Why do countries want to host the Summer Olympics?

For little over a fortnight, France was abuzz with the Olympic spirit. 

Such was the fervour that it was easy to forget the prevailing political climate of the country - one of violent polarisation and an uncertain future as a result of a hung parliament in the recent snap elections. 

France is yet to announce a new prime minister but whilst the Olympics were on, the best of Paris was on show for the world.

Multiple global feeds showed sports at some stunning locations - be it the archery range with the iconic Dôme des Invalides in the backdrop, fencing in the Grand Palais, equestrian events at Versailles or beach volleyball at the Eiffel Tower.

On the medal tally, France finished fifth, just two gold medals shy of Australia.

“These Olympics are iconic – there’s a winning dynamic that is allowing French people to feel something they haven’t felt enough for years: pride. It’s a reminder that France is capable of great things. It has contributed to our happiness,” sports minister Amélie Oudéa-Castéra told French television channel BFMTV.

The trend of host nations making strides on the medal tally is conspicuous.

In 1992, hosts Spain rose in the rankings by 19 places to finish 6th; in 2004, hosts Greece finished at 15th, its best position in modern times; in 2008, hosts China topped the table for the first time. Great Britain is the only exception to this from recent years. They could only manage a 3rd-place finish when they hosted in 2012, but can be said to have reaped the rewards with a 2nd place finish in 2016.

Usually, host countries also sustain a high level of performance in subsequent editions too.

Like Brazil, who are set to keep winning more medals at every edition since 2016 this time too.

Every host country has the advantage to participate with the most athletes. In 2016, Brazil participated with 465 athletes whereas in 2020 they had 302. Hosts Japan had 556 athletes in 2020, compared to 403 in 2024.

For those who lay store by their country’s sporting success, hosting the Olympics would be a dream come true.

How expensive is it to host the Olympics?

The other side of the coin, on which extensive research has been carried out, however, is troubling for prospective hosts - hosting the Olympics is almost inevitably economically harmful.

“Olympics are a money-losing proposition for host cities; they result in positive net benefits only under very specific and unusual circumstances. Furthermore, the cost–benefit proposition is worse for cities in developing countries than for those in the industrialised world,” according to research paper Going for the Gold: The Economics of the Olympics by Baade and Matheson.

Greece spent $11 billion on hosting the Olympics in 2004, around 5% of its annual GDP. On the other hand, China spent $42 billion on the 2008 Olympics, but that equated to less than 1% of its GDP.

Overspending on the Olympics is said to be a major factor in the economic recession that gripped Greece in the late 2000s.

Other horror stories involve Montreal paying off its debt incurred from hosting the 1976 Olympics for the next 30 years. In 2016, the city of Rio de Janeiro needed a $900 million bailout from the federal government to cover the cost of policing the Olympics and was unable to pay all of its public employees. The 1992 Olympics left the central Spanish government $4 billion in debt.

Los Angeles is the only host city that earned a profit from hosting the Olympics, mostly because the infrastructure required of them already existed. LA recorded a $215 million operating surplus in 1984, the only instance of an economically profitable Games.

According to the Oxford Olympics Study 2024, “The most expensive Summer Games to date were Rio 2016 at USD 23.6 billion and London 2012 at USD 16.8 billion. The official Games Report puts the cost of Tokyo 2020 at USD 13.7 billion… (but there are) significant budget exclusions from official figures like land costs, transport infrastructure…”

Unlike in LA, it was an expensive proposition for Brazil to host the Olympics because more than half of the funds had to be devoted to building infrastructure.

Paris has set an initial budget of $8 billion, hoping to break the streak of financial strain that past Games have left on host cities. But as per an Oxford University study from 2016, at 156 percent in real terms, the Olympics have the highest average cost overrun of any type of mega project.

The total revenue from the Summer Olympics now averages around $10 billion. But much of this revenue doesn’t go to the host. The IOC keeps more than half of television revenue, typically the single largest chunk of money generated.

