The Economics Of The Olympic Games

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INTRODUCTION

When a country decides to bid to host an Olympic Games, there are many factors the organizing committee must keep in mind. Such as: economic conditions, political climate, financial power, the potential return on investment once the games finish and many more. As the days come closer, we are about 9 months away from the 2020 Tokyo Olympic Games, one of the world’s biggest sporting events. With the organizing committee investing nearly US$ 6 billion in operating expenses (Wharton, 2019) in order to create new facilities and re-furbish existing facilities in and around the city of Tokyo. However, the organizing committee does not account for the expenditure that the national and local government is spending, which is reportedly to be around US$ 20 billion (Wharton 2019) in order to improve the infrastructure of Japan for the Games.

As one of the most important goals of the Japanese government for the past few years has been to increase the tourism footfall, the games can be used as a catalyst for the same. “The city and its region have to cover all investment in the required sports infrastructure. The ongoing gigantism of the games raises the question as to whether the anticipated benefits from the Olympic Games justify the after hidden and unforeseen expenses” (Holger Preuss, 2004).

When there is a bid, there is data that shows during 1896-1996 that almost 80% of the countries that bid and end up hosting the Olympics are all developed countries, while from 2000-2020, that percentage had dropped to 49% and the percentage of developing countries bidding for the Olympics has gone up to 44% from 10% (Baade, R. A. and Matheson, V. A. 2016). Is it actually viable for a developing country to host an Olympic Games as it entails billions in investment, which comes with high opportunity costs.

ATHENS 2004: “Welcome Home”

It could not have been more too the point. It sought to sell the uniqueness of the Athens Games as the only and ever authentic and perhaps capable of transforming the symbolic landscape of the over-commercialized and commodified Olympic Games. (Artemisia Apostolopoulou et al, 2010) There was a positive impact on the Greek Stock Exchange when Athens won the bid (Matheson, Engelhardt, Yen, Chisolm – 2018), which was beneficial for the country’s economy.

The redesign of national identity was a conscious goal of the Athens 2004 Olympic Games organizers, who saw the Olympics as an opportunity to brand the look of a “New Greece.” The aim of the organizers was to overhaul the country’s outdated image as a nation caught between a glorious antiquity and technological backwardness, as well as convince the international community of Greece’s modernity and Europeanization in both cultural and economic terms (Jilly Traganou 2009). The Greek government invested an estimated $13.8 billion (Robert A. Baade and Victor A. Matheson 2016) to turn this vision into a reality.

One of the problems that ATHOC faced was a hike in security measures. There was a 5 time increase in the security budget in comparison to the Sydney Olympics as it was the first Games to take place post 9/11 (Artemisia Apostolopoulou et al, 2010).

A few years after the games, Greece started to face an economic slowdown. For instance, elite sport development had evolved into a crucial element of a country’s sport system, and national federations and governing bodies are exploring opportunities for continuous investment of resources in order to develop effective sport structures and talent. The public funding mechanism of sport is facing formidable challenges, a fact that often leads to wide-scale closure of sport services, transferral of physical resources to private and voluntary sectors, and reorganisation of local authority sport development units. (Giannoulakis, C. et al. 2017). As Giannoulakis states, this kind of atmospheric change can change a lot of aspects of the government. They had to cut back on funding different sporting services as this would not take priority for the Greek government during a time of turmoil. There was a cutback in public funding for sports during the time period of 2007-2014. The total public funding of reduced from 43,572,000 Euros to 16,226,200 Euros (Giannoulakis, C. et al. 2017)

BEIJING 2008

Just like the Athens Olympics wanting to change the world’s perception about Greece, this was also the case for the Beijing Olympics. China was also trying to do the same. Beijing was keen to demonstrate the growing importance of China to the world economy by delivering ‘‘High-Tech Games’’as well as to demonstrate its great cultural past, which is interesting for tourism (Preuss, H. and Alfs, C. 2011).

The government invested $2.3 billion in sporting infrastructure but the total cost was $45 billion (Baade, R. A. and Matheson, V. A. 2016). Most of the costs go into creating new and revamping the current infrastructure in and around Beijing. New facilities would be built, dilapidated houses and neighbourhoods smartened up, subway lines constructed, a major investment in urban regeneration would begin. (Liu, D., Broom, D. and Wilson, R. 2014). The hosting of the 2008 Olympic Summer Games in Beijing would result in enormous pride among the Chinese, symbolizing China’s re-engagement with the world (Heere, B. and Xing, X. 2012)

During the games Beijing suffered from a “crowding out effect” as many non-sporting tourists resisted from coming to China during the period of the games. Beijing reports a 30% drop in international visitors and a 39% drop in hotel occupancy during the month of the games in comparison to the previous year (Baade, R. A. and Matheson, V. A. 2016).

After the games, there was a ‘cyclical unemployment’ as BOCOG had many employees who were contracted based or borrowed employees. Out of the approximately 9000 employees only 1947 were formal employees of the BOCOG (Xing, X. and Chalip, L. 2012). This could mean that there would have been a substantial amount of people losing their jobs once the Games were over.

