Is Hosting the Olympics Good for the Host City’s Economy?

Olympic host cities are often inveigled into shouldering the enormous costs of either summer or winter events with the promise of economic gain. However, scholars have called this promise into question. In recent decades, many of the host cities have failed to recoup the cost of welcoming the world to the Olympic games much less make a profit. In the article to follow, we’ll explore the financial reality of such an undertaking and offer additional data to explain the disparity between the promise and the actuality.

The Dependent Outcome

For much of the 20th century, hosting the Olympic games was a burden that many cities were able to bear. In fact, this history of manageable costs that bore economic fruit for both Olympic host cities and their countries is responsible for the myth that the games in and of themselves are financially profitable. What many cities fail to consider is that this outcome depended on the fact that the Olympics were often held in countries that represent the developed world. Much of the necessary infrastructure, specifically devoted space, business viability, and essential accommodations for the masses of tourists who would crowd the host city for a limited period were already in place.

This meant that the city hosting the games would be required to devote a limited amount of its established wealth to improvements. It also meant that the city and its parent country were in sufficiently good economic health to capitalize on the ephemeral influx of people with money to spend. Developed countries with an Olympic host city also stand a better chance of re-purposing dedicated games space, and they can expect an easier return to business as usual when the Olympics are finished. Understanding these basic features, upon which promised benefits are often substantiated, why have host cities of the past few decades frequently fallen short?

Enormous Costs with Limited Use Life

Are they simply dazzled by the promise of wealth for their cities? Do they not have access to the compiled data on past host cities? Perhaps it is a matter of their willingness to gamble the economic fate of their citizens on the chance that the prestige accrued holds future benefits. As many cities in developing countries have discovered, this gamble rarely pays dividends at all, and can wind up costing cities for years to come.

We understand that the lack of existing infrastructure, gaming spaces, economic viability, and accommodation represent a large cost to host cities, because they must invest enormous sums simply to bear the burden of the games and those who come to be a part of them. However, there are additional costs to consider. Since the 1970s, the costs of hosting the games—even for cities such as Montreal—have fallen in the billions. That cities often undercut their estimates, which must include construction delays, unforeseen infrastructure improvements, and other costly operations, also plays into the dashed hopes of host cities.

Those cities within developing countries have devoted millions simply to prepare a bid of the International Olympic Committee. The enormous cost of preparing a city that lacks the basic needs for the Olympics is often one that city can ill afford. In recent years, the repercussions are keenly felt by the citizens of Olympic host cities, who must bear the financial burden in the form of taxation, lack of amenities or basic needs, increased competition for scarce public resources and livable space, and an economy that is often less viable than it was prior to the games.