By all evidence, hosting the Olympics is against short-term economic logic.

How Olympic infrastructure used in future is key

“We are working hard to conduct the 2029 Youth Olympics and 2036 Olympics in the country. Sports is not confined to the ground, but by itself is an economy,” Indian Prime Minister Narendra Modi said at the inauguration of the Khelo India Youth Games last year. The intention of hosting the Olympics in 2036 was also part of BJP’s election manifesto for the Lok Sabha polls this year.

The long term economic effects of hosting the Olympics are not empirically measurable. All we can do is to point out disparate results based on how the infrastructure is planned around the Games.

The estimated cost of creating infrastructure worthy of the Olympics can range from $5 billion to $50 billion, according to a study by the Council on Foreign Relations, an American think tank. Often, this amount is bigger than the cost of actually organising the Games.

Nearly 85 percent of the Games budget of $50 billion of Russia's 2014 Winter Olympics was spent on building non-sports infrastructure from scratch, as per the CFR study. More than half of the Beijing 2008 Games budget went to rail, roads, and airports, while nearly a fourth went to environmental clean-up efforts, the study said.

How countries plan the Olympics infrastructure - stadiums, sports facilities, transport lines and other permanent urban infrastructure, all of which outlasts the Games - is key.

Facilities created on borrowed money in 2004 contributed to Greece’s debt crisis. Because stadiums are running expenses, these facilities became ‘white elephants’, sore eyesights for citizens who had no more use for them. Beijing’s Bird’s Nest arena, constructed for the 2008 Games, costs $10 million in annual maintenance, even though it has no regular tenant.

In contrast, current hosts France, in an effort to cut down on such costs, have built only two new venues: an aquatics centre and an arena for badminton and rhythmic gymnastics.

Building economic strength

There have been other ways countries have had long-term economic gains through the Olympics.

The 1992 Olympics is touted as a tourism success story for Barcelona, which rose to 5th from 11th among the most visited European destinations in 1992. This reputation only grew in following years.

China negotiated with the World Trade Organisation, opening trade for the country, after being awarded the 2008 Olympics. Korea’s political liberalisation coincided with winning the bid for the 1988 Olympics.

Going further back, the 1968 Olympics allowed Mexico to make “the leap into the ranks of industrialised nations,” according to David Goldblatt, sociologist and sports writer. The 1964 Olympics led to Japan’s entry into the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD).

Related benefits may include increased trade, foreign investment and other long-term benefits such as lower transportation costs thanks to an improved road or rail network.

Building a global image

If a host country can improve its global image through the Games, it could eventually expect long-term economic gains to offset the short-term loss.

Take the example of the 1964 Olympics which were awarded to Tokyo. It had been less than 20 years since the second World War had ended, and Japan was still rebuilding, not least in terms of global acceptance since their role in the war.

The country took up hosting the 1964 Games as a hard deadline to modernise and rebuild infrastructure. The famed bullet train, for example, is a legacy of those Games.

The exposure the Olympic Games provide can show the strengths of a host nation, but on the other hand, can also expose its weaknesses. In the lead-up to the 2008 Olympics, for instance, Beijing’s poor air quality suddenly became a global concern, such that China spent a staggering $19 billion to appease the International Olympic Committee (IOC).

When it comes to India’s ambitions of hosting the Olympics, China’s environmental bill from 2008 is a dangerous precedent. The air quality in major Indian cities is much worse than in Beijing in current times.

The UK-based consultancy Centre for Economics and Business Research (CEBR) in its December 2023 report said that India is set to become the third economic superpower and touch the $10 trillion mark by 2035.

Leaving ambitions of sporting success aside, these economic forecasts suggest India might just be the perfect candidate to host the 2036 Games, sealing a first ever for a south Asian nation. At the least, it is one of the few countries which can foot the massive bill.