We love the Olympics. It’s where history is written, and legends are born.
Every four years, for a period of one month, one ‘lucky’ city becomes the center of the world as superstar athletes, national leaders, and the rich and famous gather to compete, watch, and celebrate the games.
However, being chosen as the host city for the Olympics is no easy task. Countries must first express their interest, be shortlisted, and then submit a proposal to the International Olympic Committee (IOC). The IOC considers several criteria, including geopolitical, socio-economic, human development, and environmental factors. They also evaluate how well the proposal aligns with existing long-term development plans, the potential sustainability and legacy impacts, and the level of political and public support. This thorough process likely explains the introduction of environmentally sustainable cardboard beds at the 2020 Tokyo Olympics, which have also become a feature of the 2024 Paris Games.
But what about the host country and city? What benefits do they receive, and is the significant investment worth it?
The Olympics Are Held In One City
Unlike the FIFA World Cup, which is hosted by a nation (e.g., Qatar 2022, Russia 2018, Brazil 2014, South Africa 2010) with games played across the country—or even across multiple countries in some years, like South Korea and Japan in 2002—the Olympics are hosted by a single city and are identified as such. For example, we refer to it as the ‘Rio 2016 Summer Olympics,’ not the ‘Brazil 2016 Olympics.’
This city-centric focus gives host cities greater visibility, making them memorable landmarks in Olympic history. We remember events in their cities, such as the London 2012 Summer Olympics or the Athens 2004 Summer Olympics.
But why is this so?
Historically, the ancient Olympic games were always held in Olympia, Greece (8th century VC to the 4th century AD). Today, Olympia is not a large city but rather a small town with a population that reflects its status as a historic site rather than a modern urban center. It has a population of about 13,000.
In other words, while the ancient Olympic Games boast a rich history, they were never truly a global sporting event. In those times, participants and spectators, mostly Greeks, would gather at a single location to participate and watch the games. The ancient Olympic Games eventually ceased to exist sometime between 393 AD and 426 AD.
The modern Olympic Games, as we know them today under the International Olympic Committee (IOC), began in Athens in 1896. The second modern Olympics took place in Paris in 1900
Coincidentally, the idea of the Olympic Village was also first introduced in Paris during the 1924 Paris Olympics. Prior to that, athletes were usually housed in accommodations such as hotels, schools, or even homes across the host city. The Olympic Village allowed for more space for athletes and the opportunity for them to interact with one another. Subsequent Olympics included more amenities such as dining halls and recreational facilities for the athletes. Logistically, it also became easier.
Who Pays For The Olympics?
Without going into too much detail of the business of the Olympics (which can get rather political), the main thing to note is that while the IOC does generate revenue (mainly through selling broadcast rights and sponsorship) and pays out about 90% of its revenue from the games back into sport and athlete development, it’s the host nation/city that will incur the cost of stage the Olympics.
An article (The Economics of Hosting the Olympics Games) published by the Council on Foreign Relations, an independent, nonpartisan membership organization, think tank, and publisher based in the US, shared that “for much of the twentieth century, the staging of the Olympic Games was a manageable burden for the host cities. The events were held in wealthy countries, either in Europe or the United States, and in the era before television broadcasting, hosts didn’t expect to make a profit. Instead, the games were publicly funded, with these countries better positioned to bear the costs due to their larger economies and more advanced infrastructure.”
However, this started changing in the 1970s. The 1976 Montreal Olympics saddled the city with a massive debt of $1.6 billion Canadian Dollars, which took 30 years to pay off. Perhaps more shockingly, the initial cost for the games was $120 million (estimated in 1970) and then revised to $310 million (estimated in 1973).
As such, cities became more wary about hosting the games.
For example, Los Angeles was the only city to bid for the 1984 Summer Olympics, allowing it to negotiate exceptionally favourable terms with the IOC. Moreover, due to the strong existing stadiums and infrastructure, the city didn’t need to incur as much cost as building more facilities. That, combined with a sharp jump in television broadcast revenue, made Los Angeles the only city to profit from hosting the Olympics, finishing with a $215 million operating surplus.
According to the article however, the success also promoted more cities bidding for the Olympics from two for the 1988 games to twelve for the 2004 games held at Athens. This prompted the need to once again invest heavily to win the rights to host the games and lead to the construction of many sports facilities, some of which are of specialised nature, to be built for the games, but have little economic value once the games are over.
For example, almost all the facilities built for the 2004 Athens Olympics, whose costs contributed to the Greek debt crisis, are now derelict.
Research has shown that most host cities these days do not get the long-term benefits they hope for compared to the investments they have made. Jobs created are usually temporary. Tourism may increase for a short period of time but tends to revert to the norm after a while. This is perhaps why only two bids (Paris and Los Angeles) were submitted for the 2024 Summer Olympics, with Los Angeles being awarded the 2028 games.
The Olympics Have To Evolve
The reality is that with so many games, nations, and athletes involved in the modern Olympics, the business of organizing the event must evolve. As the Olympics continue to grow, no single city in the world is likely large enough to host the games without investing heavily in sports facilities that could become underused or abandoned in the years to come.
Instead, countries and cities could collaborate, pooling their resources to organise the Olympics in an environmentally and economically sustainable way.
For instance, the FIFA World Cup in 2026 will be held across three host countries—Canada, Mexico, and the USA—spanning 16 different cities. This approach is more manageable from a resource allocation standpoint and allows a greater number of businesses to benefit from the economic impact of this global event. It also lets more people experience the games firsthand, rather than concentrating all the athletes and events in a single Olympic village for a month.
Subscribe To The DollarsAndSense Business Pass
Enjoy what you are reading and want more? Join The DollarsAndSense Business Pass and unlock access to valuable tools, exclusive networking opportunities, and tap into the wisdom of industry experts to fuel your business expansion!
