How To Make Money From The Olympics – The Olympic Games evolved dramatically after the first modern games were held in 1896. In the second half of the twentieth century, both the costs of hosting and the revenue generated by the spectacle grew rapidly, sparking controversy over the burden borne by host countries. A growing number of economists argue that the benefits of hosting the games are at best exaggerated and at worst non-existent, leaving many host countries with heavy debt and maintenance obligations. Instead, many argue, Olympic committees should reform the bidding and selection process to encourage realistic budget planning, increase transparency and encourage sustainable investments that serve the public interest.
The 2020 Summer Olympics in Tokyo highlighted the ongoing debate over the costs and benefits of hosting such a mega-event, especially after the ongoing COVID-19 pandemic forced a year-long delay and sparked public opposition to continuing the festivities during a major outbreak. The multibillion-dollar bill facing Tokyo after the games is not unique: other former host cities are still struggling with the debts they incurred, prompting some candidate cities for future games to withdraw their bids or scale back their plans.
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For most of the twentieth century, hosting the Olympic Games was a tolerable burden for the host cities. The events were held in developed countries, either in Europe or the United States, and in the pre-television era, the hosts did not expect to make a profit. Instead, the games were publicly funded, with these advanced countries in a better position to absorb the costs due to their larger economies and more advanced infrastructure.
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. The Games grew rapidly, with the number of participants in the Summer Olympics almost doubling and the number of events increasing by a third in the 1960s. A 2012 Oxford University study calculated an average cost overrun of 252 percent for each Summer Olympics since 1976, after adjusting for inflation. The killing of protesters in the days before the 1968 Mexico City Games and the fatal attack on Israeli athletes at the 1972 Munich Games tarnished the Olympics’ image and public skepticism about taking on debt to host the games grew. In 1972, Denver became the first and only chosen host city to reject its Olympics after voters passed a referendum denying additional public spending for the games.
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The 1976 Montreal Summer Olympics symbolized the fiscal risks of hosting. The projected cost of $124 million was billions below the actual cost, largely due to construction delays and cost overruns for a new stadium, burdening city taxpayers with about $1.5 billion in debt that took nearly three decades to pay off.
As a result, in 1979 Los Angeles was the only city to bid for the 1984 Summer Olympics, allowing it to negotiate extremely favorable terms with the International Olympic Committee (IOC). Most importantly, Los Angeles has been able to rely almost entirely on existing stadiums and other infrastructure, rather than promising lavish new facilities to entice the IOC selection committee. That, combined with a sharp jump in television broadcast revenue, made Los Angeles the only city to make a profit as host of the Olympics, ending up with an operating surplus of $215 million.
The success of Los Angeles led to an increasing number of bidding cities, from two for the 1988 games to twelve for the 2004 games. This allowed the IOC to select the cities with the most ambitious and expensive plans. Furthermore, as researchers Robert Baade and Victor Matheson point out, bidding by developing countries has more than tripled since 1988. Countries such as China, Russia and Brazil have been eager to use the games to showcase their progress on the world stage .
However, these countries invested huge sums to create the necessary infrastructure. Spending rose to over $50 billion for the 2014 Winter Games in Sochi, $20 billion for the 2016 Summer Games in Rio de Janeiro, and $13 billion for the 2018 Winter Games in PyeongChang.
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These costs led to renewed skepticism, and several cities withdrew their bids for the 2022, 2024 and 2028 games due to cost concerns. Beijing had little competition for its 2022 bid, with Oslo, Norway, and Stockholm, Sweden pulling out after realizing the costs would be higher than expected. Boston has pulled out of consideration for the 2024 games, with its mayor saying he “refuse[d] to mortgage the city’s future.” 2024 finalists Budapest, Hungary, Hamburg, Germany, and Rome also withdrew, leaving only Los Angeles and Paris. In an unprecedented move, the IOC chose the 2024 and 2028 venues simultaneously in 2017, with Paris and Los Angeles respectively alternating as hosts due to a lack of bids.
Cities invest millions of dollars in evaluating, preparing and submitting a bid to the IOC. The cost of planning, hiring consultants, organizing events, and required travel consistently falls between $50 million and $100 million. Tokyo spent as much as $150 million on its failed 2016 bid and about half that amount on its successful 2020 bid, while Toronto decided it could not afford the $60 million it would have required to bid for 2024
Once a city is selected as host, it has nearly a decade to prepare for the influx of athletes and tourists. The Summer Games are much larger, attracting hundreds of thousands of foreign tourists to watch over ten thousand athletes compete in around three hundred events, compared to under three thousand athletes competing in around a hundred events during the Winter Games . The most urgent need is the creation or upgrading of highly specialized sports facilities such as cycling tracks and ski jumping arenas, the Olympic Village and a venue large enough to hold the opening and closing ceremonies.
Tokyo spent a whopping $150 million on its failed 2016 bid, and Toronto decided it couldn’t afford the 2024 bid.
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There is usually also a need for more general infrastructure, especially housing and transport. The IOC requires cities hosting the Summer Games to have a minimum of forty thousand available hotel rooms, which in Rio’s case required the construction of fifteen thousand new hotel rooms. Roads, train lines and airports need to be upgraded or built.
In total, these infrastructure costs range from $5 billion to over $50 billion. Many countries justify such expenditure in the hope that the expenditure will outlive the Olympics. For example, about 85 percent [PDF] of the more than $50 billion budget of the Sochi 2014 games went to building non-sports infrastructure from scratch. More than half of Beijing’s 2008 budget of $45 billion went to rail, roads and airports, while nearly a quarter went to environmental cleanup efforts.
Operating costs represent a smaller but still significant part of the budget of the Olympic hosts. Security spending escalated rapidly after the 9/11 attacks—Sydney spent $250 million in 2000, while Athens spent more than $1.5 billion in 2004, and since then spending has remained between $1 billion and $2 billion.
Also problematic are so-called white elephants or expensive equipment that, due to their size or specialized nature, have limited use after the Olympics. They often impose costs for years to come. Sydney’s Olympic Stadium costs the city $30 million a year to maintain. Beijing’s famous Bird’s Nest Stadium cost $460 million to build, requires $10 million a year in maintenance, and has barely been used since the 2008 games. Almost all of the facilities built for the 2004 Athens Olympics, whose costs contributed to the Greek debt crisis, are now defunct. Gangwon, South Korea’s regional government responsible for most of the infrastructure for the 2018 Games, is expected to incur an annual deficit of $8.5 million due to maintenance of unused facilities.
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Economists say the so-called implicit costs of gaming should also be taken into account. These include the opportunity costs of public spending that could be spent on other priorities. Servicing the debt that remains after hosting the games could strain public budgets for decades. Montreal took until 2006 to pay off its last debt from the 1976 Games, while Greece’s billions in Olympic debts helped bankrupt the country.
Debt and maintenance costs for the 2014 Sochi Winter Games will cost Russian taxpayers nearly $1 billion a year for the foreseeable future, experts estimate. But while some in Sochi see the unused stadiums and redeveloped facilities as a waste, other residents say the games have spurred spending on roads, water systems and other public goods that wouldn’t have happened otherwise.
As hosting costs have skyrocketed, revenue only covers a fraction of the cost. The 2008 Beijing Summer Olympics generated $3.6 billion in revenue compared to over $40 billion in expenses, and the 2012 London Summer Games generated $5.2 billion in revenue compared to $18 billion in expenses. What’s more, much of the revenue doesn’t
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