Economics of the Olympics

Written by Ella Gupta (W ‘27); Edited by Maggie Goldman (C’28)

The Olympics —the world’s biggest sporting event —unites athletes, spectators, and media globally every four years. Athletes compete on the biggest stage in sports, testing their physical and mental limits while a sense of unity and international camaraderie reigns. However, beyond all Olympics buzz lies a complicated financial ecosystem. 

Hosting the Olympics requires a hefty investment. For example, the Paris Olympic games cost a whopping $8.7 billion. The International Olympic Committee assures that the payoff to the host city justifies the investment through job creation and increased tourism. However, the reality is much more complex. An analysis by NC State’s Poole School of Management reflects that the actual benefits received by host cities can be largely context-dependent.

Firstly, for prospective hosting cities, hiring consultants to prepare bids can cost between $50 and $100 million. Once they secure the contract, the hosting cities often must build new facilities such as the Olympic village and transportation infrastructure to support the larger volume of people. Some justify this cost of infrastructure by citing higher employment. However, deeper analysis indicates that the “jobs created” by the need for construction doesn’t necessarily reduce unemployment, as these gigs can just be assumed by those already employed. These jobs are also temporary in nature and don’t necessarily translate to lasting economic impact. Cities can also incur significant debt to finance constructions. Montreal, in fact, took until 2006 to fully repay the debt from hosting the 1976 games. Host cities also have to shoulder operational costs such as security, food, and utilities.

While hosting cities can receive a portion of the revenue from streaming and sponsorships, the IC pockets the majority of this sum. Furthermore, while hosting can induce a bump in tourism, attracting visitors from around the world, it could also deter some visitors who are scared of inflated prices and crowds. Hotel prices rise during the Olympics. However, this increase doesn’t necessarily benefit the local economy or materialize as local revenue; rather, this profit enriches large corporations like Hilton and Marriott. 

There has only been one city that concluded the Olympics having generated an operating surplus — Los Angeles ($215 million profit). The circumstances were also unique for LA, however. It was the only bidder for the 1984 Summer Olympics (meaning no bid costs) and the city was able to utilize existing infrastructure and minimize new construction.

Ultimately, cities must weigh economic considerations with the prestige and legacy associated with hosting the Olympic games.