Olympics go 90% over budget on average, prospective hosts say, “La la la, we can’t hear you”

Since the start of the Rio Olympics, media coverage of the controversies surrounding the games has mostly been limited to things like the algae-polluted diving pool, turning attention away from the widespread protests in recent months against the Games themselves and their costs. (This is a bit of a tradition: The 2014 Winter Olympics in Sochi were widely considered an unfathomable scandal, until the events began and suddenly everyone forgot about the caviar highway and the anti-gay laws.) So it’s nice to see Fivethirtyeight turn its attention to what a massive money suck the Olympics have become, not just for Rio but for any city that hosts them:

By the time Vanderlei de Lima lit the Olympic torch at last week’s opening ceremonies, the country had already spent some $4.6 billion on venues, administration, transportation and the like, putting the games roughly 50 percent over budget. By the time the games close on Aug. 21, the tally for the games will likely be higher still.

But it could be much worse. The 2014 Winter Games in Sochi blew their budget by 289 percent. The 1980 Winter Games in Lake Placid overtopped projections by 324 percent. And the 1976 Games in Montreal ran a staggering 720 percent over projections; the city spent three decades paying down the bill. While outliers such as these distort the average cost overruns somewhat (176 percent for Summer Games, 142 percent for Winter Games), the median cost overrun for all games for which we have data is 90 percent, making Rio’s cost overrun somewhat lower than the historical norm, at least so far.

Those numbers are all from a new study by Bent Flyvbjerg of the University of Oxford, and are right in line with past estimates of the Olympics’ inherently massive cost overruns. The reasons why are simple: Construction projects of all kinds often go over budget, and when you add in the fixed deadlines for Olympic venues — you can’t just delay the swimming events if the stadium isn’t ready — it’s a recipe for inflated costs.

That said, what we should care about here isn’t really how badly Olympic organizers underestimate the costs of hosting the games, but whether cities lose money in the end on hosting them. And though Fivethirtyeight buries the lede a bit here, it eventually notes that the numbers on that count are if anything even more dismal:

Host cities almost invariably fail to cover Olympics costs with associated revenues (for instance, in 2012 London took in $3.5 billion in revenues and shelled out something like $18 billion to host the games), leaving them with piles of debt and various useless venues. Research has repeatedly shown that in most cases the Olympics are a money loser for cities, particularly those in developing nations where the cost-benefit proposition tends to skew even worse.

The Rio Games will likely be cheaper than other recent Summer Olympics, but still cost Brazil several billion dollars, in exchange for a hoped-for boost in tourism that other cities have found never arrives. You’d hope that all this would make cities think twice before looking to host the 2024 Summer Games, the next ones up for bid, but you would be wrong. At least we’ll always have Oslo.


30 comments on “Olympics go 90% over budget on average, prospective hosts say, “La la la, we can’t hear you”

  1. With rising costs and fading ratings (especially in the US), the IOC is nearly certain to “award” the 2024 games to Los Angeles.

    30+ years later, the ’84 games are still the most profitable. The ’24 organizers claim they have a different model to prevent losses, but its still a big risk.

    With the crappy financial results, it’s no wonder they call it an “Olympic Movement”

    • Did you catch the Rams game this weekend? Did you notice the L.A. Coliseum’s iconic Olympic rings (inside, below the torch) are permanently covered up with a scoreboard? Did you notice 1984 Olympic footage was conspicuously absent from ABC’s opening montage, which covered all of L.A.’s sports history?

      These are among the many ways the IOC screws over its host cities after the fact, forever and ever, in order to protect “brand exclusivity” for mega-sponsors like NBC and Coke. This is how they treat you after you’ve poured unimaginable money and effort into hosting the Olympics.

      Which should be a red flag for any city thinking the Olympics will “put them on the map”. Good luck staying on that map as an “Olympic city” if you can’t commemorate it beyond a few plaques and monuments outside the venues. (POP QUIZ! Where in the world is “Albertville”? Which Olympic Games did they host? Name a memorable athlete or moment from those Games. Tell me one unique thing about Albertville.)

      • um, France, 1992 and Alberto Tomba?

        what do I win!

        I probably could not do that with most other olympics, though…

        • But can you tell me a unique thing about Albertville? Non-Olympic-related, non-winter-sports-related. No cheating!

      • http://utaholympiclegacy.org/park/

        Maybe their theory is “No one cares if a bunch of hicks in the middle of nowhere use the word “Olympic”?

      • Nothing’s permanent. Scoreboards move, new rings are put elsewhere. The LA bid won’t claim the Coliseum is Olympic ready. It doesn’t even have a track anymore, and there are seats where the track used to be. They will spend a fortune to get it read could be ready. It has an advantage in that it has USC lined up to use it after the gams. So it won’t end up like Beijing’s Bird’s Nest. Now there are better ways to spend a fortune, but by Olympic standards, this is downright frugal.

    • The biggest risk is in building stuff that will never be used again. LA has like 95% of the facilities required already in place.

    • My money is on Budapest since it has not been there before. More money to extort from the home country.

  2. I’m shocked (shocked!) that econ profs would ignore the value of jobs and productivity.

    • I’m shocked (shocked!) you ignore the impact of soul crushing debt the IOC has on countries/cities.

