The International Olympic Committee on Friday awarded the 2016 Summer Games to Rio de Janeiro. The Brazilian city beat Madrid, Tokyo and Chicago, despite personal appeals by President Barack Obama and the first lady, Michelle Obama, in support of their hometown.
Why are cities so eager to host the Olympics? Are there short- and long-term economic benefits to hosting the event?
- Robert K. Barney, International Center for Olympic Studies
- Andrew Zimbalist, economist, Smith College
- Victor Matheson, economist, College of the Holy Cross
- William C. Kirby, professor of Chinese studies, Harvard University
- Dahshi Marshall, urban planner
Planning Makes the Difference
Robert K. Barney is professor emeritus and acting director of the International Center for Olympic Studies at the University of Western Ontario in Canada. He is senior author of “Selling the Five Rings: The International Olympic Committee and the Rise of Olympic Commercialism.”
There is no doubt that hosting an Olympic festival produces a large measure of civic pride and psychological satisfaction, vastly superior than a World Series victory or NFL championship. When a host city is placed before the television eyes of two-thirds of the world’s population, the event becomes a magnified public relations and advertising phenomenon, a phenomenon that has many short-term benefits on tourism, real estate values and new business.
For long-term benefits, host cities should focus on facilities that enhance urban life.
Long-term benefits are another matter. Civic pride aroused from such an endeavor is fleeting and the monuments built for the spectacle in the form of stadiums and sporting venues shortly become little more than ghostly reminders of once glorious days. In point of fact, the historical record of long-term benefit from Olympic-related sports facilities is one indelibly burdened by maintenance and operation costs that rise well above user fee revenue.
With few exceptions, unless Olympic sports facilities have great post-Games mass appeal for public use (or are dismantled and materials recycled as was Chicago’s plan), they are a losing proposition to a city; they become “white elephants.” Where does one look to find exceptions — Montreal, Seoul, Barcelona, Sydney, Athens? I think not!
Not a Rosy Picture
Andrew Zimbalist, a professor of economics at Smith College, is the author of “Unpaid Professionals: Commercialism and Conflict in Big-time College Sports.”
The evidence from past Olympic Games hardly suggests that there’s a resounding economic gain from being the host city. Montreal’s 1976 Olympics left the city with $2.7 billion of debt that it finally paid off in 2005.
A city looking for an economic boost, would be wise to not host the Olympics.
The Barcelona Organizing Committee in 1992 broke even, but the public debt incurred rose to $6.1 billion. Similarly, the Atlanta Organizing Committee in 1996 broke even, but the bottom line there is not encouraging. An econometric study using monthly data found that there was insignificant change in retail sales, hotel occupancy and airport traffic during the games. The only variable that increased was hotel rates — and most of this money went to headquarters of chain hotels located in other cities.
The Sydney Organizing Committee in 2000 also reports breaking even, but the Australian state auditor estimated that the games true long-term cost was $2.2 billion. In part, this was because it is costing $30 million a year to operate the 90,000-seat Olympic Stadium.
When Athens won the right to host the 2004 games in 1997, its budget was $1.6 billion. The final public cost is estimated to be around $16 billion — 10 times the original budget! Meanwhile, most of the Athens’ Olympics facilities are reportedly underutilized. Maintenance costs on the facilities in 2005 came in around $124 million and, reportedly, there is little use of the two Olympic soccer stadiums.
Happiness and Other Intangible Benefits
Victor Matheson is an associate professor of economics at the College of the Holy Cross in Worcester, Mass. He has published numerous articles on the economic impact of major sporting events on host communities.
Economists generally find that local organizers and sports boosters routinely exaggerate the benefits and underestimate the costs of hosting major events such as the Olympics. As a path to riches and long-term economic
development, most Olympic hosts have been sorely disappointed. For example, while Salt Lake City’s hotels and restaurants were packed during the 2002 Winter Games, other businesses not directly related the
event, like department stores, suffered significant losses in sales. Overall, economic activity the region actually fell during the Olympics.
