By: JB Becker
The 2018 Winter Olympics in PyeongChang, South Korea has just come to a close. Athletes all across the world came to compete for the gold, but what trade-offs do the Olympics have on the hosting country?
The first impact on the country’s economy is their bid to host for a given year. For example, Tokyo lost approximately $150 million on its bid for the 2016 Olympics, and spent approximately $75 million on its 2020 bid (Investopedia). Then, once the city wins the bid to host the Olympics, cities commonly add roads, build or enhance airports, and construct rail lines to accommodate the large influx of people. Housing for the athletes in the Olympic village, as well as at least 40,000 available hotel rooms, and specific facilities for the events, must be created or updated as well. Overall, infrastructure improvement costs range $5 billion to $50 billion. When PyeongChang won the bidding of hosting the 2018 Olympics in 2011, their estimated cost spent on building up infrastructure was $7 to 8 billion. Now in 2018, the Olympics were estimated to cost South Korea $12.9 billion.
With the Beijing Olympics in 2008, $40 billion was spent, and only $3.6 billion revenue was generated. After the Olympics, Beijing had a deficit of $36.4 billion. The figure below shows the deficit of recent Olympics. This results in the country needing to increase their taxes until they pay back this debt. In addition, the Bird’s Nest (stadium used for the Beijing Olympics) costs $10 million dollars annually to keep it maintained. Montreal hosted the Olympics in 1976, and they did not pay back their deficit until 2006. After some Olympics, the country does not maintain the buildings and they often go abandoned. (More information about the cost of hosting the Olympics, Video)
http://www.ibtimes.com/economic-impact-winter-olympics-not-great-russia-sochi-stands-gain-1554153
In 2009, Rio de Janeiro bid to host the Summer Olympics. At that time their economy was in the midst of one of its best economic times in 50 years. Contrast that with today, where Brazil is in its worst recession since the 1930s. During the process of building the infrastructure, Brazil ran out of money and had to take loans from the government to be able to finish building the arenas. This lead to the government cutting pay for many teachers in Brazil, which caused the teachers to go on strike for three months and resulted in schools being shut down for these months. A big news issue with Brazil hosting the Olympics, was the outbreak of the Zika virus. This virus caused many tourists and athletes to not participate in the Olympics, Rio lost $7 billion in tourism. Some people say hosting Olympics add jobs. In Brazil, the risk of the Zika virus lead Brazil to employ 2000 healthcare professionals to help during the Olympics. Unfortunately, many other host countries hire more employees to help construct the new buildings, yet most jobs are temporary and ultimately do not help the country with unemployment.
So why would any country still want to host the Olympics? There are some benefits to hosting the Olympics. Countries will more people to know about that city. For example, the Sochi Olympics lead to more people wanting to travel there. Other countries use the Olympics as a way to improve their city. London used the Olympics to improve the east side of the country. When New York was bidding, it was a way to get a new stadium for their football team the Jets and Giants.
Overall there is a extremely large negative effect on the hosting country of the Olympics. Most countries lose billions of dollars, and ultimately gain little to no marginal benefits from hosting the Olympics. While they may have received the global attention they desired, they will be reminded of the costs and debts for years or decades to follow.
Works Cited
(www.dw.com), Deutsche Welle. “Is Hosting the Olympics Worth the Cost? | All Media Content | DW | 05.08.2016.” DW.COM, www.dw.com/en/is-hosting-the-olympics-worth-the-cost/av-19451281.
Allen, Brian. “Rising Cost of Olympics Begs Question: Why Host?” VOA, VOA, 4 Feb. 2014, www.voanews.com/a/rising-cost-of-olympics-begs-question-of-why-host-the-games/1844546.html.
CBSThisMorning. “Are Costs of the Olympics Worth It for Host Cities?” YouTube, YouTube, 3 Aug. 2016, www.youtube.com/watch?v=XbhkW1WR5jg.
Harress, Christopher. “The Economic Impact Of The Winter Olympics: Not Great For Russia But Sochi Stands To Gain.” International Business Times, 5 Dec. 2015, www.ibtimes.com/economic-impact-winter-olympics-not-great-russia-sochi-stands-gain-1554153.
“Investment Management Company.” Manning & Napier, www.manning-napier.com/insights/blogs/markets-and-economy/the-economic-impact-of-the-olympics.
Voa. “South Korea Worried About High Cost of Olympics.” VOA, VOA, 18 Dec. 2017, learningenglish.voanews.com/a/south-korea-worried-about-high-cost-of-olympics/4164319.html.
Wills, Jennifer. “What Is the Economic Impact of Hosting the Olympics?” Investopedia, 24 Sept. 2016, www.investopedia.com/articles/markets-economy/092416/what-economic-impact-hosting-olympics.asp.
I find it interesting that during the 2008 Olympics, that there was such a large deficit when the event was held at such a large city. You would think that there would be a lot of people in attendance, along with the ticket sales, but the amount spent on building the arenas for the Olympics was not worth it obviously.
ReplyDeleteIt doesn't seem like a smart idea to host the Olympics with the only plus side being that you might attract more tourism because more people know about your country. I think one of the problems that contributes to this downside is the fact that you need many different arenas and buildings that take up a lot of space to accommodate for the influx of people during the Olympics. Because the buildings are so big, they take a lot of money to be kept up and running after the Olympics is over.
ReplyDeleteA lot of the money is going towards Olympic buildings. The buildings are only temporary, and are taken down after the games. The countries were they spent the most money are making the least amount back. If you look at 2014 Sochi, they have barely any ticket sales & broadcast revenue, however they spent the most on the games. Spending so much for a few weeks of publicity, only get some tourism back is not financially smart.
ReplyDeleteThis post is very interesting and provides even more insight into the factors that account for the massive cost of hosting the Olympics. The economic struggles of Rio are particularly important, as they reveal that while a temporary increase in GDP may be attained by creating new infrastructure, in the long run, poverty and unemployment are possible, and GDP will fall significantly by letting Olympics facilities go unused. The International Olympics Committee has discussed rotating Olympics between several cities in economically stable countries, and I think this is a good idea to foster less debt and despair.
ReplyDelete