By Christabelle Chukwuma-Ugwu
When a city hosts the Olympics up to billions of dollars are poured into it. The hope is that the investment will boost the city’s GDP in the short term with job growth, and boost the trend GDP growth in the long run with increased tourism. Often times the impact of hosting the Olympics are less positive than expected. In the 2006 Turin Olympics, Italy lost $3.2 million. Russia spent over $50 billion on the 2014 winter olympics, but only made a revenue of about $53 million. The 2016 Rio Olympics where expected to cost $14 billion, but came out closer to $20 billion, and Rio had to tradeoff healthcare, police, and other funds, to reallocate that money to the Olympic funds (Eizikowitz, Grant).
One of the biggest issues that comes from hosting the hosting the Olympics is all of the infrastructure that a city must add to accommodate the large crowds that the Olympics draws. In Beijing’s example, the Bird’s Nest Stadium cost about $460 million to build and an additional $10 million each year to maintain (The Economics of Hosting the Olympic Games). In order to pay for the needed infrastructure most cities choose to raise taxes, and when taxes are raised the economy actually contracts. When taxes are raised people have a lowered disposable income, which leads to a decrease in spending (demand),which leads to a lowered GDP. Also, the city usually expect to regain the spent money by using Olympic venues for other purposes, but because of the specialized nature of the venues there is not much post-Olympic demand for the facilities. With very few groups that are willing to rent out the venues, instead of making revenue, cities end up wasting more money trying to maintain an unwanted and unused buildings. Additionally, many cities expect that the increased flow of money coming from tourism will continue, but it tends to decrease after the Olympics have passed, especially if there are no longer advertisements to persuade tourists to visit that city. When it comes down to it, unless a city already has the necessary infrastructure to host the Olympics, the economic strain that comes with building it is not worth the economic output that the Olympics bring.
Works Cited
CBS News. "Why Hosting the Olympics Is a "terrible Idea"." CBS News. CBS Interactive, 03 Aug. 2016. Web.
"The Economics of Hosting the Olympic Games." Council on Foreign Relations. Council on Foreign Relations. Web.
Eizikowitz, Grant. "Why the Olympics Are a Terrible Investment for the Host City." Business Insider. Business Insider, 19 Dec. 2017. Web.
Many of the now unused stadiums in host cities now lie in desolation, as the cost of maintaining them far outweighs the amount of people who are going to actually use the venue. Very rarely do those stadiums get utilized after the Olympics have ended, and those jobs created by the construction certainly don’t last forever.
ReplyDeleteThe costs of the infrastructure needed for the Olympics far outweighs the money that comes in from the Olympics. By raising the taxes to pay for the stadium, all it does it lower the citizens' disposable incomes, which contracts the economy. After the Olympics are over, the stadiums are just left abandoned, costing the city more money to maintain it.
ReplyDeleteThis is question I have always wondered why do they want to host it because from the article you've showed me that the cities that host normally can gain a better GDP and earn more money the year of the Olympics but Russia was estimated to have the cost of 2014 Olympics to be around 14 million but really it was closer to 20 million so why take the risk of losing money?
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ReplyDeleteWhen you look at the Olympics from a business sort of view all you can see is money flowing out of everywhere because this is a worldwide event that happens every 2 years and people are so excited about it. For businesses I think that they expect to receive a ton of money because of how highly the olympics are sought to be but these countries have never hosted an event like this so they don’t know what to expect. I think that the olympics is a great thing but if you are trying to make a profit then don’t even try it because it won’t work.
I was surprised to hear how much money the host city actually loses from hosting the olympics. I wonder how much more money they make from lodging and restaurants from tourists? Does that even make a dent in the amount of money it costs to build and maintain the nice olympic facilities?
ReplyDeleteMost people think that hosting the Olympics does bring in big revenue for the city but the amount they spend on things that need to be done in order to host, tends to be much more than expected. It’s hard for a city to make that commitment because of not truly knowing how much they will spend and how much will come in yet so many cities want to host the Olympics. Most of these cities, most likely aren’t thinking about the long term effects but rather the short term effects of the increasing jobs and hopefully increasing revenue.