In the long-run, Beijing was able by remodelling the sports infrastructure for other purposes so the ‘white elephant’ problems would not be as bad as Athens. Beijing’s iconic “Bird’s Nest” Stadium has rarely been used since 2008 and has been partially converted into apartments, while the swimming facility next door dubbed the “Water Cube” was repurposed as an indoor water park at a cost exceeding $50 million (Baade, R. A. and Matheson, V. A. 2016)

LONDON 2012

This was the third time that London was going to play host to the Olympics. This benefited them greatly has they already the infrastructure in place and quite a bit of the sports infrastructure as well. The total budget of the games was $8.77 billion. Although this bid was won on a budget of $2.4 billion, data shows that on an average the Games goes 150% over budget (Baade, R. A. and Matheson, V. A. 2016).

Following the success of the bid, the Labour government wanted to use the Games to make the UK a world-leading sporting nation. London 2012 legacy planning was affected by political shifts in the pre-event period, most notably the transition at national level from the Labour government (1997–2010) to one led by the Conservative party. In a detailed critique of policy initiatives prior to the Games, traces a philosophical change from Labour’s to the Conservative– Liberal coalition when it gained power in 2010. (Brown, G. et al. 2017)

Another problem that London ran into was the ‘crowding out effect’ same as the Beijing Olympics. There was a shortage of tourist in London during the Olympics. The number of international visitors in 2011 was 6,568,000 during July and August. While in 2012 the number fell to 6,174,000 (Baade, R. A. and Matheson, V. A. 2016). This means that the number of non-sports tourists fell by a considerable rate.

After the games, London was able to prevent the ‘white elephant’ problem by have The Stadium at Queen Elizabeth Park converted to a football stadium for West Ham United, even though they had to incur extra costs to remove the track and put football facilities around the stadium. (Baade, R. A. and Matheson, V. A. 2016). The stadium continues to be used for sporting activities.

RIO 2016

This was the first time that South America was going to host the Games so the pressure to stand-out was a given. An Olympic Games on an average goes 156% overbudget (Matheson, Engelhardt, Yen, Chisolm, 2018), this was the case with Rio de Janeiro as well. Rio was only the second host city to be from a developing country the first being Beijing in 2008. Even it being one of the most popular tourist destinations in the world still had a shortage of infrastructure. They had to build 15,000 new hotel rooms for tourists during the games. While investing in the hospitality industry can pay off in the long term, Rio was still going to face a problem of overcapacity. (Baade, R. A. and Matheson, V. A. 2016)

REFERENCES

Apostolopoulou, A., Papadimitriou, D. and Damtsiou, V. (2010) ‘Meanings and Functions in Olympic Consumption: A Study of the Athens 2004 Olympic Licensed Products’, European Sport Management Quarterly, 10(4), pp. 485–507.
Baade, R. A. and Matheson, V. A. (2016) ‘Going for the Gold: The Economics of the Olympics†’, Journal of Economic Perspectives, 30(2), pp. 201–218.
Brown, G. et al. (2017) ‘Event satisfaction and behavioural intentions: examining the impact of the London 2012 Olympic Games on participation in sport’, European Sport Management Quarterly, 17(3), pp. 331–348
David Wharton (2019) ‘Tokyo’s rough road to 2020 Summer Olympics’, Los Angeles Times. July 23
Engelhardt, B. et al. (2018) ‘The Economic Impact of Olympic Games: Effects of Host Country Announcements on Stock Market Returns’, International Journal of Sport Finance, 13(3), pp. 243–260.
Giannoulakis, C. et al. (2017) ‘Impact of austerity measures on National Sport Federations: evidence from Greece’, European Sport Management Quarterly, 17(1), pp. 75–97
Heere, B. and Xing, X. (2012) ‘BOCOG’s road to success: predictors of commitment to organizational success among Beijing Olympic employees’, European Sport Management Quarterly, 12(2), pp. 161–181.
Jilly Traganou (2009) ‘National and Post-National Dynamics in the Olympic Design: The Case of the Athens 2004 Olympic Games’, Design Issues, 25(3), p. 76
Liu, D., Broom, D. and Wilson, R. (2014) ‘Legacy of the Beijing Olympic Games: a non-host city perspective’, European Sport Management Quarterly, 14(5), pp. 485–502.
Matheson, Engelhardt, Yen, Chisolm (2018) ‘The Economic Impact of Olympic Games: Effects of Host Country Announcements on Stock Market Returns’, International Journal of Sports Finance, 13(3), 243-260
Preuss, H. (2004) ‘Calculating the Regional Economic Impact of the Olympic Games’, European Sport Management Quarterly, 4(4), pp. 234–253
Preuss, H. and Alfs, C. (2011) ‘Signaling through the 2008 Beijing Olympics-Using Mega Sport Events to Change the Perception and Image of the Host’, European Sport Management Quarterly, 11(1), pp. 55–71
Rong Zhang and Dennis C. McCornac (2014) ‘Challenges for the International Tourism Industry in Japan – An Agent for Economic Recovery and Development’, Almatourism, (10), p. 109.
Xing, X. and Chalip, L. (2012) ‘Challenges, obligations, and pending career interruptions: securing meanings at the exit stage of sport mega-event work’, European Sport Management Quarterly, 12(4), pp. 375–396.

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The Economics Of The Olympic Games

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