The Cost of Hosting Olympic Games

Are the prestige and tourism the Games may bring still worth the cost?

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Illustration: Lindsey Wiercioch

As the dust settles on the Pyeongchang Olympics, a decades-long debate on the financial virtues of hosting the Olympic Games is beginning once again. Hosting the Games has always been expensive, but in recent years the cost of doing so has increased dramatically, causing citizens and governments across the world to question whether the prestige and tourism that the Games may bring are worth it any longer.

While Olympic Games were not always profitable during the first half of the 20th century, the received wisdom was that any deficit racked up by the city or local government in funding the games would be compensated in the long-term via investment in infrastructure and increased tax returns from local businesses. However, the 1976 Montreal Summer Olympics showed that, at the very least, improper planning and oversight could lead to financial ruin for the host city. As a result of the 1976 Olympics, Montreal was left with nearly $1 billion worth of municipal debt that took 30 years of tax hikes to recover from.

Those in favour of hosting the Olympics argue that the circumstances surrounding the Montreal Games were unique, and are not inevitable for all hosting cities. In particular, they point to the fact that the Montreal government was unable to reign in striking unions, leading to cost overruns, and did not receive a guarantee from either the Quebec or Canadian governments. If the Montreal government was able to stop any of these failures and miscommunications from happening, at least some of the cost overruns could have been avoided.

Further, supporters of the Olympics often point to the Salt Lake City Winter Games of 2002 as a success story that can be replicated elsewhere. While it suffered a cost overrun of 24 per cent (compared with the 720 per cent cost overrun in Montreal), a successful marketing campaign meant that the Salt Lake Olympic Committee was left with a $40 million surplus at the end of the games. This surplus enabled the government to maintain the former facilities and use them for youth programs. Beyond that, Salt Lake City is used as a role model because much of the cost went into improving and building infrastructure, in particular the TRAX light rail system, which remains one of the most effective light rail systems in the United States. The games also resulted in Salt Lake City becoming a tourist destination for winter sports; whereas previously the city’s Mormon reputation had dissuaded tourists.

Complicating the debate is the recent phenomenon of nationally funded Olympic Games, in particular the Beijing 2008 Summer Olympics and Sochi 2014 Winter Olympics. These two Games were the most expensive in history, costing $44 and $51 billion US respectively. Both games were financially unsuccessful in the sense that neither made a profit, but the governments of China and Russia viewed the propaganda and prestige value of hosting an opulent Olympics more important than balancing the books. These ambitious and extravagant state-funded Games have contributed to the rapid increase in the costs of hosting since the 1990s. In order to be considered a potential host, municipalities in democratic countries are forced into a competition with countries that are gladly affording the opulence with the open wallet of national treasuries.

This pressure has led all but the largest cities to withdraw from applying to host the games, especially the Summer Olympics. The competition for hosting the 2024 Summer Olympics came down to only two finalists, Paris and Los Angeles, after medium size cities such as Boston backed out over fears that the city government would be forced to foot the bill for the inevitable cost overruns.

Given these fears, how has the 2018 Pyeongchang Olympics fared? While not the worst performing Olympics on a financial scale, these 2018 games are expected to cost $12.9 billion, which is far more than the previously estimated $8 billion. If tax intakes do not increase or tourism does not pick up significantly, the regional government could suffer a $9 million dollar deficit per year as a result.

While the 1988 Seoul Summer games were a success, Pyeongchang does not seem to be repeating that success. This is in part because the city, compared with Seoul, is small and relatively impoverished. Many of the Olympic facilities are remote and inaccessible to the general public. The city itself also lacks existing tourist attractions to go with these Olympic facilities. In a word, the city is too unpopular for tourism to thrive there. Hopefully at least, the facilities will not suffer the fate of those of Athens’ 2004 Summer Olympics – remaining in a state of disrepair.

So long as the cost of hosting the games continues to rise, organising committees will face the task of convincing local residents that their taxes are best used in competing against the financial might of global financial capitals and state treasuries.

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