ReplyDeleteIndeed the city that hosts the Olympics can affect the economy of that town. If you have all of those famous athletes just walking around the net worth of everyone just skyrockets. If it’s hosted in a big major city then a lot of people would visit because they always wanted to visit that city. This can also cause the economy in that area to fail a little bit because of all that money that’s coming in and all the people that go to events like this just to protest or do something bad that will affect the city. Look most of the Olympics there's always some sort of threat that happens. If you noticed the town the Olympics is hosted in the prices of everything just skyrockets because they know that people from all over the world will come to watch so they need a place to stay, to eat, and transportation to get around.
ReplyDeleteI never truly realized how much money is truly spent on the Olympics building process. I have always known it was a lot for some countries to handle while also taking into consideration their own economy before and after the Olympics occur. Back when Brazil was hosting I remember there was lots of concern for the athletes who would be going there as the water conditions weren’t well managed making many countries back out from competing.
ReplyDeleteI didn’t realize how much money countries lose when they host the olympics. Do they get support from any TV providers that make massive amounts of money from the olympics when people all over the world watch it? They have to have a system put in place that helps the host get out of whatever debt is caused.
ReplyDeleteFor countries without the needed infrastructure to host the olympics it is not worth it. The only point to spend billions of dollars on the olympics expecting their revenue to be higher than what they spent, is if that country is able to use the built infrastructure for multiple olympics instead of building it and maybe not hosting the olympics for another 50, and the whole time spending millions to care for everything that was built but not being used. Countries bid to host something that most of them don’t already have the infrastructure for and are just going to lose money.
ReplyDeleteI'm surprised that all these business loos that much money do to how popular the Olympics are but it kinda makes scene that the business are losing money instead of gaining money. Do to the people that pay to get in which is a lot of money like the starting price is at $400 and can get up to almost $6,000 for front row seats. So i can see why business can loss money instead of gain money.
ReplyDeleteI would have never expected that hosting the olympics would cost so much just for 7 days! But thinking about everyone across the globe going to one sport to compete for their country is a good explanation why hosting the olympics could cost so much. I was also wondering how the government of the country would save up over $400 million?
ReplyDeleteEven though the Olympics loses a ton of money, I would argue that there are a lot of positive effects on the host city/country. Restaurants, hotels, other attractions, and more would all benefit because of the sheer abundance of people in the area. For example, when the Olympics were in Rio, attractions like the street vendors, the monuments like the Giant Jesus statue with the open arms, and also their beaches saw a vast increase of people and wealth.
ReplyDeleteI agree that because of the exposure of the Olympics can affect how the city functions and I think it can depend if the event has a positive effect on the city. The event brings many visitors, which can bump up the tourism revenue for the city, but at the same time, it can cost a lot to build new buildings and stadiums for the events. For some cities, where a lot of it is already built, it can be easier, but in a more rural place, they need to build a lot, which has high costs.
ReplyDeleteI agree that the buildings for Olympics are costing way too much to make and way too much to maintain after the Olympics are done. Especially since the countries/cities aren't making enough money from the Olympics to make a profit or even break even. This is putting many countries in debt and also makes a space that people use once but are still paying annually to maintain.
ReplyDeleteFirst of all, your graphic is really powerful in showing just how much is spent on the Olympics, as opposed to the expected return on those investments. It was also really important how you emphasized what happens in the short run versus the long run. Most countries know that when they host the Olympics that the short run will not be as profitable as in the long run, but showing how along with explicit costs, implicit costs greatly detract from the revenue a city would make during and after the Olympics. It was also good to note that while demand might increase due to tourism, spending from the people of the country itself who affected by tax hikes will decrease, and that decrease is much more constant than a short influx of tourists who may only spend money for the short time that they stay, and without advertisements, may not return.
