The Financial Impact of the Olympic Games
As I am enjoying a much-needed replacement of my usual non-stop news coverage with Olympic swimming, skateboarding and soccer, I can’t help but wonder if anyone makes any money from all of this. Interesting question with the expected answer, which I am sharing below.
The answer is not really.
Historically, the average $10 billion needed to host the summer games has dealt a financial and environmental blow to the host city/country. The construction of temporary infrastructure, promised to aid the host city for the following decades, has rarely delivered on that commitment. The likely cost overruns, coupled with the potential environmental impact, has made it increasingly difficult to convince cities and countries to host these games. The notable exception to the negative financial impact was the 1984 Summer Games in Los Angeles, which delivered a $200 million surplus, largely by using existing infrastructure and offering valuable sponsorships and broadcast rights. Los Angeles will again host the summer Olympics in 2028, although some of the events will be held as far away as Oklahoma City! I will say that financial considerations aside, we really enjoyed the 1996 Summer Olympics here in Atlanta!
Now what about 2024 host city Paris? The International Olympic Committee (IOC) and Paris hope to reverse both the negative press and the historically negative financial and environmental trends. These are valiant efforts for sure but it’s way too early to assess the results. Critics insist that changing the financial and environmental trajectory will require a vastly different athlete and fan experience, with the likely need for permanent or a small rotation of host cities/countries. Since that’s not happening for the foreseeable future, let’s have a look at some of the numbers.
5 of the last 6 Olympic games have had cost overruns of at least 100%. And experts claim that some of the actual costs have not been included in the analyses. Many of the eventual host countries also invested $100 million in their bids to secure the Games.
Summer Olympic games are almost double the cost of winter Olympic games.
The current cost estimate for the Paris Olympic and Paralympic Games is $9.7 billion which is 25% over the initial bid from 7 years ago. Officials cite this little factor called inflation. Yep.
Paris already had many sports venues so the plan was to limit new construction to the Olympic Village which will presumably become mixed-income housing later, an aquatics venue and a small arena. Not included in the $9.7 billion estimate was the $1.5 Billion to make the Seine clean enough to swim in, because presumably that was to be done regardless. Still remains to be seen how that will work out.
There have already been 8.6 million tickets sold for the events in France (not sure if that includes tickets for the surfing in Tahiti) but early reports suggest fewer than expected visitors – with the expected negative impact on airlines, hotels, and restaurants. Paris is also apparently considered a prime tourist destination, so a long- term tourism boost is less likely.
My conclusion – I sure love to watch these events, even though I still cannot understand rugby, but not sure there is a strong financial proposition here. Happy viewing!