The cost of hosting the Olympics

In class recently I have been covering the cost-benefit analysis of running an event like the Olympics. Rio de Janeiro in 2016 had major short falls in funding and for a city with a lot of poverty one questioned their motive for hosting.

The 1976 games in Montreal was the start of the financial issues for host cities – the blowout of $1.5 billion was paid by city’s rate payers and it wasn’t until December 2006 that the final payment was made. The projected cost of $124 million was billions below the actual cost. The 1980 Olympics was held in Moscow under the communist system but in 1984 the first real commercial games in Los Angeles took place. Because of the cost overruns in Montreal there was little interest in hosting the games in 1984 and therefore Los Angeles were able to negotiate favourable terms with the International Olympic Committee (IOC). With a lot of the infrastructure already in place and an increase TV rights – $34.9m Montreal 1976 to $286.9m Los Angeles 1984 – the latter was the only city to make a profit from hosting the Olympics – $215 million. See chart below for initial budgets and actual costs from 1996 – 2016..

However the financial success of Los Angeles games encouraged more cities to apply to become hosts with the desire to demonstrate their progress on the world stage. These countries invested massive sums to create the necessary infrastructure. With all Olympics there are specialised facilities that are only used for the games itself and have limited use post-Olympics. Almost all the facilities used in the 2004 Athens Olympics are derelict and ultimately the debt incurred with hosting the games contributed to the financial crisis in Greece. This was a similar story with the Rio Olympics where stadiums and the athlete’s village were left unused and the government was unable to sell them to the private sector.

Source: The Economics of Hosting the Olympic Games – Council on Foreign Relations.

Did the Olympics benefit London 2012?
The London Olympics which had a budget blow-out but did transform east London. From a rundown area into a community called East Village. The video from CNBC goes into more detail below:

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