Hosting the Olympic Games: Is it worth it?

The Olympic games have long since been a means to display an array of talents, vast cultural exchanges and application of peaceful global interactions. As the most televised event globally, the Olympics offer an arena for individuals to be involved in a historic global phenomenon. It presents a phenomenal incentive for countries’ social and cultural atmosphere to be able to host such a unique event. Of course, this does not come without extraordinary monetary costs.

Particularly in developing countries such as Brazil, the costs of general, sporting and operational infrastructure, as well as the daily expenses of the Games, put a highly tangible toll on the economy that, if past Olympic games precedent holds true, is rarely recovered. Over the 10 years since Brazil won the bid at the 2006 Annual Assembly, the Olympics has offered a significant increase in jobs and money flow around the nation’s economy. However, the estimated $12 billion investment was only 58% private ventures, leaving the Brazilian government filing for bankruptcy and pending a recession. Furthermore, post-Games government debt levels for developing countries have in the past resulted in an inability to maintain the quality of Olympic infrastructure, leading to significantly lower than expected actual tourism levels in the years following the games.

The costs and benefits must be analysed by any nation wishing to bid to host the Olympic Games. These nations must consider the tangible effects such as financial burden, ongoing infrastructure costs as well as effect on local businesses. However, these must be weighed up against intangible effects such as domestic morale, global perceptions and cultural amplification in order to gauge the true impact of hosting the Games on their society. In balancing the rewards and shortcomings that are attached to the deal, one must identify the motives behind a city bidding to host.

The prospect of the advertising effect associated with hosting the Games is particularly alluring. From acquiring hundreds of hours of television exposure from the millions of global viewers, to the sponsorship deals – the revenue potential appears exponential. Additionally, if you include the projections for boosts to tourism, placing a bid seems to be a hot investment.

However, if you look at the recent history of budgets from the cities (and their respective countries) that have hosted an Olympic Games, an immediate trend is identified – the Olympics are incredibly expensive to run, especially in comparison to the allure of revenue.

This article was originally produced by current BCom students, Claire Shinkfield (editor), Caris McClements, Alistair de Steiger, Kayley Loo and Elise Coorey (co-writers), and first appeared in CAINZ Digest.

CAINZ is a commerce-focused student organisation, initially established at The University of Melbourne in 2011 with a remit centred around bridging the gap between classroom theory and industry practice. In addition to producing its weekly business news publication, the CAINZ Digest, CAINZ holds a variety of networking events and workshops to develop the professional skills of its members.