Matthew Fritchen
Mrs. Straub
Econ
11 October 2014
Is It Worth Hosting the Olympics
This topic receives attention every time cities apply to host the Olympics. Is the Olympics as costly as it is commonly made out to be. The answer is no the Olympics can produce great economic benefit to the cities that host them. The success of the olympics rests on the pre-olympic setup plan. To put this into perspective in the 2004 Olympics Athens managed to accumulate close to 15 Billion US dollars worth of debt or in Montreal in 1976 where the city recorded a debt of 990 million dollars. Although there has been many accounts of unsuccessful hosts losing millions of dollars there have also been great successes as seen in the 1984 Olympics in Los Angeles where there was a profit of 250 million dollars. So the question is commonly posed why host the games?
When we analyze what went wrong for Athens in their planning that lead to the largest loss in Olympic history we will see that the cost of producing all new stadiums and facilities sets up for extreme losses. The first thing that Athens did wrong was base some of their predicted profits on future increases in tourism. Planning for an increase in tourism after the Olympics has cost cities money every time it is believed to eliminate out the costs of preparing for the games. The second thing that Athens did wrong occurred when they constructed way to many hotel rooms for the games. The main issue that occurred in Athens was that they saw marginal benefit in planning for long term increases in revenue when the olympics typically don't produce long term profits. Athens also built stadiums that they would never use after the games which cost the city greatly.
What did Los Angeles do to make a profit? The first thing that Los Angeles did that was different than most cities in their planning was the use of stadiums that were already built which greatly lowered the costs of preparing for the Olympics. With eliminating the cost of producing all state of the art facilities Los Angeles stayed well within their budget which is another key to producing a profit. Lastly with the costs of stadiums out of the way the only thing that Los Angeles needed to spend a substantial amount of money on was on Hotels.
The Olympic games also bring many positive externalities to the cities that host. First there is a large increase in the need for construction jobs and workers for the facilities at the games. As well as just jobs the olympic games also brings state of the art facilities to the community. During the olympics local business see increases in profits due to the rush in tourism. With the olympics there is an increase in consumer demand for olympic based products due to a rise in consumer expectations for the products. The Olympics also bring negative externalities to the community as well, the increase in tourism could cause there to be an increase in disturbances during the games. Another negative externality that occurs is an increase in taxes due to the fact that the games need funding so people living in and around the host city see increases in their taxes.
The successfulness of the Olympics is heavily dependant on the plan that is put in place. By following what has worked before profits can be made and there will be great economic benefits for the host city and its citizens. Overall the hosting the Olympics is worth the cost included in preparing it.
Sources
NEW YORK (CNNMoney) -- Hosting the Olympic Games is a lot like throwing the world's largest --, and most party.. "Olympics is a very risky bet for cities."CNNMoney. Cable News Network, 30 July 2012. Web. 11 Oct. 2014. <http://money.cnn.com/2012/07/30/news/economy/olympics-cost/>.
"Rising Cost of Olympics Begs Question: Why Host?." VOA. N.p., n.d. Web. 11 Oct. 2014. <http://www.voanews.com/content/rising-cost-of-olympics-begs-question-of-why-host-the-games/1844546.html>.
When you said "Overall hosting the Olympics is worth the cost including preparing it" I believe considering all of the information you gave it would be better to say that hosting the Olympics is worth the cost if it is prepared for correctly because as you said with Athens, they did not plan well and suffered huge losses from their hosting while Los Angeles planned very well and made profit.
ReplyDeleteMatt, this is topic is personally very intriguing because of the Chicago bid in the last Olympics and the press in this area that got. Many people argued that it would be good for Chicago to host the Olympics because of all the revenue it would generate, but there were opponents to the plan as well. From your article, considering the fact that Chicago already has numerous stadiums and hotels, it would most likely be profitable for it to host. I'd be curious to see the average net gain/loss for all olympic host cities. Also, do you think a smaller city like Milwaukee could profitably host the Olympics? We don't have as much infrastructure as Chicago or LA so I wonder if we could pull it off.
