Chasing the Rings: The Financial Gamble of the Olympic Games

The Olympic Games have long been a monumental event in global affairs, bringing together nations from across the globe in celebration of athleticism, culture and international camaraderie. The first modern games were held in 1896 and ever since it has been considered as the largest sporting event in the world.

Illustration by The Geostrata

In recent years the financial landscape surrounding the Olympics have undergone a dramatic shift with hosting costs surging to unprecedented levels. Host nations now shoulder financial responsibilities that far exceed the benefits they receive.

Maintaining the vast sporting as well as non-sporting infrastructure required for the Games, often built through heavy borrowings, have increasingly become an insurmountable challenge. The trend of overrunning costs continues unabated, raising questions about the sustainability of the event. 

The International Olympic Committee has been defending the games under the rhetoric of enhancing the city’s global profile, infrastructural investments and revenue generation through tourism in the longer run.

However, this is now viewed to be a defunct perspective as instances from the past Olympic Games have proved this presumption wrong. This article shall examine the fiscal risks of hosting Olympic Games.

Hosting the Olympic Games is an exceptionally costly affair with host nations having to spend billions to successfully run it. An Oxford University Study estimated that since 1960 the average cost of hosting the Games have been triple the bid price. This stands as a record no other mega project can surpass.

Once a candidate city wins the bid, the additions made to make it an Olympic village is enough to push a nation into a mounting debt crisis. Typically, the city refurbishes existing airports, adds rail lines and roads to accommodate the large influx of crowds, housing and media villages and other special facilities for the events calls for an overwhelming amount of infrastructural updation or additions.  

Overall, infrastructure costs may range from $3 billion to $50 billion. The evaluation, preparation and submission of bids to IOC is a tediously long procedure, incurring massive financial costs.

Studies reveal that  costs soared 179% above initial estimates in real terms, and a staggering 324% in nominal terms, vastly outpacing cost overruns seen in other areas such as ICT and infrastructure. 

Many of the infrastructural additions are not mere one-time costs but they end up becoming an ongoing liability. For instance, the 2000 Olympic stadium in Sydney assumes about $30 Million in annual maintenance, in the same way, Beijing’s nest Arena costs about $10 Million in annual maintenance.

The IOC also requires host cities to have a minimum of forty thousand available hotel rooms, which has driven certain host cities like Rio to expand their building projects. For these purposes, most host cities borrow heavily to finance the constructions which ultimately takes them years to repay.

As a case in point, Montreal city which hosted the 1976 Olympics took about 40 years to be debt-free. In a more extreme case, the Athens Olympics in 2004 is considered to have contributed to the debt crisis in Greece which culminated in a bail-out in 2014. The only time a nation successfully ran on profits was in 1984 Los Angeles Summer Olympics as they were able to almost completely rely on  existing infrastructural facilities and stadiums rather than constructing them from scratch to appeal to the IOC selection committee.

This became a pivotal point in the bidding process, as competing candidates to be the host doubled from two for 1988 summer games to twelve for the 2004 Games. More strikingly, this period also witnessed the entry of developing nations in the bidding process.

Due to the wider range of options available to the IOC, they began choosing a city which has the most ambitious and expensive plans; meaning that cities began excessively competing to seal a spot in the race at the cost of going overboard with expenses. Nations such as Brazil, China, Russia and now India have demonstrated their eagerness to use the games as a means to project their developmental milestones. 

In the past decade, however, the trend has yet again been reversed with many nations choosing to withdraw their bids. In an attempt to make hosting the Games lucrative once again, the IOC has adopted a process to make bidding less expensive, by increasing the time window allowed for bidding and expanding the geographic requirements to allow various cities within the same nation to co-host.

Surprisingly, this has not ensured the increase in the number of bidders. Taxingly enough, the bidding campaign is itself an expensive endeavor requiring millions of dollars, for instance, Tokyo spent approximately $150 Million on its failed 2016 bid. 

Ultimately it falls to the aspiring nations to carefully consider whether the intangible benefits of national pride, cultural exchange and increased global visibility truly outweigh the long-term financial challenges that the Olympics often bring.

This is a particularly important question for developing economies to reflect on, as they weigh the potential advantages against the significant costs involved. 

THE CLIMATE TOLL 

Hosting such a multidisciplinary mega-scale project also harms the environment, hastening calamities. An academic study demonstrates that when it comes to sustainability practices, almost 16 Olympic games since 1992 were proven to be severely lagging behind.

Paris turned the wheel, and proclaimed to have hosted the greenest Olympics of all time in 2024, with the usage of recycled items, vegan food options at the Olympic village and restricting the construction of newer facilities.

Although the organisers started off with an impressive strategy to promote sustainability in sports, it ultimately ended up being another case of greenwashing as many of the initial promises failed to materialise.

The Olympics being a mega scale event needs to be radically rethought and implemented to cut down on the carbon footprint. And if this is turned a blind eye to, the future of the world can be severely jeopardised. 

INDIA’S OLYMPIC AMBITIONS: HOW CAN INDIA BE OLYMPICS READY? 

India has a multitude of challenges to overcome in order to be prepared for 2036. To translate the government’s ambitious vision to life, the nation would have to undergo large-scale developments and upgrades; from on the ground fancy stadium designs to excessively ‘cosmopolistising’ the host city to fit it into international standards, we have a long road to traverse.

To stay efficient and welcoming throughout the course of the Games, technical staff need to be upskilled, accommodation logistics to be seamlessly integrated and transportation ecosystem to be amped up among other aspects.

Furthermore, it needs to be ensured that the billions invested in creating infrastructure provides long-term benefits to the host city and its residents.

What compounds the already existing challenges is the diversity India houses, as materialising a collaborative-consensus based approach to hosting could be a daunting checkpoint to clear. With over a decade to realise her ambition, only meticulous strategizing and seamless collaboration with diverse stakeholders can bring the dream to fruition. 

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BY NAKSHATRA

TEAM GEOSTRATA

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