      Actually not shocked.

      • The IOC didn’t force anyone to bid. Blame “democratically elected” politicians for that.

    • which jobs are those? temporary jobs building venues that are never used again? Or crappy service industry jobs that disappear once the olympics leave? As for productivity…it certainly makes things *less* productive when your whole city grounds to a halt because the IOC requires major thoroughfares be shut down for the duration of the olympics to shuttle athletes and officials around.

      I *love* the Olympics. I am one of those dumb people who believe (or hope, at least) that sports and some sporting events can affect positive change locally and internationally and provide inspiration and opportunity for participants, even at the lowest levels. But the modern olympics have turned out to be a terrible, terrible investment for the host cities and and have really served to enrich the IOC (or local dictators) rather than the people who live in the cities. It’s kind of sad, really.

        • So you admit the jobs, at least the ones that are paid, are temporary in nature. At least you agree with people on how dumb of an idea this is.

          • So, creating temporary jobs is “dumb”? Do you really support enslaving people economically by limited their opportunities to make extra money outside of their permanent jobs?

    • I think he may have been referring to the thousands of volunteer roles and other unpaid jobs that poor people are asked to do so that the IOC leeches don’t have to use their per diems on actual transportation or meals.

      I think the poor people are supposed to carry the execs around in those sedan chair things so popular during Roman times.

      Now that is productivity…

  3. Russia was punished in these Olympics by the (((powers that be.))) Not letting their track athletes compete. Russia has the same gay-marriage policies that the Vatican, and Israel have.

    • Here’s an idea for you Mike: don’t use a widely publicized white supremacist and anti-semitic internet code used for marking Jews next time.

      • https://en.wikipedia.org/wiki/Triple_parentheses

        https://mic.com/articles/144228/echoes-exposed-the-secret-symbol-neo-nazis-use-to-target-jews-online#.5H6VYs6KP

        http://www.vox.com/2016/6/6/11860796/echo-explained-parentheses-twitter

        http://www.nydailynews.com/news/national/echoes-means-twitter-article-1.2667546

        You get the idea.

      • Huh, you learn something every day. And it’s not about Israel’s LGBT policies, which actually aren’t anything like Russia’s:

        https://en.wikipedia.org/wiki/LGBT_rights_in_Israel
        https://en.wikipedia.org/wiki/LGBT_rights_in_Russia

      • I had no idea punctuation carried secret meanings.
        Judging by the average social media “contribution”, I wasn’t even sure punctuation was still widely adopted.

  4. I can only laugh when “civic boosters” in Boston remain upset–after watching the fiascos surrounding the IOC (and FIFA)–that Boston wasn’t able to put forward a bid for the Olympics. Even now you’ll read columns and quotes that say Olympic opponents were somewhere between flat-earthers and pure NIMBYs for not being fully on board.

    The connection between big events like the Olympics and public projects is always a bit vague. The Olympics aren’t going to “pay for anything” permanent, but some politicians seem to believe the lie that they will is needed to politically push through expensive projects. There are obvious reasons to have working transit lines, nice streets, and good airports–and cities/states/feds are going to need to pay for them anyway, whether there are Olympics or not. So maybe getting in the habit of doing so would be a step forward.

    • It has been a long held maxim that “using an Olympic bid” as a way to get infrastructure is a bad idea.

      If your city needs or wants a $50m aquatics centre, just build one. Tying same to an Olympic bid just guarantees that that $50m aquatics centre will cost at least $70m, and will require various ancillary developments (athletes village, security installations, TV infrastructure, IOC vig, etc) be paid for as well.

      • You’re being generous. London spent $350 million on their 2012 aquatic center. It temporarily seated 17,500, but is now a 2,500-seat venue with a long-course pool and a diving/warmup pool which they somehow spent $350 million on.

        My suburban L.A. school district is building a 1,500-seat aquatic facility with a long-course pool and a diving/warmup pool. Total cost: $15 million. And a lot of people think that’s excessive.

        • It was just an example (featuring a hypothetical city that wants a $50m aquatics facility. How much Beijing or London spent is irrelevant). The community I live in spent $26m on a pool with no seating at all. No doubt others have spent more.

          An olympic sized pool can easily be built for $50m. Constructing a facility that includes 15,000 spectator seats (that will generate maximum of $100 a day each for a week or less) and will cost an extra $200m (to generate just $10m in revenues) is ludicrous.

          Build the pool. Use CGI fans. Save $190-300m in the process. On one facility.

  5. Also, seats aren’t selling.

    http://www.cnn.com/2016/08/17/sport/rio-olympics-empty-venue-seats/index.html

    Because I’m a basketball geek, I’ve been watching some of the women’s games… I don’t think the arena has been 25% full yet.

    • The women’s soccer quarterfinal where the U.S. was eliminated by Sweden had 1,000 people at it, tops.

    • Yes. It’s been bad everywhere really. Most Brazilians don’t earn enough money to attend an Olympic event. I would have expected more tourists to flock to Rio to get their share of enjoyment largely paid for by poor Brazilian taxpayers (of the future), but that doesn’t seem to have happened.

      Could it be that the entire Olympic economic model/argument is just one gigantic lie???