Is hosting the Olympics a bad deal?

Tokyo 2020 was estimated to cost $7.4B. It will clock in at $20B+ and is the latest example of an Olympics deal gone awry.

A big part of the Olympics is watching which records fall.

Is hosting the Olympics a bad deal?

One record that host city Tokyo probably didn’t want to claim was “most expensive Summer Olympics ever.” Per The Wall Street Journal, Tokyo 2020 will own the title with a $20B+ price tag.

The only salvation is that Russia somehow spent $50B on the 2014 Sochi Winter Games.

Why are the games so expensive?

It mostly has to do with construction. Dozens of sporting venues as well as the Olympic Village have to be built.

One Oxford study looked at the previous 5 Olympics and found that sports-related costs averaged $12B; nonsports costs like transportation and security cost even more.

To make matters worse…

… the nature of construction often leads to cost overruns. These expenses are shouldered by the host cities, and every Olympics has run over budget by an average of 172% since 1960.

To wit: the Tokyo Games were originally estimated to only cost $7.4B (the 1-year COVID delay added $2.8B alone to the bill).

Most notoriously: the 1976 Montreal Summer Games went over budget 7x and the city spent 30 years paying down the extra debt.

What about all the money the cities can make?

Ticket sales, tourism, and sponsors can certainly boost the bottom line (COVID has crushed all 3 for Tokyo 2020).

But there are some notable issues, per Business Insider:

  • The International Olympic Committee (IOC) is taking a larger slice of the TV revenue pie (4% in the 1990s vs. 70% from Rio 2016)
  • Upkeep for (often unused) stadiums costs $30m a year
  • Precious real estate is used up

Add it all up…

… and the international recognition and good times seem less and less appealing. As noted by Business Insider, fewer cities are even bidding for the event:

  • Summer 2004: 12 cities bid
  • Summer 2020: 5 cities bid
  • Winter 2022: Only 2 cities bid! (China beat out Kazakhstan)

So, what cities want to beat Tokyo 2020’s “record” next? Paris will try in 2024 while Los Angeles will give it a go in 2028.

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