Economic advantages of hosting the Olympics

I was wondering why hosting the Olympics is supposed to be such a big deal for the host city’s local economy considering the huge monetary investment required. I was reading in the Post today that Beijing plans on spending $20 Billion USD for infrastructure upgrades and $12 Billion USD for environmental upgrades. I’m sure they expect to recoup those costs in 2008, but what I can’t figure out is how the Olympics can generate billions of dollars in revenue for a city. Does most of this money come from all the tourists/athletes/press/etc infusing the local economy with their cash when they buy things like hotel rooms and food? About how much total income does the Olympics generate for the host city? And, aside from “national honor” and prestige, what are the long-term economic and social gains from hosting the Olympics? Just curious.

The money’s supposed to come from tourist arrivals and increased foreign & domestic investment. But in China’s case, a lot of the domestic investment might have been better spent elsewhere, for example on rural education.

Some cities have made money, but Montreal and Barcelona went billions of dollars into the red. Meanwhile China’s corruption means that it’s probably going to be a lot more than 20 billion.

I suspect it’s a little like athletic stadiums in the US; they’re always touted as big money-makers, but rarely are.

New York Times

Total speculation here, but perhaps the Olympics can be seen as a wealth transfer:

The infrastructure is paid for by the government of the host city/country, while at the same time, domestic businesses reap the rewards.

Even if there is a net positive, it seems to me that the taxpayers may end up subsidizing a windfall for domestic businesses. Of course, many of those taxpayers are employed by domestic business, and many of those businesses pay taxes, so it’s hard to guess (as a non-economist) who wins and who (if anyone) loses.

Well, there’s also the little advantage that it lets people know you exist. Sure, not a big deal for Beijing, but how about Torino? I don’t even know what country that’s in, but I bet I will after they hold the Winter Games there in 2006. And a billion other people will too. Priceless…

The profit in the Olympics comes from the sponsorship deals. Yes, the economy is stimulated by all the building and such, but prior to the LA Olympics in 1984, Olympics were a big money-loser for the host country. In 1984, The Olympics was first run as a corporation, and companies first paid big money to be the “exclusive”-whatever of the Olympic Games. From the point forward, the Olympics were profit-making enterprises for the host country, and every country wanted to host one. Just to give an idea, Coca-Cola alone spent more than $350 million on sposorship at the Atlanta Olympics. Apparently the average sponsorship at Sydney deal was around $50 million/company – you are looking at billions of dollars. I’ve been trying to find an offical comprehensive list but can’t. Off the top I know of McDonald’s, Coca-cola, Kodak, Visa, Nike, Speedo. I know there are lots more.

Smack Fu:

Actually, that’s the local name for Turin, Italy…already a household name due to a famous shroud. A better example would be the last two Winter Games hosts, Lillehammer, Norway and Nagano, Japan.