An Olympic Price Tag: What it Costs to Host the Games

August 16, 2016

If you’re like me (and quite frankly the rest of the world) you’ve spent the last week glued to your TV screen while the likes of Michael Phelps, Katie Ledecky, and Simone Biles showed us that seemingly inhuman feats of strength and endurance were entirely possible.  Every few years the Olympics take over for several weeks with coverage that seems to air constantly and on multiple channels.  They’re everywhere and along with the athletic coverage comes an inside look into the culture and heritage of the host country.  So far I’ve watched an interview with the Brazilian supermodel, Gisele Bündchen, learned about Brazilian cuisine, and seen an interview with the woman who inspired the song The Girl from Ipanema.  I didn’t even know that Ipanema was in Brazil and now I do.  Unfortunately, for any country that chooses to host the Olympics and show the world what they’re all about there is a heavy cost – a cost that many would argue is probably not worth it.

 

Currently, the cost of the Olympic games in Rio is estimated at around $4.6 billion which is significantly less than the last two Olympics (London spent $15 billion and Sochi spent $21.9 billion – the most costly to date).  However, the Rio Olympics are still expected to end up costing an additional $1.6 billion over budget.  This isn’t surprising given that a recent paper published by students from the University of Oxford’s Said School of Business found that the Olympics have the highest average overrun cost of any mega-project and not only that, but they found cost overrun for all Olympic games meaning cities consistently underestimate the cost of hosting the Olympics.

 

When Brazil was initially chosen to host the Olympic games in 2009 their economy was booming, but in recent months Brazil has seen the fallout of ongoing political corruption, the spread of the Zika virus, and just 49 days before the start of the Olympics the governor of Rio declared a state of financial emergency.  Not the best environment for taking on a $4.6+ billion project.

 

Is it worth it?  Unfortunately, the answer is difficult to nail down largely because it’s hard to measure exactly how much money a country spends to host the games versus how much revenue it takes in as a result.  While multiple sources quote the $4.6 billion figure, it’s not entirely clear what this number includes.  Obviously there is a cost to building all of the infrastructure and event centers to host the games, but there are also the additional extraneous costs for things like beefing up the local police force and cleaning up the city that may not be included.  It’s also difficult to quantify how exactly a city benefits from hosting the games.  There’s the money that was made from tourism, but even that is difficult to perfectly nail down.  In some ways, the best we can do is look at the mood of the population and economic stability of the country in the aftermath of the games.

 

Historically, cities have experienced varied levels of “success” due to hosting the Olympics over the long run and much of their “success” seems to be due to the stability of the city to begin with.  Again, it’s difficult to quantify what counts as a success and what counts as a failure, but looking back at two contrasting examples we can get a good idea.  While London spent the most of any city in history on its' Olympic games, a government survey estimated tens of billions of pounds would be poured into the British economy as a result of the games and the overall mood among the people there in response to hosting the games was positive.  In stark contrast, there are some that would argue that hosting the Olympics played a significant role in landing Greece with a debt burden that has continued to plague the Greek economy to this day.

 

While it’s unclear what the exact expense-reward tradeoff is to hosting the Olympics, what is clear is that the decision to do so is not one that should be taken lightly.  While we were watching a few nights ago, my husband happened to ask a friend of ours who is a native of Brazil if he felt like the world was being unfairly critical of Brazil for all of their problems.  He responded by saying that what everyone was criticizing Brazil about was indeed the reality there and it was good that people were finally acknowledging it, but it will take time for them to sort everything out and we can’t expect all of their problems to be fixed overnight.  He is right in many ways and only time will tell whether hosting the games was truly worth it for Brazil.

 

Bang, Soren. “Reports claim large profits form the London Olympics.” PlaytheGame. January 8, 2013. http://www.playthegame.org/news/news-articles/2013/reports-claim-large-profits-from-the-london-olympics/.

 

Flyvbjerg, Bent, Allison Stewart, Alexander Budzier.  “The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games.” Said Business School Research Paper. July 1, 2016.  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2804554.

 

Haddon, Alex. “Is hosting the Olympics ever worth the cost?” Quartz. August 10, 2016. http://qz.com/753250/rio-2016-is-hosting-the-olympics-ever-worth-it/

 

Tomkiw, Lydia.  "How Much Have The Rio Olympics Cost Brazil?  Budget of the Games Explained.” International Business Times. August 5, 2016. http://www.ibtimes.com/how-much-have-rio-olympics-cost-brazil-budget-games-explained-2397764.

 

Watts, Jonathan.  “Rio de Janeiro governor declares state of financial emergency ahead of Olympics.” Theguardian. June 17, 2016. https://www.theguardian.com/world/2016/jun/17/rio-de-janeiro-financial-emergency-olympic-games-2016.

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