Very few events draw as much fanfare as the Olympics, but the costs of hosting it can be staggering and often unrecoverable.
The Olympics is the biggest, most prestigious sporting event where athletes reach their pinnacle and are rewarded for all their hard work.
And as in any spectacle of epic proportions, so are the expenses and expectations on the host countries as well.
The POST takes a closer look into the costs it takes to mount the world’s biggest sporting event, which compels us to ask: Bragging rights aside—after all, only very few cities in the world can lay claim to being an Olympic host—is it all worth it?
Epic expenses for an epic event
A report on the website of the Council of Foreign Relations mentioned how the Olympics have evolved dramatically since the first modern games were held in 1896. In the second half of the twentieth century, the article continued, “both the costs of hosting and the revenue produced by the spectacle grew rapidly, sparking controversy over the burdens host countries shouldered.”
This hasn’t always been the case. Hosting the Olympic Games was a “manageable burden” for the host cities, mostly because the events were held in wealthy European or American countries. The games which were held pre-television broadcasting were also publicly funded, the report explained, with these countries better positioned to bear the costs due to their larger economies and more advanced infrastructure.
The turning point came in the 1970s. The economist Andrew Zimbalist, author of three books about Olympic economics, wrote how the games were growing rapidly, with the number of Summer Olympics participants almost doubling from the early twentieth century and the number of events increasing by a third during the 1960s.
It was the 1976 Summer Olympics in Montreal that first came to symbolize the “fiscal risks of hosting,” with the projected cost of $124 million way below the actual cost. Construction delays and cost overruns for a new stadium (eventually nicknamed the ‘Big Owe’) saddled the city’s taxpayers with some $1.5 billion in debt that took nearly all of three decades to pay off.
Once, the games were auctioned off and won by affluent cities in the Global North. But newly developed countries such as China, Brazil, and Russia have been eager to use the games to show their progress on the world stage.
We don’t have to look very far back to see how the Olympics have become a burden to host cities even long after the games have ended. Every Olympics since 1960 has run over budget, at an average of 172 percent in inflation-adjusted terms, according to an analysis by researchers at Oxford University, as mentioned in a New York Times report. They concluded that this was “the highest overrun on record for any type of megaproject,” far exceeding roads, bridges, dams and other major undertakings.
When once the games were an event to be auctioned off to the highest bidder— which is usually an affluent city in the Global North—newly developed countries such as China, Brazil, and Russia have been eager to use the games to show their progress on the world stage, the CFR article said.
However, these countries invested massive sums to create the necessary infrastructure. Costs spiraled to over $50 billion for the 2014 Winter Games in Sochi and $20 billion for 2016 Summer Games in Rio de Janeiro. Beijing says the cost of hosting the 2022 Winter Games is among the cheapest ever at $3.9 billion, but as per Business Insider’s estimates, the real cost might be more than $38.5 billion, 10 times the reported amount. The new bullet train built for the games alone cost China a hefty $9.2 billion.
But even first-world cities aren’t spared of being the “financial bonfires” the Olympics have become. London, the host for the 2012 Summer Olympics, aimed for $5 billion but ended up spending $18 billion. The COVID-19 besieged 2020 Tokyo Olympics saw initial cost estimates at $7.3 billion, but respected Japanese financial newspaper Nikkei and the daily Asahi said spending was far above what organizers contend. They placed overall spending at about 3 trillion yen, or about $28 billion.
According to the CFR article, the IOC adopted a process to make bidding less expensive but this has not yet translated into more bidders. In 2021, Brisbane, Australia, the 2032 Summer Games’ host, became the first city to win an Olympic bid unopposed since Los Angeles in 1984.
Expenses start piling up as soon as a city decides to place a bid to host the games. The cost of planning, hiring consultants, organizing events, and everything else in between consistently falls between $50 million and $100 million. Tokyo spent as much as $150 million on its failed 2016 bid, while Toronto decided it could not afford the $60 million it would have needed for a 2024 bid.
Beijing’s 2008 Summer Olympics generated $3.6 billion in revenue, compared to over $40 billion in costs, while Tokyo’s much delayed Summer Games generated $5.8 billion in revenue and $13 billion in costs. The IOC also keeps more than half of all television revenue.
Once a city is chosen to host, it has to make sure the necessary sporting infrastructure or facilities are built (or upgraded). There are a host of other non-sporting expenses, of course, such as hospitality (e.g. food and lodging), operational, clean-up, among others. Needless to say, adding all these up amounts to staggering figures.
Then there are the so-called white elephants, expensive facilities that, because of their size or specialized nature, have limited post-Olympics use and often require regular and costly maintenance. Sydney’s Olympic stadium, for instance, costs the city $30 million a year to maintain, as per the CFR article.
