The rosy projections of KPMG and the soothing words of International Olympic Committee (IOC) executives to the contrary, independent scholarship on the economic impact of hosting the Olympic Games is not encouraging. Prospective host cities have been getting the message and staying away.
Five European cities dropped out of the bidding to host the upcoming 2022 Winter Olympics, leaving the IOC with the unenviable choice between Almaty, Kazakhstan and Beijing, China. The competition for the 2024 Summer Games at one point included Boston, Hamburg, Rome, Budapest, Toronto, Los Angeles, and Paris. All but Los Angeles and Paris dropped out, and when it came time for the IOC to announce the selection of Paris, fearful of having no appealing bidders for the 2028 Olympics, the IOC took the extraordinary step of announcing a double winner – Paris for 2024 and Los Angeles for 2028.
The 2026 Winter Games selection was equally embarrassing for the IOC. Original bidders included Milan/Cortina, Stockholm/Are, Calgary, Erzurum, Sapporo, Graz, and Sion. Four dropped out of the bidding and Erzurum was not invited to the final stage, so the IOC was left with a choice between Milan and Stockholm. However, it was no choice at all because the Stockholm City Council refused to sign the required contract wherein it would guarantee to cover any cost overrun. So, the IOC picked Milan/Cortina – two cities that are 250 miles apart and a five-hour drive without plane service. So much for lowering the carbon footprint and the symbolism of unity and togetherness at the Olympic Village.
In 2019, Thomas Bach and the IOC decided that they had experienced enough humiliation. They reformed the bidding process by putting it behind closed doors where the public could not see the dearth of bidders. With an assist from Australian and IOC Vice President John Coates, Brisbane became the first city to fall into the trap.
The Economic Reality
Brisbane submitted an initial operating budget for the 2032 Games of $4.5 billion. Here’s what Brisbanians should know about this number. First, a study out of the University of Oxford found that the average cost overrun (the ratio between the final cost and the initial bid cost) for host cities has been over 2.5. By this metric, the final cost Brisbane can anticipate is upwards of $11.25 billion. Second, the $4.5 billion does not include the costs of any of the required transportation infrastructure, new venues, the Olympic villages, the International Broadcasting Center, security, and staff, among other expenses.
Third, in order to induce some private sector investment, the government will offer handsome tax benefits and land discounts. Also lowering government revenue will be the IOC’s requirement that taxes from construction and operating sales and income related to the Games be exempt. Fourth, if Brisbane follows the experiences of previous hosts, there will be appreciable environmental degradation and social dislocation (e.g., evictions) to clear needed real estate for the venues and new transport routes.
Fifth, evidence suggests that more than 500 hectares of scarce urban real estate will be necessary to accommodate the host city’s contracts with the IOC. This land would have alternative uses that may be more productive or desirable than hosting sports venues. The reason why certain sports venues do not currently exist in Brisbane (e.g., a 50,000 capacity Gabba Stadium, a 15,000 seat aquatics centre, a 12,000 seat basketball arena, a 10,000 capacity gymnastics and boxing facility) is because they do not have an economically viable purpose. It is doubtful that they will have such a purpose after the Games are over. Rather, they will each require annual operating and maintenance subsidies in the millions of dollars.
Tokyo’s recent experience should provide adequate caution. Its initial 2014 bid was $7.4 billion. Its final cost was approximately $35 billion, $3 billion of which is attributable to the postponement. The figure would be considerably higher if the cost of shutting down part of the local economy to contain the pandemic is included.
While it is alleged by the Brisbane organising committee that 84 percent of the venues will be either pre-existing or temporary, this figure can also be deceptive. For instance, Gabba Stadium is an existing structure, but it will undergo a massive rebuild, costing at least $1 billion. The temporary stadiums have the virtue of not becoming white elephants and not occupying valuable land after the Games depart town, but they have the downside of not leaving a sporting legacy, and costing tens or hundreds of millions of dollars to construct and then lasting for only one month.
It is undoubtedly true that some of the investments, particularly those related to public transport, will have some long-term value. It is also true that if those investments were meritorious, they could be prioritised in government budgets and happen anyway, even without hosting the Olympic Games. Too often, such investments, such as the $3 billion put into the metro line between Ipanema and Barra da Tijuca in Rio or the $5 billion rapid train between Beijing and the locations of the Alpine and Nordic ski areas to its north, are extremely low priority, wasteful, and would never happen without the exigencies of hosting the Olympics.
The world’s grave problems with climate change demand that all cities and countries be much more mindful about how they expend resources. The pattern of building an Olympic Shangri-la in a new city every two years repeats the extravagant and wanton behavior that exacerbates climate change.
When the modern Games began in 1896, there were no international telecommunications. It was necessary to move the Games around to engage as much of the world as possible. That constraint no longer exists. The rational economic and environmental approach commends a single, permanent host city for the summer Games and another for the winter Games.
Andrew Zimbalist is the Robert A. Woods Professor of Economics at Smith College in Northampton, Ma, a sports industry consultant, and the author of several books on the economics of the Olympics, including Circus Maximus: The Economic Gamble of Hosting the Olympics and the World Cup (2021).
This article is published under a Creative Commons License and may be republished with attribution.