The 1992 Summer Olympics served to put Barcelona on the map as a world class tourist destination.
While evidence of any direct economic impact from these types of “mega-events” is lacking, in some cases intangible benefits do exist. The 1992 Summer Olympics served to put Barcelona on the map as
a world class tourist destination and the city has experienced a surge in visitors over the past two decades. Studies of the 2006 World Cup in Germany showed that the country experienced little in the way of improvements
in income or employment figures, just as most economists would have expected. However, surveys noted a noticeable improvement in residents’ self-reported levels of happiness following the event. The World
Cup didn’t make the Germans rich, but it appeared to make them happy.
If a city is using an expectation of a financial windfall as justification for hosting the Olympics, past experience suggests that the host will be in for a rude awakening. On the other hand, the Olympics are a fun and exciting event for a city to be a part of. Of course, the residents of Rio don’t really need an excuse to throw a great party.
A Huge Improvement for Beijing
William C. Kirby is the director of the Fairbank Center for Chinese Studies at Harvard.
The Beijing games were in many ways the most extravagant games ever held. Stunning new stadiums were erected that have themselves become tourist sites. Large parts of northern Beijing (a city where land is expensive and scarce) were devoted to Olympic athletic, recreational and housing facilities. All this went well above budget, even before one counts the cost of the magnificent opening ceremonies.
The investment was worth it, because the country, not the city, picked up the tab.
Did these facilities themselves benefit Beijing? Possibly, but marginally. What the city gained was much more: an enormous (and enormously overdue) investment in its basic infrastructure and in its public spaces. New subway lines began to crisscross a city that had become paralyzed by vehicular traffic. New highways were added, as ring-upon-ring roads encircled the central city. A stunning new airport terminal, larger than all of Heathrow, and perhaps the most beautiful on earth, opened to coincide with the Olympics. New parks were built across this otherwise gray city, often to accompany or parallel new roads, though these, and the roads, often came at the cost of whole neighborhoods of hutongs, the traditional alleyways of old Beijing.
Did Beijing and Beijingers benefit from all this? Yes, at least in comparison to their difficulties in much of the previous 60 years. When the Communists made Beijing their capital, they destroyed its famous walls, brought to it class revolution and economic destitution, and no sense at all of urban planning. The municipal government was both corrupt and tasteless. The investment in the city for the Olympics was a form of historical payback — and worth it, because the country, not the city, picked up the tab.
A Renaissance for Atlanta
Dahshi Marshall is a transportation planner with the Atlanta Regional Commission.
I would have to disagree with the assertions of some of my fellow panelists on this topic. Like some of the readers have mentioned in their comments below, the 1996 Summer Games had a tremendously positive effect on Atlanta’s urban landscape — and even more so on its tax digest. Without the incentive of hosting the Games, who knows if an excellent public space like Centennial Olympic Park would have been constructed in our city center. Currently the park is a centerpiece in Downtown Atlanta’s revitalization efforts as several major high-rises, museums and attractions have been built on its periphery. It still serves as an amazing event space.
Yes, the Olympics are costly, but they can help create a more sustainable urban environment for the host city.
The infusion of federal funds leading up to the Summer Games allowed our regional transit authority, MARTA, to construct the new North line — connecting the rapidly growing northern suburbs of Dunwoody and Sandy Springs to Downtown and the Airport with heavy-rail transit Because of the new rail line, Lindbergh Center station became a major hub in our transit network and subsequently attracted hundreds of new residential units, as well as hundreds of thousands of square feet of new commercial space.
The two arenas that were constructed for the Games — Turner Field and the Georgia Dome — are used by the Atlanta Falcons and the Braves.
The Olympic Village is now used by Georgia Tech as dormitories. Additionally the investments that the city made near the village and Georgia Tech’s campus allowed the once blighted neighborhood surrounding Georgia Tech to redevelop into a major activity center in the middle of the city used by students, faculty and staff. These improvements also benefited nearby Georgia State University.
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