The Olympics in Rio are expected to cost £8bn, a modest amount compared with London (£18bn) and Beijing ($44bn). However the price tag for hosting the Olympics and the often poor returns are discouraging cities from making bids.by Vicky Pryce, Andrew Zimbalist / August 18, 2016 / Leave a comment
Are the Olympics worth the money?
Why should the most-watched global event ever end? It began in 776 BC, as a unifying sporting and religious event offering a temporary truce between Greek city states. Ever since its relaunch in 1896 in Athens, it has been moving from city to city every four years almost uninterrupted.
But there are negatives. Doping and political propaganda have tainted the Olympic spirit. There have been major financial mishaps. Some cities, fearful of the expense, no longer bid for the opportunity to host them. In 2004, Athens—the first city to host the summer Olympics after 9/11—faced a sharply increased security bill. The total cost of $9bn was substantially more than the $6.6bn Sydney had to find in 2000.
Many blame the cost overruns of the otherwise very successful Athens Olympics for Greece’s subsequent fiscal and economic crisis, but the London Games also overran—by 76 per cent. Lessons have been learned. Today’s operating budgets which cover the cost of staging the games—venue construction, an Olympic village, media facilities, transport, catering, administration, ceremonies—should, if properly managed, be covered by revenues from ticket sales, television rights and sponsors.
But there are also potential long-term benefits which cannot always be monetised—such as a population that takes up more sport and becomes healthier. It is up to the city to see that the Olympic legacy is properly funded and maintained. Athens may have left its stadiums to rot but London hasn’t.
And then there is the extra capital expenditure to upgrade the infrastructure. These costs are in addition to the core budget and shouldn’t figure as part of the overall costs. But their impact on the economy is long lasting. In Athens, the much improved transport links have eased congestion and made it much more attractive for workers and tourists. In London, infrastructure investments for the 2012 Games were crucial for increased connectivity and the regeneration of east London.
Rio may have been a mistake. Greater care in choosing cities may be needed. But there is no reason why the cost-benefit cannot be positive, especially in the long term.
Vicky Pryce is a board member of the Centre for Economics and Business Research, and a former joint Head of the Government Economic Service. Her…