Sunday, October 4, 2009
LONDON -- So you didn't get the Games, Chicago. Relax. It's not as tough a break as you think. We Londoners should know. Watching the festivities in Copenhagen on Friday, I couldn't help but recall the International Olympic Committee's announcement in Singapore in 2005 that, to the astonishment of the world, our city had beaten Paris for the 2012 Summer Games prize. Four years later, the Parisians have come to terms with their loss, while U.K. taxpayers have learned to curb their enthusiasm for an event that is currently estimated to cost $15 billion, though many expect that price tag to go even higher. For the triumphant Rio citizens, there are many lessons about the burdens of hosting that you will have to learn for yourselves, but here's a head start.
1. The Olympics will pay for themselves.
Nope, they never do. The Olympics have always needed a public subsidy, but in recent years the cost has ballooned as the number of cities vying for the big prize has grown. This is no coincidence. More competition means brasher promises and bigger purses. Representatives of national Olympic committees, governments and other interest groups are fond of saying that the revenues from ticketing, broadcast rights, sponsorship and merchandising will cover the operating costs. This leaves out the cost of the Olympic infrastructure -- the stadium, velodrome, aquatic center and the rest. London is building a 12,000-seat handball arena. Most Brits don't even know what handball is. Add to that all the transportation that has to be created or enhanced to get an estimated 250,000 fans into and out of the Olympic site quickly and safely. Operating costs are the tip; infrastructure is the iceberg. Moreover, much of this infrastructure has limited value after the Games and will never generate much income. In 2007 the U.K. government announced that the real cost of the Games would be closer to $15 billion than the $4 billion they had initially promised. Olympic accounting is shrouded in mystery, but since Los Angeles in 1984, there have been no cases where the Games can show a net profit.
2. Winning the Games means a gold rush of jobs for the host city.
The truth is that the local economy doesn't get much of a boost while those shiny new athletic venues are being built. Many of the jobs created are filled by specialists who come in from outside -- to construct a BMX bicycle track, it helps to have built one before -- and they take their pay home with them. To the extent that local labor is tapped, suppliers are taken away from other projects in the area, raising costs in the process. It would be nice to think you could create an Olympic city by hiring an army of the unemployed, but mega-projects like this do not work like that.
3. The Olympics will boost local tourism.
For most foreign visitors, attending the Olympics is a proposition that costs thousands of dollars. Demand is just not that great. True, many foreigners and Olympics die-hards will come, but far more of the attendees will be locals taking the chance of a lifetime. And of those who do travel from abroad, many will be what's known as "time-switchers": people who would have come anyway but plan their trip to coincide with the Games. Tourist arrivals usually fall after the Olympic circus leaves town. When Athens hosted in 2004, Greece didn't see visitor numbers recover to their pre-Games level until two years later.
4. Playing host to the Olympics changes the landscape of a city forever.
Maybe, but it's not a legacy worth much. Athens has struggled with unused venues; the Beijing Bird's Nest is mostly empty. London is building an 80,000-capacity Olympic stadium for 2012 only to strip it down to 25,000 seats immediately after the Games. Even Sydney, which staged one of the best Games of recent decades, has torn down a number of venues. In the end, the cost of maintaining unused buildings is so high that demolition is often the only sane option. The Olympic Village does have some value after the fact. London will be selling off around 4,000 Olympic properties at a price that will more or less cover their costs. But for the most part, the athletic venues and the new transportation systems don't reshape a host city for years to come. The infrastructure carries a construction premium -- facilities must be built to time (contractors ruthlessly exploit this) and to the IOC specifications, which many not be what the city needs.
5. The Olympics inspire greater participation in sports.
In recent years concern about the obesity crisis has offered another crutch to bid-city boosters: The Olympics will make us more active and therefore healthier. It's hard not to be skeptical, though, about claims by any organization whose major sponsors are Coca-Cola and McDonald's that what it does is good for your health. We admire Usain Bolt, but we are not likely to go to the track and start sprinting because of the records he's broken. And when did you last watch a bout of Greco-Roman wrestling and say to yourself, "I fancy a go at that"?
It is true that many Olympic athletes were inspired by watching the Games, but most of these people had athletic talent to begin with. For everyone else, the effect is more likely to go in the opposite direction -- the Olympics can reduce participation in sports. Public subsidies that might have gone into boosting local facilities are diverted to the Games. In the U.K., national lottery funds traditionally devoted to local investment in sports facilities have been committed to funding the Olympics over the next 10 years.
Maybe it's for the best, though, that the Games don't actually inspire a generation of Olympic hopefuls and host-city boosters. As public debt continues to mount, the cost-effectiveness of hosting the Games will come under increasing scrutiny, and by 2020 the IOC might be struggling to find credible bidders.
Stefan Szymanski is a professor of economics at the Cass Business School at City University London and the author, most recently, of "Playbooks and Checkbooks: An Introduction to the Economics of Modern Sports."
