The Olympic Games are more than just a mega sporting event. Athletic aspirations, national pride and the fanfare together make it the largest and most expensive event hosted every four years.

The cost of conducting sports events alone – there were 33 in Tokyo – amounts to an average of $12 billion. Non-sports costs such as infrastructure to host the athletes, travel and the opening and closing ceremonies are typically much higher. Every Olympics held since 1960 has overshot its budget by an average of 172 percent, which is the highest overrun recorded for any mega event – not just sports.

Is it, then, beneficial or even profitable for cities and nations to host the Olympics? Contrary to common notions, the Olympic Games have almost turned into a lossmaking venture, leaving behind a financial mess that typically takes years to recuperate from.

The average price tag for hosting each of the five Games held from 2007 to 2016 was $12 billion, excluding expenses on upgrading roads, rail, airports, hotels and other infrastructure to accommodate the large contingents of athletes, officials, journalists and tourists from different nations.

After the 2004 Olympic Games in Athens, the Greek economy was in shambles. The Games had overshot the budget and the debt from hosting it made Greece sink into what the Financial Times had famously dubbed the “forever crisis.”

For the 2012 Summer Games in London, the cost estimate had to be revised upwards by almost 100 percent. However, when the cost turned out to be slightly less than the revised estimate, the organisers went about claiming that the London Games had been held within the estimated budget – no heed was paid to how this was a revised estimate that far exceeded the original estimate.

An academic paper published last year titled ‘Regression to the Tail: Why the Olympics Blow Up’ studied the cost overruns for every Olympic Games held since 1960 and concluded that the economic impact of hosting the event is less positive than expected.

It stated that most cities found themselves immersed in debt after hosting the Games, especially those that did not have the necessary infrastructure and had to build everything from scratch. Several nations spent millions of dollars just on bidding to get a chance to host the Olympics.

Visuals from the 2016 Rio Olympics

Income from the Games hardly covers a tiny percentage of the expenses. London earned $5.2 billion after spending $18 billion on the 2012 Olympics. Vancouver received $2.8 billion against expenditure of $7.6 billion on the Winter Games in 2010. Beijing made $3.6 billion although it spent over $40 billion in 2008.

Although many believe that the resulting tourism and foreign investment more than make up for the costs incurred, in most cases, the Games have proven to be overly expensive, leaving behind only a trail of economic woes.

Studying the actual costs incurred when hosting the Olympics helps to understand better why tourism and foreign investment are never enough to make the Games a profitable venture.

The expenses start with submitting bids to the International Olympic Committee. Typically, a city spends $50 million to $100 million in fees for consultants, event organisers and travel, after which hosting rights aren’t guaranteed. Tokyo spent almost $150 million bidding for the 2016 Olympics but didn’t win it.

After a bid is won, cities start adding roads and upgrading airports and rail connectivity to accommodate the large influx of people. Work has to start on building the Olympic village to house the athletes and at least 40,000 hotel rooms must be made available with specific facilities needed for various events. Overall, infrastructure costs range from $5 billion to $50 billion, depending on the city’s existing facilities.

Earlier, cities could recoup the expenses and even earn a profit through revenue collected from TV rights. However, the IOC now takes a larger share of the revenue from telecasting rights – from 4 percent in the 1990s to 70 percent in the 2016 Rio Olympic Games.

Moreover, the IOC requires host cities to guarantee they will cover budget overruns, too.

Cities that host the Olympics create temporary new jobs and benefit from upgraded infrastructure.

Rio added 15,000 hotel rooms to accommodate Olympic tourists alone. Additionally, thousands of sponsors, journalists and athletes visit the host city for months before and after the Games, bringing in additional revenue.

The Los Angeles Games in 1984 was the only one in recent times to realise a profit. This was possible because it already had the required infrastructure.

Before the outbreak of COVID-19, the 32nd Olympic Games in Tokyo was marketed as the “Recovery Olympics.” It was hoped the Games would invigorate the Japanese economy, which had been affected by a slew of natural disasters.

Seats sit empty during the women's 49kg weightlifting event, at the Tokyo International Forum, during the 2020 Summer Olympics, July 24, in Tokyo, Japan. (Image: AP)

According to economists Robert Baade and Victor Matheson, the potential benefits of hosting the Games can be divided into short-run benefits such as tourism and associated spending, long-run benefits like infrastructure development, and intangible benefits such as civic pride. However, when they set out to review the literature on the Olympics, they found limited evidence to support their claims.

The financial fallout of hosting the Olympic Games may cast a shadow over the future of the Summer Olympics. The number of bidders has been reducing over the years.

In 2004, there were 11 bids, which reduced to 10 in 2008, nine in 2012, seven in 2016 and five in 2020 (one city withdrew). The IOC received two bids for hosting the 2024 Olympics – from Paris and Los Angeles; Boston withdrew its bid. Paris won the 2024 bid and the 2028 Games was automatically awarded to LA. For the 2032 Games, there was no bid in process and the IOC awarded the rights to Brisbane directly.

And now, Delhi chief minister Arvind Kejriwal dreams of hosting the 2048 Olympics. What does it mean for India?

The Delhi CM plans to transform the national capital into the “No. 1 city in the world” by 2047, when India will celebrate 100 years of Independence from British rule.

India has already made two failed attempts to host the Olympics and wants to start planning 26 years in advance this time. But will it be economically and financially wise for India to host the Games, given the evidence that disfavours hosting the sporting extravaganza?

And even if India wins the bid, will taxpayers bear most of the expenses as Japan did? (According to playthegame.org, 75 percent of the cost of hosting the Olympics – over $22 billion – comes from public funding.)

Visuals from the Commonwealth Games held in New Delhi in October, 2010 (File Image: Reuters)

“There is nothing wrong with dreaming about hosting the Olympics someday, especially with making elaborate plans to host the 2048 Games as there is ample time to prepare,” said sports vlogger Taus Rizvi, who runs the YouTube channel ‘The Sports Journalist.’

Rizvi noted that India successfully hosted the Commonwealth Games in 2010 despite all the controversies. He does not think India will have a tough time making arrangements for the biggest sporting event. As a sporting nation with a healthy economy, India has the potential, he said.

“Sure, the cost would be huge and the expenses incurred in preparing the stadiums will not be realised in investments, but it would give a much-needed fillip to India’s tourism industry,” he said. “Shying away from hosting the Games out of the fear of a possible financial crisis would snatch the country’s chances from emerging as a favoured destination for hosting future mega-events.”

The cover image was created by Suneesh Kalarickal.

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