Exploring the Economic Impact of Hosting the Olympics: Does It Truly Stimulate Growth?

As the preparation for the upcoming 2024 Olympic Games in Paris, scheduled to take place from July 26th to August 11th, are approaching, anticipation and excitement are growing. The major event taking place only every four years is the dream of every elite athlete. Certainly many of you will tune in on the TV to catch the live broadcast of your favorite sport. Fun fact: the 2008 Beijing Olympics in China drew the largest television audience in the history of the Olympic Games, with 4.7 billion people across the globe tuning in to the spectacle between 8 and 24 August.

As Paris prepares to host a global stage of sporting excellence and cultural exchange, it is time to ask: do these major sporting events really do bring an advantage for the host country and boost the economy?  Or do the costs outweigh the benefits? Rigorous competition to host these mega-events have been historically evident. The bidding process often involves extensive lobbying efforts, diplomatic negotiations and significant financial commitments to meet the strict requirements set by event organizers. The impact of the Olympic Games extends far beyond the duration of the event itself. Beyond the sporting arena, it serves as a catalyst for social and economic transformation, driving investment in infrastructure, tourism, and community development. However, with the potential rewards come risks. Host countries encounter challenges of managing costs, mitigating social impacts, and delivering ambitious promises. Therefore, let’s figure out if this phenomenon is indeed a winning economic strategy. 

Undoubtedly, ticket sale revenue is a huge contributor to growth in the economy. In fact, looking at the 2020 Tokyo Olympic Games held without any spectators due to the COVID-19 crisis, the lack of spectators resulted in an estimated loss of 90 billion yen (about €55 million) in ticket revenue. In addition, the GDP boost from hosting the Tokyo 2020 Games without spectators is estimated to have shrunk to 0.3 trillion yen (around €1.8 billion) . Hence, this may have possibly resulted in a loss of 1.4 trillion yen (about €8.5 billion) in GDP compared to if the event had been held in its full form. This substantial loss of ticket revenue contrasts sharply with the high demand for tickets at the upcoming Paris 2024 Olympics. Getting tickets to the Paris 2024 Olympics has been in high demand, with around seven million sold since sales began almost a year ago. While reasonably priced tickets for certain events are still available, high-profile sports like gymnastics and diving have become nearly inaccessible, with prices soaring above €1,700 before selling out. Organizers, led by Paris 2024 president Tony Estanguet, have defended the pricing, noting it is cheaper than the 2012 London Olympics. Moreover, good luck getting any one of the 100,000 ticketed seats to be front and center at the opening ceremony. Those are mostly sold out and the few left cost around a whopping € 2,700. Therefore, the massive ticket sales contribute significantly to the economic implications of hosting mega-events.

Another aspect where hosting the Olympics has a huge impact is inevitably accommodation and the housing market. With approximately 15 million visitors expected and only around 85,000 guest rooms available, hoteliers and Parisians are capitalizing on the high demand. 

Numerous hotels have increased their typical summer rates significantly, with some charging double or triple the usual price (around €1,000 per night instead of €300), while others have raised them fivefold. In fact, many locals are renting out their apartments at top rates, with average Airbnb prices for Olympic dates exceeding €500 per night. Furthermore, traveling around Paris is going to be more expensive than ever as the cost of a Paris Metro ticket is temporarily doubling from €2,15 to €4 . Even iconic attractions such as the Louvre Museum and Palace of Versailles have increased admission fees.

On the other hand, general tourism effects are more ambiguous and the consensus is mixed. The overall economic impact of the Paris Olympic Games is estimated between €5.3 billion to €10.7 billion, with tourism expected to contribute around a quarter to a third. However, these figures may need adjustment due to the inflationary crisis. It is anticipated that Olympic tourists will mostly substitute other visitors who would have come anyway. Consequently, the Olympics' economic impact on the French capital is likely to be minimal. For instance, cities like London, Beijing, and Salt Lake City experienced decreases in tourism during their Olympic years.

Moreover, past Olympic Games showcase a poor return on investment. This may be due to  hosts investing significant funds in specialized infrastructure that sees limited use after the event. For instance, the ongoing maintenance of infrastructure from the 2014 Sochi Winter Olympics has posed a financial burden exceeding €920 million annually. Furthermore, the tendency to underestimate costs and overpromise benefits often leads to host cities rarely breaking even. While profits have occasionally been achieved in modern Olympic history, they fail in comparison to the magnitude of the deficits.

After examining the various economic aspects and historical trends associated with hosting the Olympic Games, the question remains: will it boost the French economy? While the Paris 2024 Olympics undoubtedly bring opportunities for revenue generation, particularly through ticket sales and accommodation, the overall economic impact appears to be mixed. Despite the high demand for tickets and increased tourism during the event, potential gains may be offset by significant costs, such as infrastructure investment and ongoing maintenance expenses. Moreover, past experiences from other host cities suggest that the economic benefits may not always outweigh the drawbacks. With the potential for limited long-term benefits and substantial financial risks, it is uncertain whether hosting the Olympics will provide a significant boost to the French economy. Ultimately, careful consideration of costs, benefits, and potential long-term implications is essential in determining the true economic impact of hosting the Paris 2024 Olympics.

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Written by:
  • Celina Madaschi
| Published on: May 06, 2024