I've had the pleasure of living in two towns during the Olympics -- Los Angeles in 1984 and Atlanta in 1996 -- both considered successes for the cities. But that isn't the norm. Most cities lose a lot of money after hosting the Games, and Tokyo this year fared particularly poorly. Will this make cities shy away from hosting moving forward? And is "winning" the bid to host really winning?
Cities need to prepare to lose money
Host cities get lots of publicity when the Olympic Games come to town. They say in advertising there's no such thing as bad publicity, and hosting the Olympics usually leads to tourism. But at what cost?
Host cities spend billions preparing for the Games:
- Building an Olympic Village to house the athletes.
- Constructing new sporting venues for the events.
- Promoting the games.
- Hiring security.
- Building new roads.
- Enhancing airports.
- Adding new rail lines.
The thought is they'll recoup the money by fan attendance, sponsorship, and increased tourism. And jobs are created in the years leading up to the event. But even with those perks, most cities lose millions or even billions of dollars.
Everyone knows what happened in Tokyo: Very few fans attended due to the pandemic, and this was after postponing the event for a year. Both factors cost Tokyo dearly, to the tune of around $800 million on ticket revenue loss; a $2 billion loss on what fans would have spent on lodging, food, transportation, and merchandise; and almost $3 billion was lost due to postponing the event.
What happened in Tokyo
The Tokyo Olympics, unfortunately, might go down in history as being primarily a negative event. There was controversy over hosting during a pandemic. Even Toyota pulled out of sponsoring the Games because public sentiment was mostly against holding the event this year.
Tokyo ended up spending almost three times more than was budgeted -- over $20 billion -- when the budget was supposed to be capped at $7.4 billion. The biggest expense was from building venues specifically for the Games.
How LA and Atlanta managed to make money
LA was unique in that it had Peter Ueberroth's ideas. He got private investors instead of the city to pay much of the costs, and he greatly limited new construction, building only two new venues and using LA's existing facilities for the rest. It's true that there were fewer athletes and guests that year, as the USSR boycotted the games, but the bottom line is that LA netted over $230 million after hosting the Olympics.
Atlanta was a success because, after the Olympics, tourism boomed and people started flocking to the city. No one confused Atlantic City with Atlanta anymore. Plus, Atlanta uses the facilities it built: Centennial Olympic Park is a destination place. The Olympic Stadium became Turner Field, home of the Braves, for 20 years. And Olympic Village turned into student housing.
Some major losses
- The 1992 Olympic Games held in France cost $62 million.
- The 2004 Games held in Athens, Greece, while probably not the sole reason for Greece's economic crisis, was a big factor, costing Greece anywhere from almost $3 billion to $7 billion.
- The 2008 Beijing Olympics cost the city over $36 billion.
- The 2012 London Olympics cost almost $13 billion.
- Rio de Janeiro paid over $20 billion to host the 2016 Games.
The Millionacres bottom line
There are usually more cons than pros when it comes to cities hosting the Olympics. But it could work out if more cities follow LA's and Atlanta's leads, namely only hosting if the city has the infrastructure to support the Games (or if the city will use what's built) and a plan to pay for it all. Otherwise, the International Olympic Committee might need to start paying cities to host. But don't hold your breath for that to ever happen.