, ironclad financial control systems, and can present a detailed, legally binding plan that protects residents from displacement as a result of hosting an Olympics, the chances of achieving some level of economic success for your city are low. The burden of proof needs to be reversed; rather than having the cities that wish to host the Olympic movement prove they are financially prudent and socially responsible, we should be requiring them to do so.
It’s possible. Los Angeles, with its 2028 bid, has proposed a “no new stadiums, no new debt” model as part of its bid, directly mimicking what made its 1984 success work. If Los Angeles’ model works, it could also create a shift in how bidding committees approach costs, focusing on operational costs instead of capital costs.
But for now, history is clear: hosting the Olympics is usually a bad investment for the local community. So the next time a mayor boasts about bringing the Games home, instead of taking in the sugar surge, maybe one should ask: who’s really winning here? The answer is rarely the local taxpayer.
Featured Image by Julio Hernández on Unsplash
