As Beijing’s Olympic structures lie empty and Vancouver and London’s costs soar over budget, the Olympics is once again proving to be a financial drain for host cities.
Beijing’s $43 Billion Olympics Providing Little Return
The “Bird’s Nest” stadium, the $500 million centerpiece of the 2008 Beijing Olympics, has just one event booked for 2009: an opera on the one-year anniversary of the opening ceremonies. The 91,000-seat stadium, too large even for the national soccer team, will be transformed into a shopping center in several years.
The fate of the iconic Bird’s Nest has come to symbolize China’s reckless spending and development leading up to the Games, which cost $43 billion—three times more than any other Olympics. Other venues go unused and will likely be demolished, and massive commercial and residential developments built in the lead-up to the Games are empty.
“They wanted to build ‘the world’s biggest this’ and ‘the world’s biggest that,’ but these buildings have almost zero long-term economic benefit,” economist Huang Yasheng told the Los Angeles Times.
Post-Olympic financial problems are common for Olympic host cities, particularly for the host of the larger and more expensive Summer Games. Spending billions to host the two-week event, cities almost never make a profit and usually spend years paying off their Olympic-size debt. Furthermore, these cities are often left with unused venues and “white elephant” main stadiums.
Two cities scheduled to host future games are already experiencing financial problems caused by the global recession and overambitious plans. Vancouver, set to host the 2010 Winter Olympics, had its credit rating lowered Friday after it had difficulty receiving funding for the $800-million athletes’ village.
The budget for the 2012 London Olympics has nearly tripled from $4.9 billion to $13.5 billion and it will likely continue to rise. It has had to scale back its plans, as it had has difficulty securing loans for the $1.3-billion athletes village and $500 million media center. The budget for the Olympic Stadium has nearly doubled to $790 million and it appears that the city will be unable to sell the stadium to a soccer or rugby team after the Games.
Tessa Jowell, the British government minister for the Olympics, admitted in November that, in hindsight, the city made a mistake by bidding for the Olympics, according to the Chicago Tribune. “Would we have bid for the Olympics?” she asked. “Almost certainly not.”
Background: Paying for the Olympics
Forbes’ Tom Van Riper explains that an Olympic budget is divided into three categories. The first category is the direct operating expenses of the Olympics, such as the athletes’ village, transportation, security and ceremonies. The typical budget for this category—around $1.5 billion for Winter Games and $3 billion for Summer Games—is usually covered by the television, tourism and ticket revenues.
Sources in this Story
- Los Angeles Times: Beijing’s Olympic building boom becomes a bust
- The Globe and Mail: Vancouver’s credit status drops to lowest recorded level
- Chicago Tribune: 2012 Olympic host London shoulders ‘winner’s curse’ in severe economy
- The Daily Mail: The Olympic money pit: As Britain makes savage savings, 2012 spending is careering recklessly out of control
- Forbes: Host City Curse
- The CBC: CBC Digital Archives: ‘The Big Woe’
- The Globe and Mail: Big O finally a done deal
- The Independent: After The Party: What happens when the Olympics leave town
The third category is for general infrastructure improvements in the city, which, despite the cost, “generally bring lasting benefits to Olympic cities.” It is usually the second category, the building of sports venues and temporary transportation systems, which causes long-term financial troubles for the host city.
Host cities are forced to build state-of-the-art venues, many for sports that are popular only during the Olympics. When the Olympics are gone, these venues often sit barely used or attract crowds that fill only a fraction of the seats.
“If the I.O.C. did more to encourage temporary venues or to reuse existing ones, then more cities would have a chance,” said former Salt Lake City Deputy Mayor Brian Hatch to Forbes. “Instead, the I.O.C. has encouraged gigantism; spending massive amounts on sports that come around every four years.”
For the Summer Olympics, a city must build an extravagant main stadium that tends to seat between 70,000 and 110,000 people. Often these stadiums have no primary tenant after the Games and cost cities millions of dollars every year in maintenance.
No structure better represents the drain of the Olympics than Montreal’s Olympic Stadium, home to the financially disastrous 1976 Summer Games. The futuristic design, which included a tower and retractable roof, wasn’t completed before the Olympics. Originally estimated to cost $150 million, the “Big O”—often derisively called the “Big Woe”—took 30 years for the city to pay off and cost a total of $1.47 billion in construction, nearly constant renovation of the roof, and interest.
Including the growing problems in Beijing, the last three Summer Games have been financial disasters. Athens spent $12 billion—5 percent of Greece’s national GDP—on the 2004 Summer Games, plunging the city into massive debt. According to the Independent, 21 of the 22 Olympic venues are currently unused. Sydney, whose 2000 Summer Games was widely considered a success, still cost the city 1.5 billion Australian dollars (approximately $970 million) and left it with a rarely used Olympic Park.
The Olympic Games held in the United States have been successful by relying heavily on corporate sponsorships and having a long-term plan for Olympic venues. The 1984 Los Angeles Games made a $200 million profit by using venues that were already in place, whereas the 1996 Atlanta organizers arranged for the Olympic Stadium to be converted into a new baseball stadium for the Atlanta Braves.
Other cities have used the Olympics as a springboard for improving the city, most notably Barcelona, host of the 1992 Summer Games. The Olympics helped transform the image of the city into a popular tourist destination and inspire the growth of sports in the area. “The event proved that, in the right hands, the Games need not be a poisoned chalice,” writes the Independent.
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