How the Olympic Games imposed staggering expenses on host cities

“All Games, without exception, have cost overrun,” researchers wrote in an Oxford University study released in May. “For no other type of megaproject is this the case, not even the construction of nuclear power plants or the storage of nuclear waste.”

Including Paris, five of the past six Olympics (summer and winter) had inflation-adjusted cost overruns of well more than 100%, it added.

Data from German statistics platform Statista shows that Barcelona ran 266% over cost in 1992 and Rio de Janeiro exceeded its plan by 352% in 2016.

In 2014, the Games were 289% more expensive than expected at the Russian town of Sochi.

“While hosting an event like the Olympics is sometimes touted as an opportunity to improve city infrastructure, the enduring legacy of the Games sometimes ends up being a slew of abandoned and overgrown venues that no one uses due to poor long-term planning,” Statista said in a report.

Andrew Zimbalist, Smith College sports economist, said that many cities race to host the Olympics by spending up to $100 million on the bidding process alone.

“The competition to host the Games became almost as intense as the athletic competition itself,” he told CNN.

While the hosts say that hosting the Olympics can put their city on the world map and increase tourism, business and investment opportunities, Zimbalist said that these claims are “outlandish and inaccurate.”

The true costs of hosting an Olympics include the time, labor and money spent on a large facility which likely interrupts daily commerce, takes up valuable real estate, pulls attention and labor away from needed infrastructure projects, and drains future resources via ongoing maintenance costs or debt service payments, he added.

According to Zimbalist, since 2005, the revenue from each Olympic Games has been around $6-8 billion, which is quite small compared to the huge amount of money spent.

Statista suggests that some host cities only realize the “catastrophic” consequences after the Olympic party is over, but a few are more cautious. For example, Hamburg (Germany) withdrew its bid to host in 2015 due to cost concerns following a public referendum.

Amanda Phalin, an associate professor who specializes in international business and economics at the University of Florida’s Warrington College of Businessm said: “Although sporting events, including the Olympics, attract a lot of people, there are also a lot of people who are going to forego visiting there because [of the event].”

Infrastructure costs have always been a challenge to host cities as the construction of new venues and buildings can contribute to an overspending of billions of dollars, CNBC said in a report.

But France is seeking to bucked the trend by hosting one of the cheapest Olympics this year.

“This will be the first Olympics, since Sydney, where the total costs are coming in under $10 billion,” said Victor Matheson, a College of the Holy Cross professor of economics who has researched the financial costs of the Olympics, as cited by CNN.

This is because the International Olympic Committee, a non-governmental sports organization, is aiming to take a more frugal and greener approach than in years past, he said.

He added that the committee was “running out of cities willing to host this thing” because of the large financial costs and the little chance of making money back in the long run.

One of the reasons for Paris’ cost-efficiency is that its construction costs are at a manageable level of $4.9 billion, as 95% of the venues are already in place and only three new ones were built.

Paris’ infrastructure has already been designed to host a large number of visitors as the city welcomed 100 million tourists last year.

The city also has long-term plans on how to take advantage of Olympics infrastructure after the event.

The Paris’ Olympic Village, where the athletes stay during the games, will be turned into housing and student accommodation afterward, and this will be a boost for the local area, said Hugo Soubrier, associated director of S&P Global.

He added that Paris already has a large system of public transport, including metros and trains, and this will help move visitor efficiently between venues.

Zimbalist said: “When you have a fully developed city like Paris or Los Angeles hosting the games, and they already have the vast majority of the venues, this is obviously a smaller problem. And that is good news.”