The Financial Impact of the Olympics

by David Sung

The Olympics hasn’t always been how we know it today. Our modern version was inspired by the ancient Olympic Games, which began in Olympia, Greece beginning in 776 BC. The origins of the Olympics are unknown, but a favorite myth is that the legendary Heracles and his father Zeus were the progenitors of the Games. The first Olympic Stadium was built by Heracles as an honor to Zeus.

Since its creation, the Olympic Games have morphed into a worldwide event with over 200 nations participating. The Olympic Games have also turned into expensive events to organize for the host cities. The 2014 Sochi Winter Olympic Games have been the most expensive yet with total expenses estimated at $51 billion. That’s $10 billion more than the next most expensive Games, which were held in Beijing in 2008. Each event costs about $520 million. The ski jumps alone cost $265 million. The road which leads up to the mountain cost over $200 million to build in Sochi. The 30-mile long road that leads from the airport to the Olympic site in Sochi totaled $9.4 billion. The Winter Olympics generates only about $3 billion, which is not a lot of revenue considering the implementation cost.

With all the money spent on hosting the Olympic Games, does the Olympic Effect hold true? While there is a boost to the construction industry, and about 95 percent of those with the host country companies, the lasting effects just aren’t there. There is an increase in economic output, which is expected, however, the majority of increased spending is from international visitors. Take, for example, the London Olympics. It cost £9 billion. And in comparison to annual growth in the UK economy, it is the equivalent of approximately 0.7 percent of GDP. According to studies, stadiums and venues are bad investments. Once the Olympics are over, these buildings are under used and they cost the government millions of dollars just to maintain.

Hosting the Olympics also has its benefits. For example, the 2004 Athens Olympics transformed the city into a cleaner, more modern and easier to get around place. It presents the cities in a new light and can potentially increase tourism.

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