ReplyDeleteI was interesting to see how much cities go over budget when hosting the Olympics. You would think that they would make some of the money back from the amount of people lodging in hotels and dining at restaurants, but it all really depends on how the area was before the Olympics came into town. It would cost so much more money for cities to build hotels and restaurants if they did not have them before so in the long run, the money made by these amenities wouldn't even allow them to break even. I look forward to see what the future holds for cities that are going to host the Olympics and see if they are willing to pay the price.
ReplyDeleteThis is very interesting to think about, because going back a couple of years ago I remember when the games were in Rio and they had to build a ton of new venues, and consistently make sure that the city was clean (they were having issues with water quality I believe). The bad thing is that most of those venues are now just sitting there untouched and were built for a couple of weeks in the summer. I think on the flip side if they can find a way to use these venues then they'll be able to make some of the money back that they lost. But I also believe the Olympics impact the economy positively because tourists that may have never visited their country come and watch to support their native country. While there the people will have to eat, have a hotel, buy things they may have forgotten at home, etc. So there's still positives from hosting the Olympics and it gives the country a ton of exposure. There are losses and benefits of having the Olympics your country just has to decide is it really worth it.
ReplyDeleteHosting the Olympics is a huge accomplishment in this day and age ,but I didn't realize that only hosting the event for a limited time can cause there to be so much of a cost up front. It obviously produces an excess of wealth for surrounding business, but simply the costs of the addition of amenities is insane. Plus, when the Olympics is over, countless buildings are simply set to rot and are left abandoned. It is interesting in how cities will change how they make the buildings in the future.
ReplyDeleteThis is interesting because usually you would think that the Olympics encourage economic growth. But as mentioned if buildings are not being used and cost more to maintain that the amount of money that is brought in it will lead to higher taxes for people who live in the country/city. Instead of building new stadiums every year it would be more effective to re-use stadiums and places so that billions of dollars are not wasted constructing building that are only used once or twice. Hopefully in the future the stadiums will be more cost effective to eliminate the negative affects on the city.
ReplyDeleteThe Olympics are watched by just about every country in the world. The exposure the Olympics gives those hostess is actual insane so even though yes there might be a lose economically the publicity and promotion given to the host still is drawing in mass amounts of income so I feel like I agree but the exposure still makes hostess crazy amounts of cash.
ReplyDeleteIt's interesting how the host nations put so much money into the theatricals and promoting of the Olympics, when so many people already watch it in the first place. The nature of the Olympics has created a standard to adhere to, which is, now, very costly. With intentions of profiting from the international event, nations go full out in their delivery of the event. When, in reality, places that have hosted actually suffer more than benefit from the Olympics. For the 2016 summer games in Rio, the event resulted in impoverished citizens, violence, and the elongation of a three year recession, rather than an economic boost. I like how you included the domino-like effect of the need to build infrastructure, which leads to raised taxes and less consumer spending. This in turn, lowers the GDP instead of raising it. It is unfortunate that such a fun event can lead to a huge amount of debt for the host country after all of it ends.
ReplyDeleteI think it's remarkable how much some of these countries spend on the Olympics. It's making me think that part of the criteria for who can host the games should also be who can financially support them without too much of a negative impact. For Rio, I remember the huge controversies with how other city infrastructure tanked because the money had to get shuffled over. Countries who want to host the Olympics shouldn't do it because they want to make an economic gain but rather because they want to celebrate this tradition. Doesn't the Olympic Committee have a responsibility to ensure that they aren't choosing host cities that have widespread issues financing the event (before and after)?
ReplyDeleteI remember looking at the Olympics in Russia and how it negatively effected their economy rather than helping it. I thought this was a special case, so it shocked me that the Olympics typically run economies further into the ground. It does make sense though, with the intricate stadiums, as well as the wages that they need to pay the people working there, like security, vendors, etc. The Olympics just cost so much money and the crowds aren't as big as expected, therefore failing to break even almost every time. With these expenses, its hard to make economic profit, let alone accounting profit.
