Kyle Feinstein, Stanford University
Olympic host cities incur tremendous costs to welcome thousands of athletes from across the globe. Since the first modern Olympic Games in 1896, economists have debated whether the costs outweigh the benefits for potential host cities and how the International Olympic Committee (IOC) can institute reforms to make hosting a more appealing opportunity.
Before a host is even chosen, cities spend millions of dollars preparing to submit a bid to the IOC. Planning and organizing typically requires an investment of $50 million to $100 million. After a city is selected, the host has approximately a decade before the Games begin.
Infrastructure investments typically account for the bulk of spending, ranging from $5 billion to over $50 billion. This includes constructing specialized athletic facilities as well as the general infrastructure necessary to handle the flood of visitors. The IOC has a set of infrastructure requirements that each host city needs to meet, including having a minimum of 40,000 hotel rooms and an Olympic Village for 15,000 athletes and officials. Over 85% of the Sochi 2014 Games’ budget went to constructing non-sports infrastructure. More than half of the Beijing 2008 budget was spent on rail, roads, and airports, and roughly a fourth of Beijing’s budget was allocated to environmental clean-up efforts.
Operational costs comprise a smaller but still substantial portion of the Olympic city’s spending. Security costs have greatly increased since the 9/11 terrorist attacks. In 2000, Sydney spent $250 million on security. In 2004, costs soared to $1.5 billion for Athens and have since remained comparably high.
Many hosts also incur unexpected costs that cause the project to significantly overshoot its budget. Research from Oxford University finds that every Olympics since 1960 has exceeded its budget with an average overlay of 172%, adjusted for inflation. For example, after a surge in coronavirus cases, the Japan 2020 Olympics were postponed by a year and fans were not allowed in venues. This led to an estimated $2.8 billion in additional costs, an $800 million loss in ticket sales, and thousands of hotel cancellations. Overall, Tokyo’s initial $7 billion budget ballooned to over $15 billion.
All of these costs sum up to a multibillion-dollar price tag for hosts—and costs are only increasing. The Sochi 2014 Winter Olympics were the most expensive in history, with costs reaching nearly $60 billion.
It is speculated that few, if any, Olympic Games turn a profit. Beijing 2008 incurred more than $40 billion in costs while producing only $3.6 billion in revenue; Tokyo 2020 generated $13 billion in costs but only $5.8 billion in revenue. Television broadcasting is typically the largest revenue source, and the IOC collects more than half of this income. So who is left to pay the bill? The burden largely falls on the hosts’ taxpayers.
To cover the Tokyo 2020 Games’ major losses, the IOC contributed $1.3 billion, local sponsors contributed $3.4 billion, and Japanese taxpayers contributed a staggering $7.1 billion. And these are only the immediate payments. Many hosts are often left with infrastructure that requires costly upkeep and obscure sports facilities that have little future utility. Beijing’s “Bird’s Nest” Stadium cost $480 million to build, and its upkeep requires $11 million annually. Few events can fill enough of this colossal building’s seats—today, the stadium often sits unused.
Despite the massive costs associated with Olympic megaprojects, host cities still stand to gain valuable long-term economic benefits. Hosting the Olympics can foster job creation and attract international business. From 2004 to 2008, the Beijing Olympics created 1.8 million new jobs, of which 430,000 were in construction and 130,000 were in retail and wholesale industries.
Arguably the greatest benefit of hosting the Olympics cannot be quantified: prestige. For the duration of the Games, the host city shines under the global spotlight. Ornate facilities and high-tech stadiums are symbols of a country’s prosperity. Ultimately, Olympic hosts are not betting on profit—they are buying the world’s attention.
The question of how to make hosting the Olympics more affordable and sustainable is fundamentally economic. Los Angeles 1984, one of the most profitable Olympic Games in history, offers a blueprint for future hosts to follow. The L.A. Games concluded with a surplus of about $225 million. In the aftermath of the well-publicized fiscal failures of the 1976 Montreal Olympics, L.A. was the only city to submit a bid for the 1984 Games, giving it a significant amount of bargaining power with the IOC. Los Angeles Olympic Organizing Committee leaders also seized the opportunity to showcase American innovation by investing $50 million in technology, including personal computers, electronic timers, and mass spectrometers for drug screenings. Yet, at the heart of L.A.’s success was the city’s broader strategy to incorporate the Games into existing development plans. Former L.A. Mayor Eric Garcetti noted that L.A. changed the model by ensuring that “the Games fit inside the city’s needs and infrastructure, rather than the city trying to fit into the Games’ needs and the Games’ demands of new infrastructure.”
L.A. is confirmed to host the 2028 Olympic Games, and city leaders are working to reimplement this vision. For instance, the city will be utilizing UCLA housing and dining facilities in lieu of constructing a costly new Olympic and Paralympic Village.
In recent years, the IOC has also taken steps to reduce bidding costs and prioritize sustainability, including by instituting a new approach to electing Olympic hosts. The revamped policy ensures that hosts use a maximum of existing and temporary facilities and only build new venues if they fill a long-term need. To this end, events can be located across multiple cities or regions. Brisbane became the first host elected under this policy—the Brisbane 2032 Games are projected to deliver $17.5 billion in social and economic benefits for Australia.
As France and the IOC gear up for the 2024 Olympics, the world waits to see what it can learn about the effects of athletic megaprojects in a post-pandemic economy. However, even after the Olympic torch is extinguished, the IOC must continue to implement reforms that consider the individual needs of hosts and increase affordability.