Is It Worth Hosting the Olympics
Matthew Fritchen
Mrs. Straub
Econ
11 October 2014
Is It Worth Hosting the Olympics
This topic receives attention every time cities apply to host the Olympics. Is the Olympics as costly as it is commonly made out to be. The answer is no the Olympics can produce great economic benefit to the cities that host them. The success of the olympics rests on the pre-olympic setup plan. To put this into perspective in the 2004 Olympics Athens managed to accumulate close to 15 Billion US dollars worth of debt or in Montreal in 1976 where the city recorded a debt of 990 million dollars. Although there has been many accounts of unsuccessful hosts losing millions of dollars there have also been great successes as seen in the 1984 Olympics in Los Angeles where there was a profit of 250 million dollars. So the question is commonly posed why host the games?
When we analyze what went wrong for Athens in their planning that lead to the largest loss in Olympic history we will see that the cost of producing all new stadiums and facilities sets up for extreme losses. The first thing that Athens did wrong was base some of their predicted profits on future increases in tourism. Planning for an increase in tourism after the Olympics has cost cities money every time it is believed to eliminate out the costs of preparing for the games. The second thing that Athens did wrong occurred when they constructed way to many hotel rooms for the games. The main issue that occurred in Athens was that they saw marginal benefit in planning for long term increases in revenue when the olympics typically don't produce long term profits. Athens also built stadiums that they would never use after the games which cost the city greatly.
What did Los Angeles do to make a profit? The first thing that Los Angeles did that was different than most cities in their planning was the use of stadiums that were already built which greatly lowered the costs of preparing for the Olympics. With eliminating the cost of producing all state of the art facilities Los Angeles stayed well within their budget which is another key to producing a profit. Lastly with the costs of stadiums out of the way the only thing that Los Angeles needed to spend a substantial amount of money on was on Hotels.
The Olympic games also bring many positive externalities to the cities that host. First there is a large increase in the need for construction jobs and workers for the facilities at the games. As well as just jobs the olympic games also brings state of the art facilities to the community. During the olympics local business see increases in profits due to the rush in tourism. With the olympics there is an increase in consumer demand for olympic based products due to a rise in consumer expectations for the products. The Olympics also bring negative externalities to the community as well, the increase in tourism could cause there to be an increase in disturbances during the games. Another negative externality that occurs is an increase in taxes due to the fact that the games need funding so people living in and around the host city see increases in their taxes.
The successfulness of the Olympics is heavily dependant on the plan that is put in place. By following what has worked before profits can be made and there will be great economic benefits for the host city and its citizens. Overall the hosting the Olympics is worth the cost included in preparing it.
Sources
NEW YORK (CNNMoney) -- Hosting the Olympic Games is a lot like throwing the world's largest --, and most party.. "Olympics is a very risky bet for cities."CNNMoney. Cable News Network, 30 July 2012. Web. 11 Oct. 2014. <http://money.cnn.com/2012/07/30/news/economy/olympics-cost/>.
"Rising Cost of Olympics Begs Question: Why Host?." VOA. N.p., n.d. Web. 11 Oct. 2014. <http://www.voanews.com/content/rising-cost-of-olympics-begs-question-of-why-host-the-games/1844546.html>.
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