With Olympic preparations often marked by delays and cost overruns, it’s worth asking whether hosting the Games makes economic sense at all.
Do the Games make enough money to justify the disruption, cost overruns and political headaches that come with them?
We spoke to economics assistant professor Colin Mang about why most Olympics lose money, how taxpayers typically pick up the bill and the rare circumstances in which host cities can turn a profit.
Where the money is made and lost
Hosting the biggest sporting events in the world doesn’t come cheap. Arenas for dozens of sports, accommodation for thousands of athletes and new transit infrastructure mean that host cities end up spending eye-watering sums.
The 1976 Montreal Summer Olympics, for instance, cost C$1.3B (nearly C$7B in today’s money), including a C$120M stadium whose retractable roof was not finished in time for the start of the Games.
And that’s just the capital spending. The operating costs run up extra billions, with the Vancouver 2010 Olympics spending C$1.9B on staffing and salaries, insurance, maintenance, utilities and more.
All of this is paid for by the organizing committee in the host cities who make money from ticket sales and sponsorships. But any deficit needs to be made up with public money, meaning taxpayers pick up the bill.
Take Vancouver. The total revenue for the 2010 Winter Olympics was around C$1.9B, so enough to cover the operating costs. But further costs included a transit link to the airport, a new convention centre, an expanded highway to Whistler and security and policing by the RCMP. That extra cost? C$5B, paid by the provincial and federal governments.
A lasting legacy
Of course, once the infrastructure is built, it outlives the Games. In theory, that should bring long-term benefits to the community.
Vancouver built the new transit line; Toronto built the UP rail line for the 2015 Pan-Am Games; London regenerated a sizable neighbourhood in the East End, bringing in parks, a mall, housing and a modern stadium for West Ham Football Club.
The 2012 London Summer Olympics regenerated an area of East End London.
When infrastructure spending is targeted and strategic, the benefits can be real. That’s especially true if the projects were already earmarked for development: Games can be a convenient reason to get the ball rolling and get public buy-in.
On the flip side, spending on infrastructure can backfire if it isn’t planned correctly. Officials in Athens overestimated how much the venues built for the 2004 Games would be used. Most facilities were abandoned due to the upkeep costs.
Indeed, Athens shows the most extreme example of a negative legacy from hosting the Games. The costs ran up to €11B, including an unexpected €1.4B security bill to meet the demands of the post-9/11 world.
Simply put, the Greek government couldn’t afford the costs and took on a huge amount of debt in order to host the Games. In the years that followed, the 2008 financial crisis had an outsized impact on Greece, made worse by their Olympic debt bill. Years of brutal austerity followed.
Why does anyone bother?
Given the huge risks that come with hosting the Olympics, it’s reasonable to ask why host cities even submit bids.
For countries looking to signal prestige on the global stage, from Brazil and China to Greece and Japan, the Olympics offer a chance to demonstrate economic strength, organizational capacity and international relevance alongside traditional big players like the US, UK and France.
But indeed, appetite to host Games is decreasing. Fewer cities are submitting bids, which has led the International Olympic Committee to soften its requirements for infrastructure building to make hosting more appealing.
After all, when you don’t have to build new venues and rail lines, the costs come down. Take the Los Angeles Games of 1984, which were originally projected to have a net loss of up to $336M (over $1B today). But, in the end, the city didn’t build any infrastructure or giant new venues; they just used what they had.
The LA ’84 Games generated a profit of $250M (nearly $800M today), which was used to fund the next generation of Team USA athletes, sustaining their athletic dominance at the Olympics.
As for Milano-Cortina, it’s too soon to say how the economics will shake out. But the fate of its new hockey arena, which organizers have admitted won’t be fully complete for the Games, may end up telling the story.