White-elephant Olympics facilities have limited post-Olympic use and are costly to maintain, such as Beijing’s famous “Bird’s Nest” stadium which cost $460 million to build but requires $10 million a year to maintain. Montreal’s “Big Owe” (below) is another example of this. Photo above from the Olympics website; the one below from Rodrigolab
Beijing’s famous “Bird’s Nest” stadium—once China’s pride and joy and symbolic of the country’s rise to economic power—cost $460 million to build but requires $10 million a year to maintain. It also sat mostly unused after the 2008 games, earning it the moniker the “empty nest” and is now described as a “vacant museum piece,” according to a report on The Atlantic. Good thing the city got to use it again for the 2022 Winter Games.
Going back to 2004, almost all of the facilities built for the Athens Olympics contributed to the Greek debt crisis, and as if to add insult to injury, most of which are now derelict.
All this, plus a handful more, leads to economists arguing that the burden of hosting the Olympics far outweighs the benefits, as it leaves many host countries with large debts and maintenance liabilities.
Do the host cities (and countries) actually earn anything?
With sky-high costs, it comes as little surprise that revenues cover only a fraction of expenditures. Beijing’s 2008 Summer Olympics generated $3.6 billion in revenue, compared to over $40 billion in costs, while Tokyo’s much delayed Summer Games generated $5.8 billion in revenue and $13 billion in costs. And if you think the host city gets the biggest chunk of the revenues, then you’ve got it all wrong. The IOC keeps more than half of all television revenue, the single largest chunk of money generated by the games, according to the CFR report.
Studies conducted or commissioned by host cities before the games often argue that hosting the event will provide a considerable economic advantage. While to some extent this is quite obvious, since having the Olympic Games in your backyard can generate jobs, draw in tourists, and boost overall economic output, post-Olympics studies, however, don’t paint an entirely rosy picture.
In a study of the 2002 Salt Lake City Games, for example, economists Victor A. Matheson, Robert Baumann, and Bryan Engelhardt, found a short-term boost in jobs but no long-term increase in employment. Economists have also found that the impact on tourism is “mixed,” as tightened security, bigger crowds, and inflated prices that the games bring with it discourage many visitors from traveling to a particular host city until the Olympics fever has died down.
In Brazil, the cost of the 2016 games exceeded $20 billion against an initial budget of $14 billion as per the CFR. Coupled with a deep recession, Rio required a $900 million bailout from the federal government to cover the cost of policing the Olympics. Even worse, the city was unable to pay all of its public employees and most of the venues built for the games now sit abandoned or barely used.
Some experts argue that low- and middle-income countries should spare themselves the burden of hosting altogether.
Paris earmarked a budget of about $8 billion when it won its bid in 2017. The city has since upped its budget by several billions more. But the organizers say the decision to rely almost entirely on existing venues, such as those built for the annual French Open and the 2016 European Football Championship, has held down costs.
This year’s summer games will also be spread out to stadiums in other French cities, including Lyon, Marseille, and Nice. But Paris has still spent $4.5 billion on infrastructure, including $1.6 billion for its Olympic Village, whose price is at least one-third more than it originally budgeted. Still, if the final cost stays in that ballpark, Paris will host the cheapest Summer Games in decades.
If the final cost stays within the estimated figures, Paris will host the cheapest Summer Games in decades. Photos from Getty Images
Behind the feverish excitement and underneath the shiny veneer of Olympics hosting are a slew of challenges host cities have to face, not just before or during the actual games, but even long after the event has ended. With this, analysts suggest that Olympic committees reform the bidding and selection process to incentivize realistic budget planning, increase transparency, and promote sustainable investments that serve the public interest.
In response, the IOC under President Thomas Bach has promoted reforms to the process, known as the Olympic Agenda 2020. Among the recommendations are reducing the cost of bidding, allowing hosts more flexibility in using already-existing sports facilities, encouraging bidders to develop a sustainability strategy, and increasing outside auditing and other transparency measures.
Some experts think “more drastic measures” are necessary. Matheson and Baumann (co-authors of the abovementioned Salt Lake City Olympics study) argue that low- and middle-income countries should spare themselves the burden of hosting altogether and the IOC should instead “award the games to rich countries that are better able to absorb more of the costs.”
Zimbalist has proposed that one city be made the permanent host, allowing for the reuse of expensive infrastructure. Barring that, many economists argue, any city planning to host should ensure that the games fit into a broader strategy to promote development that will outlive the Olympic festivities.
Why cities continue to bid for Olympic hosting despite all the potential troubles is another topic for another day. A quick answer is that construction industry executives deciding that this would be a “wonderful thing for their industry” as they’re assured of billions of dollars of contracts. Then, of course, there’s the bragging rights that come with the prestige of being among the very few cities to have played host to the world’s most massive event. Still, this is a discussion that warrants a separate article altogether.
For now, whether or not Paris proves to be an outlier against previous host cities—it is already on track to being the most sustainable—remains to be seen, but we hope it does break the curse of burdensome Olympics hosting.
You can read the Council of Foreign Relations’ report, “The Economics of Hosting the Olympic Games,” here.
