Hosting an Olympic Games is widely regarded as a significant privilege, a right often fiercely contested among countries worldwide. However, it also entails substantial responsibility, primarily of an economic nature.
The 2020 Tokyo Games, initially scheduled for that year but postponed due to the COVID-19 pandemic, reportedly incurred costs amounting to approximately 20 billion dollars. Experts estimate the average cost of hosting an Olympics to be around 12 billion dollars. According to an Oxford-based study, every Olympic Games since 1960 has exceeded its initial budget projections, highlighting that the quadrennial event has one of “the highest overruns on record for any type of megaproject.”
Where is the money spent?
The majority of the expenses for hosting an Olympic Games typically go towards infrastructure. This includes constructing or upgrading sports facilities needed to accommodate the wide range of events that make up the Olympics.
The host country also needs to focus on improving local transportation and providing accommodation for athletes, journalists, and spectators. According to a report from the Wall Street Journal, China allocated over half of its $45 billion budget for the Beijing 2008 Olympics to develop rail networks, roads, and airports.
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Furthermore, the city must make substantial investments in urban beautification and public services.
After investing in infrastructure, there are operational costs that encompass everything from the arrival of athletes to the conclusion of the Games. A notable portion of these expenses is allocated to security, a priority that has gained greater significance since the 9/11 terrorist attack in the USA.
Where does the money come from?
The hosting nation bears most of the cost of hosting the Olympics by building the necessary infrastructure through capital investments. The nation can obtain funding from both private and public sources. The IOC organising committee budget covers a significant portion of the operational costs, including venue operations, workforce, technology, and games services. This budget is funded by domestic sponsorship, ticket sales, and licensing. Other operational costs, such as security, transportation, medical services, customs, and immigration, are covered by the host nation using the revenue generated from the initial investments. The estimated budget for the Paris Games is 10 billion dollars, with the IOC contributing 1.7 billion dollars.
Do countries make a profit out of the Olympics?
The University of Limoges published a report stating that the 2024 Olympics is expected to provide the Paris region with a net economic benefit of nearly 12.2 billion dollars.
Christophe Dubi, Paris Games Executive Director, stated, “As the first Olympic Games aligned with Olympic Agenda 2020, Paris 2024 is proving that the Games can bring substantial economic benefits to their hosts while being socially and environmentally responsible. These are Games that truly adapt to the needs of their host and to the times we live in, creating an impactful legacy before the opening ceremony and long after the sporting competitions have ended.”
The IOC has projected that hosting the Olympics creates job opportunities for local communities, boosts tourism, and improves the branding of cities.
Barcelona is often cited as a success story of how hosting the Olympic Games helps with tourism. The Spanish city jumped from 11th to sixth among the most popular European cities after the successful 1992 games.
However, this success has not been replicated in cities like London and Beijing, which recorded lower tourism footfall in the years after they hosted the Olympic Games.
One major issue faced by Olympic host cities is the underutilization of the cutting-edge sporting facilities built specifically for the games. The most prominent example is the ‘Bird’s Nest’ stadium in Beijing, which cost China 460 million dollars and has been left largely untouched since the 2008 games, costing the Asian nation nearly 10 million dollars a year for maintenance, as revealed by The Atlantic. The 2004 Olympic Games in Greece pushed an already weak Greek economy to the brink, resulting in a long-drawn-out debt crisis.
Despite the IOC’s support, hosting the Olympics is a financially risky business, as evidenced by both predictions and experiences.
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