CHART OF THE WEEK

While the Olympics are a spectacle of global unity and athletic prowess, the economic implications for host cities are expensive and often contentious. Hosting the Olympics involves substantial costs, primarily due to the need for new infrastructure like stadiums and transportation investments.

Recently, the International Olympic Committee (IOC) has reduced the restrictions on infrastructure requirements, bringing down costs but not increasing the number of cities bidding for the Games. For the 2012 Olympics, nine cities were in contention, whereas for the 2024 Games, only two cities remained in contention due to three cities withdrawing because of home protests. Concerned about the lack of future bids, the IOC awarded the next two Olympic Games to those two cities, Paris (2024) and Los Angeles (2028).

The bidding process requires cities to submit budget estimates of the cost of hosting the Games. The process is designed to severely underestimate the costs to enhance one’s bid prospects. The outturn cost figures in the chart are likely underestimated and they focus solely on sporting venue costs, not counting other infrastructure investments. In some estimates, it is said that Beijing spent around US$50 billion for the 2008 Games.

Direct revenue from the Olympics is generated through six main sources. The IOC (which provides financial aid to cities hosting the Games), control broadcast partnerships, the Olympic Partner Programme (TOP), and other commercial rights. Meanwhile, the Organising Committees of the Olympic Games (OCOG’s) control domestic sponsorships, ticket sales, and licensing programmes. Despite direct revenue increasing throughout the years, questions remain about the sustainability of this financial model.

A common argument presented by the International Olympic Committee (IOC) is that hosting the Olympics provides long-term benefits through enhanced global exposure and the revenue generated by tourists will offset the initial costs. This is not a guarantee, as both Beijing and London saw decreased tourism following their hosting of the Games.

Given the financial burdens and challenges associated with hosting the Olympics in a single city, it might be worth considering a model where the event is spread across multiple locations within a country or a set location with permanent infrastructure. These approaches could potentially alleviate some of the pressure and distribute/reduce the cost.