Most Expensive on Record: The Costs and Benefits for Olympic Host Cities
July 28, 2021 Author: Tess Downing, MBA, CFP®, Complete View Financial
When Tokyo won the bid for the 2020 Summer Olympics back in 2013, the estimated cost to host was $7.5 billion. With the games now underway, Tokyo has far surpassed that number. It is estimated that costs have exceeded $25 billion.1 This makes the 2020 Tokyo Olympics the most expensive in recorded history.1 It’s important to note that a sizeable amount of these overages, around $3 billion, is due to delays caused by the coronavirus.2
Cities bid for the opportunity to host the Olympic Games, despite the billions of dollars it costs to pull off. Why? Here are some estimated costs of hosting the Olympic Games and a few reasons why host cities find it worth the price tag.
Bidding
Before a city is ever even selected to host the games, they’re already shelling out millions. Interested cities must start by creating their own National Organizing Committee (NOC) before submitting a bid to the International Olympic Committee (IOC).3 The first round of application fees are $100,000 per city. If your city is selected to move on to the next round, the cost is another $500,000 per city.3
From there, costs have ranged anywhere from $50 million to $100 million as cities work on marketing, logistics and infrastructure planning. Essentially, these cities must prove to the IOC that they are capable and willing hosts with a solid plan to accommodate the influx of athletes and tourists.3
Infrastructure
The Infrastructure costs will vary from city to city, as it depends heavily on the existing infrastructure. Athlete-specific infrastructure like the competition venues and Olympic village are only a fraction of what needs to be accounted for. With millions of additional tourists and fans flocking to the city, things like roads, public transportation, bridges, sewer systems, city cleanup and hotels will need to be prepared as well.
These costs may be covered, in part, by private investors - which can help reduce the financial burden placed on the host city.
Operational Costs
Infrastructure aside, host cities spend millions on the operational costs preparing for and running the Olympics.
These include:3
- Promotional items and marketing
- Transportation
- Security
- Food
Administrative Responsibilities
It’s important to note that a number of workers at the Olympics are volunteers. In fact, Tokyo brought on upwards of 94,000 volunteers to help in all areas of the games including media, healthcare and operational support.4
Opening and Closing Ceremonies
The opening and closing ceremonies are really the city’s time to shine. The whole world is watching, putting pressure on host cities to represent themselves in the best light. It should come as no surprise that these ceremonies alone can rack up quite the bill. It’s currently estimated that Tokyo’s opening and closing ceremonies combined will cost around $159.7 million.5
For comparison, London’s 2012 opening ceremony cost around $40 million and Rio’s 2016 opening ceremony cost around $20 million.6
The Benefits of Hosting
In 1984, Los Angeles hosted the Summer Olympics. Because it was the only city to bid years previously, it negotiated impressive terms for hosting with the IOC. Other factors worked in LA’s favor including an increase in broadcast television and the fact that they already had some sizeable athletic facilities in place. This combination meant that the city of Los Angeles ended with a $215 million operating surplus - the only games on record in which the host city earned a profit.7
That being said, why do cities continue to bid and spend billions on hosting the games? There are several good reasons why. First, it often creates thousands of jobs for the city. This is typically due to the need to improve infrastructure, build facilities, etc. For example, the 2012 London Olympics created 48,000 temporary jobs within the city.7
In addition, the games boost tourism - the exception being this year’s games. Those same London Olympics attracted 8.2 million spectators, that’s 8.2 million people coming to spend money on hotels, food, merchandise, etc.8 Athletes, media personnel and visitors often come for longer than the Olympics themselves, sometimes staying months beforehand and after.
With the 2020 Tokyo Olympics in full swing, it’s eyeopening to pull back the curtain and see just how much money, time and effort cities spend on hosting the games. Of course, this year’s games look different than anything we’ve seen before, and Tokyo has faced a tremendous battle in pulling them off. We hope you enjoy cheering on your favorite athletes over the coming days as we all watch the greatest competition in the world take place.
3 https://scholarworks.gvsu.edu/cgi/viewcontent.cgi?article=1646&context=honorsprojects
4 https://olympics.com/tokyo-2020/en/games/volunteer-activity/
5 https://www.insidethegames.biz/articles/1102272/budget-tokyo-2020-ceremonies-increase
6 https://www.al.com/sports/2016/08/how_much_do_the_olympic_openin.html
7 https://www.cfr.org/backgrounder/economics-hosting-olympic-games
8 https://www.statista.com/chart/21046/number-of-tickets-sold-for-summer-olympic-games/