The Economic Impact of Hosting the Olympics

The economic impact of hosting the Olympics tends to be less positive than anticipated. Because most cities have ended up falling massively in debt after hosting the games, cities without the necessary infrastructure may be better off not submitting bids.

Key Takeaways

• Many countries and the cities within them bid tens of millions of dollars for the chance to host the Olympics.
• Many believe that the level of tourism and foreign investment that result from hosting the games can be an economic boon.
• Others see the games as overly expensive, leaving cities and nations with massive debts and economic woes.

Costs Incurred When Hosting the Olympics

Hosting the games is even more costly than the bidding process. For example, London spent $14.6 billion to host the Olympics and Paralympics in 2012. Of that amount, $4.4 billion came from taxpayers. Beijing spent $42 billion on hosting in 2008. Athens, Greece, spent $15 billion on hosting the 2004 Olympics. Sydney paid $4.6 billion on hosting the Olympics in 2000. Of that total, taxpayers covered $11.4 million. Rio de Janeiro, Brazil, paid over $20 billion for the 2016 Olympics.

Once a city wins a bid for hosting the Olympics, cities commonly add roads, build or enhance airports, and construct rail lines to accommodate the large influx of people. Housing for the athletes in the Olympic village, as well as at least 40,000 available hotel rooms and specific facilities for the events, must be created or updated as well. Overall, infrastructure costs may range from $3 billion to $50 billion.

Benefits of Hosting the Olympics

Cities hosting the Olympics gain temporary jobs due to infrastructure improvements that continue benefiting the cities into the future. For example, Rio de Janeiro constructed 15,000 new hotel rooms to accommodate tourists. Sochi, Russia, invested over $50 billion in constructing non-sports infrastructure for the 2014 Olympics.

Beijing spent over $22.5 billion constructing roads, airports, subways, and rail lines, as well as almost $11.25 billion on environmental cleanup. Additionally, thousands of sponsors, media, athletes, and spectators typically visit a host city for six months before and six months after the Olympics, which brings in additional revenue.

Drawbacks of Hosting the Olympics

Job creation for cities hosting the Olympics doesn’t always pan out as projected. For example, when Salt Lake City hosted the 2002 Olympics, the city added only 7,000 jobs, about 10% of the number that officials had initially indicated the games would bring. Also, most jobs went to workers who were already employed, meaning unemployment statistics did not necessarily budge significantly. Furthermore, many of the profits realized by construction firms, hotels, and restaurants flow to international companies rather than to the local economy.

Income from the games often covers only a portion of expenses. For example, the London 2012 Summer Olympics brought in $5.2 billion, compared to the city’s spending of $14.6 billion. Vancouver, Canada, brought in $2.8 billion after spending $7.6 billion on the Winter Games in 2010. Beijing generated $3.6 billion and spent more than $40 billion for the Summer Olympics in 2008. As of 2016, Los Angeles is the only host city that realized a profit from the games, mostly because the infrastructure required of them already existed.

Debt Resulting from Creating Olympic Facilities

Many of the arenas constructed for the Olympics are not one-time costs. Rather, they represent ongoing expenses. For example, Sydney’s stadium costs $30 million annually in maintenance. Similarly, Beijing’s Bird’s Nest arena costs $10 million in annual maintenance.

In addition, when a city borrows to finance construction, it can be on the hook for repayment long after the games are over. It wasn’t until 2006 that Montreal finished paying off its debt from the 1976 games. This is the case even if the facilities are themselves defunct. For instance, most of the facilities created for the Athens Olympics in 2004 contributed to Greece’s debt crisis and remain empty.

Examples of Olympics Cost

The 1976 Olympics in Montreal

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, which 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, with the decaying, custom-built venues remaining a forlorn eyesore for decades.

The 2004 Olympics in Athens

Some economists trace the beginning of Greece’s ongoing economic woes to the Olympics held in Athens in 2004. The event stands as the embodiment of excess and irresponsible spending. Its total cost was an estimated $15 billion, which far surpassed the original budgeted amount. A significant portion of the overrun was due in part to additional security costs incurred in the aftermath of 9/11.

The 2016 Olympics in Rio de Janeiro

Health concerns over the Zika virus that was spreading in Brazil caused many athletes to withdraw from the 2016 games and many spectators to not enter the country. Although the Brazilian government added 2,000 healthcare professionals to help during the Olympics, the country’s debt crisis put additional strain on the healthcare system. Additionally, scientists determined that the water being used for boating and swimming events was contaminated with raw sewage and “super bacteria,” adding to health concerns. Brazil had already lost an estimated $7 billion in tourism due to the Zika virus before the Olympics were taken into consideration.

The 2016 Olympics cost the Brazilian government approximately $13.1 billion to host, which was $3.5 billion over budget. In addition, it bore $8.2 billion in infrastructure upgrades and renovations, paid for with a mix of public and private money.

The 2020 (2021) Olympics in Tokyo

Japan won the 2020 games by bidding $12 billion, pushing out rival Italy to win the hosting spot. But then the COVID-19 pandemic hit in the spring of 2020, and the decision was made to postpone the Olympics to the summer of 2021. The postponement added an additional $2.8 billion to the total outlay, which is estimated to be a total of more than $15 billion, making it the most expensive Olympics ever held.

When 2021 brought a surge of COVID-19 in many parts of the world, including in Japan, the decision was made to bar spectators. Without fans, international tourism did not provide the spending needed to make up for the costs incurred by the Japanese government.

How Does Hosting the Olympics Affect the Economy?

The Olympics can bring a range of benefits and drawbacks to its host city. Countries and cities are often compelled to bid for the privilege of hosting the games, in hopes that it will stimulate the development of infrastructure, draw tourisms dollars, and boost employment. However, in many instances, the games have failed to deliver on their projected economic boons, leaving host cities with debt and defunct facilities.

Is Paris 2024 on Budget?

In a January 2024 interview with Bloomberg, the CEO of the Games organizing committee indicated that the Paris Olympics was on track to meet its cost goals. Central to the city’s bid was an aim to have 95% of infrastructure be either existing or temporary, so as to keep building and maintenance costs low.

How Much Will the 2024 Olympics Cost?

The original budget for the 2024 Paris Olympics was set at 8 billion euros, or $8.2 million USD.

The Bottom Line

Hosting the Olympics tends to result in severe economic deficiencies for cities. Unless a city already has the existing infrastructure to support the excess crowds pouring in, not hosting the Olympics may be the best option.

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