Expensive Olympics

Once the Olympic games are over, the nation of Brazil is likely to experience a familiar dose of economic trauma.

Why? A recent study by the Council on Foreign Relations looked at the economics of different Olympic games, and found that the costs inevitably outweigh the benefits. Part of the problem is enormous cost overruns; when nations bid for the games, they typically underestimate the cost of constructing stadiums, fields, apartments for the athletes, safe transportation and security. The accompanying chart shows just how much these cost estimates fell short of the actual price tag; note the Beijing and Sochi games, which cost $45 billion and $51 billion respectively. Building appropriate venues for the games in Athens, Greece, actually led to a government bankruptcy.

CA - 2016-8-3 - Costly Olympics

If those facilities could be recycled into popular tourist destinations, the expense might be justified. But the report found that the more typical situation is a lot of so-called “white elephants”—expensive facilities that have limited post-Olympics use. Beijing’s famous “Bird’s Nest” stadium cost $460 million to build and now sits unused. The entire city of Sochi, Russia, stands idle.

The Rio Olympics are estimated to cost $20 billion for infrastructure alone, even after plans to overhaul the city’s sewage system were cancelled due to cost overruns. Estimates suggest that the city will attract only a fraction of the anticipated 480,000 (International Olympic Committee estimate) to 600,000 (Brazilian Ministry of Tourism estimate) visitors, which means that the already-compromised fiscal situation in Brazil will get worse at some point after the games have left town. And don’t expect the sewage situation to be cleaned up once the visitors have departed.

Meanwhile, it is getting more expensive simply to bid on hosting the games. When you add up the cost of drawing up construction plans, hiring consultants, organizing the way the event will be run and the necessary travel expenses, a bid can cost as much as $150 million—as it did when Tokyo made its 2016 bid. The city of Toronto recently backed out of bidding on the 2022 games, due to an estimated $60 million in bidding expenses—and of course that doesn’t count the rumored under-the-table payments to IOC executives.

That leaves two countries still in the running for the 2022 Winter Games: Kazakhstan and China. It may not be a coincidence that neither country has to worry about pesky voters and citizens claiming that the costs are not justified by the benefits.

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One Response to Expensive Olympics

  1. Joanne Goodrich August 12, 2016 at 10:58 am #

    Sounds like the world of Olympics needs to “downsize and get real”. Maybe a look back at much earlier Olympics and figure out how to keep the competitiveness but eliminate some of the show. Looks like the outfits alone had to cost a lot – so many different changes of costumes (yes, I know there are sponsors who pay to put their names on stuff). Maybe have to offer the next Olympics to previous countries/sites to get more use from unused past venues.