How Much Money Do Countries Make From The Olympics
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Hosting the Olympics Is a Bad Bargain
Even in normal times, the Games don't pay off, argues the economist Andrew Zimbalist.
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Yesterday's Olympic opening ceremony was a year behind schedule and took place in a nearly empty stadium, during a state of emergency. The Games, which most residents of Nippon would have preferred to postpone again or cancel, will exist unusual at the least — and a public health disaster at the worst.
But the large corporeality of money that Tokyo will burn past hosting the upshot fits right in with the financial bonfires nevertheless burning at many quondam Olympic locations.
Tokyo initially said it would spend $vii.3 billion, but a 2019 authorities audit put the actual spending at effectually $28 billion.
Every Olympics since 1960 has run over budget, at an average of 172 per centum in inflation-adjusted terms, according to an analysis by researchers at Oxford University. They concluded that this was "the highest overrun on record for any type of megaproject," far exceeding roads, bridges, dams and other major undertakings.
For the 2016 Summer Games, Rio de Janeiro budgeted $xiv billion and spent an estimated $twenty billion, according to data collected by the Council of Strange Relations. Sochi, Russia, budgeted $x.3 billion for the 2014 Winter Olympics and spent more than $51 billion. And London, the summertime host in 2012, aimed for $5 billion and spent $eighteen billion.
Some other study, published in the Journal of Economic Perspectives, examined how rosy projections of the Games' economic impact — usually commissioned past organizations with an involvement in their metropolis's hosting the spectacle — stacked upward to reality. It concluded that actual effects "are either near-zero or a fraction of that predicted prior to the consequence."
Few researchers have studied the business of the Olympics more than Andrew Zimbalist, a professor at Smith College who has published iii books almost the economics of the Olympics. His research has led him to raise questions well-nigh the value to cities of hosting the Olympics — and influenced some cities to back away from behest. He believes Tokyo has spent more on the Olympics than the 2019 authorities audit estimated and expects the Games to lose at to the lowest degree $35 billion.
"They're going to be white elephants," he said of many of the newly built Olympic buildings and venues. "The reason why they didn't exist before the Olympics is because there was no economically feasible use for them."
DealBook spoke with Mr. Zimbalist about why he believes hosting the Olympics, fifty-fifty in normal times, is a money-pit for cities — and why they end up competing to host them anyway. He also has a clever solution to fix it all.
How do Olympic cities finish up spending billions of dollars?
The budget put out by the organizing committee is for operating the Games for 17 days. In improver to the 17 days, in recent years they've too started to include some other expenses, similar temporary venues. The figure they are using for Tokyo is about $15 billion. It doesn't include the edifice of the national stadium, the construction of the Olympic Village, the media hamlet. It also doesn't include whatever of the transportation, communication and hospitality infrastructure investments that were made in order to host the Games. The number itself is very fungible depending on what you lot want to include.
Where else does the money go?
The security upkeep will be somewhere effectually $2 billion. Then there is transportation for the 205 Olympic teams that are coming to Tokyo. The International Olympic Committee pays for all the flights for them to become to Tokyo.
If you await at the bid document, the I.O.C. requires a lot of hospitality expenditures — Thomas Bach and John Coates and others to stay at fancy hotels and their meals. Yous've got to pay for the xi,000 athletes and their coaches and trainers who were in the Olympic Village. Yous have to pay for their lodging, food, health intendance and and then on. And another thing that's at that place, by the way, is the $3 billion that information technology costs them to postpone.
Why are cities all the same behest for the Olympics if, as you argue, the economics are so bad?
If yous become back four or five Olympic Games, consistently you take several European cities dropping their bids considering of a plebiscite or their residents voted, "No, we don't want to practice this." They're looking at the balance sail, which is overwhelmingly negative. They're looking at the social and environmental disruption, which is extremely problematic.
What the I.O.C. has done in response to that is introduce a few tepid reforms. One of which is putting all the bidding behind airtight doors. They're sick and tired of being embarrassed past cities dropping out. And so the process is now secretive.
But some cities all the same do desire to practice this, right?