ReplyDeleteI agree with this article, as it goes to show how the host city fares while hosting an international event. Many of the cities more urgent and important get diverted until the city has fully built their Olympics facilities. Final costs turn out to be considerably high compared to the initial budget, which leaves the countries in a worse-off state. Over time, the stadiums rarely get used, and still use up money to be maintained. This causes an even greater cost over time, which seems rather unnecessary.
ReplyDeleteThe reality that only one Olympics held was truly profitable (LA in 1988) would make it seem useless to host them. However, I think the prestige of hosting an event of that magnitude is almost worth the astronomically high costs associated with hosting the games, and, even if not profitable, the Olympics often force cities to better themselves in general before hosting (looking at London in the 2000s leading up to their Olympics in 2012). Obviously, things can go wrong as they did in Athens and Rio, but costs alone I think aren't enough to make the Olympics not worth it. While riddled with controversy, the honor of hosting such a historically significant event is usually enough to convince cities to consider hosting. Either way, with bids for the games often spanning multiple cities and countries nowadays, such costs could be either alleviated or spread out in mass amounts.
ReplyDeleteOne thing to add to the direct income from hosting the Olympic Games is the prestige and "soft power" from hosting them. Many countries, especially ones like Russia and Brazil with growing economy and aspirations for a more influential role in world politics, will try to host the Olympics to present a good face to the rest of the world. This intangible income supplements the actual income the city brings in because of the games.
ReplyDeleteThere is also the human cost of holding the olympics. In Rio, at least 11 people died during the construction of the stadia, and the very suspicious government of Brazil faced very little international backlash. The political situation in Brazil is seems to be reaching a head during the election year, where the populus voted in a known grafter in Bolsonaro, a month after he got stabbed at a rally. Latin election seasons, much like latin dramas, are spicier than their american counterparts.
ReplyDeleteThere is also the human cost of holding the olympics. In Rio, at least 11 people died during the construction of the stadia, and the very suspicious government of Brazil faced very little internatio
ReplyDeletenal backlash. The political situation in Brazil is seems to be reaching a head during the election year, where the populus voted in a known grafter in Bolsonaro, a month after he got stabbed at a rally. Latin election seasons, much like latin dramas, are spicier than their american counterparts.
This is a really interesting topic. I think the cities initially experience economic growth, with the new popularity of the cities, and people staying at hotels and eating at restaurants. However, the negatives surely outweigh the positives. These cities build Olympic Stadiums that get used maybe once or twice a year after the Olympics. There is also the cost of the damage done to the city. In the Rio Olympics, crimes went up by 26%, and the sewage systems didn’t work for most of the city. Overall, host cities do not benefit from hosting the Olympics, they suffer.
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ReplyDeleteMost people think that hosting the Olympics does bring in big revenue for the city but the amount they spend on things that need to be done in order to host, tends to be much more than expected. It’s hard for a city to make that commitment because of not truly knowing how much they will spend and how much will come in yet so many cities want to host the Olympics. Most of these cities, most likely aren’t thinking about the long term effects but rather the short term effects of the increasing jobs and hopefully increasing revenue.
This is a very interesting topic because hosting the Olympics typically does not bring in all that much money for your country. Although you may not be making very much revenue from the actual Olympics, the publicity that your country receives is also a very beneficial factor of hosting the Olympics. This is important because it may make people feel they want to vacation to your country or they want to move to your country. There are certainly positives and negatives to hosting the Olympics.
ReplyDeleteWhich ever country hosts the Olympics usually gets a great amount of publicity throughout that time period. It is interesting to see how much money is put into the Olympics, but also to see how much damage it can do to the country/city in the long run. It is not much of a shock to me that the country hosting the Olympics receives many tourists and people visiting their country during this time, but not much after it is over. That is a very difficult economic issue considering taxes were raised during the whole Olympics, than dropped after due to the lack of people being interested in the Country anymore.
ReplyDeleteI agree that overall, there is not as much of an economic benefit to hosting the Olympics as there might seem. So much money if poured into building state of the art sports facilities that are then left abandoned and unused, wasting space and the money that was spent to build it.
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