ReplyDeleteMatt, this is a very interesting topic that I've never really thought about in detail. The Olympics are a big deal, throughout the entire world, and it is an honor to host them, and is supposed to be a huge source of economic advances. Because of hosting the Olympics the city gets great renovation projects done, a huge increase in tourism, and recognition and honor. I never thought about the negative externalities that came with the olympics. Hotels are obviously key to the olympics aside from facilities to host the games, people that are coming from different countries need somewhere nearby to stay, and this cost is not worth it once the games are over. Clearly it is a necessity, but they should think about creating hotels that can be turned into something that’ll continue to be used, such as office buildings when the games are over. Overall this was a very interesting topic, and one that I only thought about the economic blossomings that occur, and not the downfall.
ReplyDeleteHey matt!
ReplyDeleteI believe you have a very strong topic. I like how you related something that most people would not even think about into our economy class. It helps us all realize that there is more to certain events then what is shared with the public. My greatest concern however, is the taxes that the citizens have to face. If I was a citizen of Los Angeles and I was told that I had to pay more money in taxes just to have annoying tourists taking pictures while i'm trying to drive to work or clogging up the nearest Bdubs to my house because they are all hungry at the same time, I would tell you it wasn't worth it. So it is probably better that they don't know,
While having the Olympics s a great honor, the aftermath can be quite the mess. Athens, among many other places that took a hard hit in debt, prepared too much for the Olympics. Sometimes people don't realize how bad the negative externalities can be.
ReplyDeleteMatt, you bring up a really interesting topic. I for one love watching the Olympics, so I really enjoyed reading your post. Hosting an Olympics is no doubt a huge commitment and project for a city to host, and comes with a whole range of pros and cons. I would have to agree, also, that the right planning and preparation for the Games will prove profitable. In the end, I believe that hosting the Olympics should be a great honor for a city, and not a burden.
ReplyDeleteThis was a very interesting way to look at the Olympics. Most people assume that every place that hold the Olympics will automatically make money and continue to make more money through tourism. But no one realizes that you are not guaranteed that great tourism after the fact. Also it is hard to predict how great of a turn out you will have with buildings and other stuff they have to build. Overall holding the Olympics is a very risky game, you never know how well your profit will be.
ReplyDeleteMatt, fantastic job! Actually, every time I watch the Olympics, I think about what they do with the stadium after the games are done. I mean, you can still use it for track events, but who goes to track events am I right!? Los Angeles was smart and lucky because you used stadiums that were already built, and they were actually pretty close to each other. I'm very lazy, so I wouldn't want to walk 2 miles to get to a different event. Now thinking about it, the so called "Nest" in Beijing is probably just sitting there not being used, but sitting there trying to be cool. I love it Matt and I'll be holding your kicks for the rest of the season!
ReplyDeleteLove, Conner XOXOXOXOXOXOXOXOXOXOXOXOXOXO
Wow Matt, I haven’t really, before now thought about the negative externalities of holding the Olympics. I previously knew that the Olympics cost a lot of money to hold, but I figured with all of the people who attend the Olympics the cities would come out at least even, not in debt. I also hadn't thought about where the money for the Olympics comes from, so having the Olympics in your hometown would be cool, the idea of higher taxes would not be.
ReplyDeleteGreat Job Frich! I completely agree with Conner, I have always wondered what the countries do with the stadiums and all the things that they created for the games after they are done. I believe that at first it seems like its going to be worth all the money spent, but in the end after the stadiums are all built and the games are done and over with, the people then realize that with taxes it just doesn't cut it.
ReplyDeleteThis is a quite interesting take on the topic that has been highly debated lately, and not just for the Olympics. The same argument holds weight for the FIFA World Cup, as was just hosted in Brazil this past summer. I do think that much of the success or failure does come from the foresight of the planners. I agree that those in Los Angeles did a good job be realistic about a budget and staying within it to gain a profit. Many lessons for the future can be learned from that example.
ReplyDelete