Published on October 19th, 20126
The Olympics – A Burden or a Profit for the Hosts?
Whether or not a city and a country should bid to host the Olympics is often a source of heated debates. For sure, the Olympics are a source of great national pride. But does hosting such an event yield positive economic benefits?
In 1976 Montreal hosted the Winter Olympics. Shortly after the city had been awarded the games, its Mayor Jean Drapeau made his famous statement “The Montreal Olympics can no more have a deficit than a man can have a baby.” He was soon to eat his words, as the games resulted in large cost overruns.
Before a bidding process the skeptics often raise the argument that the Olympics will be too expensive and that the potential for re-use is insufficient to justify construction of costly venues. Also, major sport events are associated with negative environmental and social externalities, which risk making the overall costs from playing host larger than the benefits.
On the other side of the table stand the advocates, arguing that the event will stimulate economic activity, increase export revenues, create positive publicity for the country and in turn lead to economic growth and increased levels of domestic and foreign investment.
In the literature on sport management, the lion’s share of researchers argue that there is no direct economic gain from being a host nation. They contend that the economic multipliers presented when arguing in favor of hosting a large event are usually over-estimated. Also, real revenue associated with hosting the Olympics is insignificant.
However, Professors Wolfgang Manning and Stan du Plessis highlight what they call the multidimensional benefits of hosting tournaments, which include direct, long term and also non-pecuniary benefits like political gains and a so-called “feel-good” factor.
Popular Social Science agrees that the prospect of economic gain is not the only driving force and plus side associated with arranging the Olympics. One need to take into account the positive factor that is hard to measure, namely that of national pride and joy.
Maennig, W. and du Plessis, S., (2007) “World Cup 2010: South African Economic Perspectives and Policy Challenges Informed by the Experience of Germany 2006” Contemporary Economic Policy, 25(4): 578–590.
Matheson, V. A. (2009) “Economic Multipliers and Mega-Event Analysis” International Journal of Sport Finance, 4(1): 63–70.