The main respond is that you have the structure manufacture executives deciding that this would exist a wonderful affair for their manufacture. They're going to become billions of dollars of contracts. They can line upward, of grade, the merchandise unions, and some investment bankers. They hire a consulting house to do an economic impact study, which uses a faulty methodology and makes some unrealistic assumptions. And they come out with "By golly, this is going to put our city on the map."
And so this is virtually misalignments?
If, say, Deloitte were to come out, having been hired by a sleeping accommodation of commerce, and say, "This is a crazy idea. Your city should never do this," they are never going to exercise another economic touch on study for a megastar sport consequence. So this is their modus operandi.
What about the $iv billion the I.O.C. gets from broadcasters?
Private members don't brand anything, except that they're treated to hospitality. The I.O.C. has an immense and elaborate operating structure with all sorts of subcommittees and subagencies. So their operating costs are quite substantial. Information technology's probably somewhere in the social club of 15 percent of their total revenues over a four-year Olympic cycle.
Do you lot think the broadcasting rights will gain or lose value in the futurity?
Well, are we going to start betting on the Olympic Games? Certainly the Supreme Court decision invalidating the Professional and Apprentice Sports Protection Human activity is an indication that sports betting is going to striking all of the sports leagues. This could be a big revenue-generating item for broadcasting rights fees.
The next Olympic Games volition be in Beijing this winter. How exercise y'all expect it to fare?
I imagine there'southward an enormous corporeality of political pushback to the I.O.C. for having selected Beijing. Of course, they but had a pick betwixt Beijing and Almaty, Kazakhstan. It was a Hobson's choice.
Will Beijing make money?
They're doing some actually crazy, crazy things. They've selected 2 venues 60 and 120 miles to the n of Beijing to host the Nordic and Alpine skiing events. Both of those areas are arid — non far from the Gobi Desert. They accept to invest tens of billions of dollars in a water transfer system because they're going to have to utilize artificial snow. None of that'southward going to appear in the Olympic budget. It's extremely stupid to spend that kind of money to promote skiing in the northward of China when information technology's not a very popular sport. They admitted to spending $44 billion for the 2008 Summer Games.
How much are the Olympics well-nigh countries and cities demonstrating political power?
It's hard for me to imagine that President Xi thinks that this is going to put Beijing on the map. One of the things nosotros learned in 2008 was that Beijing was horrifically polluted, and we learned much more than nigh repression in China because of the Games' being broadcast.
So why did Japan bid?
Back in 1964, one of the things that Japan was so happy most when it hosted the Olympics was their opportunity to say to the world: "We're not part of the Axis powers anymore. Nosotros're a young, growing capitalist society." To some extent it worked, because they were transforming dramatically.
When they bid in 2013, they promulgated these ideas within Japan: "We were going to be able to show the world that nosotros have recovered from Fukushima and that the economic miracle — which stopped in the early on 1990s and was followed by three decades of stagnation — that we're now over that."
You've identified lots of bug. Do yous have a solution?
If we were living in a rational world, we would have the same city hosting the Games every 2 years. There'due south no reason to rebuild the Olympic Shangri-La every four years. It doesn't make sense for the cities. It certainly makes no sense from the standpoint of climate change. When the mod Olympics were created in 1896, nosotros didn't accept international telecommunications and international jet travel. So in order to have the earth participate in and relish the Olympics, you had to move information technology around. We don't accept to do that anymore.
Practice y'all recall the I.O.C. would ever do that?
They are non going to respond positively to that idea. Their role in the world and their prestige in the world, and their definition of themselves, circumduct around their power to determine where the Olympics are going to happen. Why would they give up that power?
What about the experience-expert part of the Olympics? Don't you buy the statement that the Olympics bring the world together?
I like some of the symbolism of the Olympics. I'm not sure how penetrating it is, but I like the idea that yous bring the globe's best athletes together from 205 countries, and yous have them compete against each other on the playing field rather than on the battleground. That resonates for me. I like it. At present, how far does that have u.s.? I don't think very far. It'due south very expensive symbolism.
What do you lot think? Are the Olympics good or bad for the cities that host them? Permit us know: dealbook@nytimes.com.
Source: https://www.nytimes.com/2021/07/24/business/olympics-economics.html
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