South Korea’s Olympics may be the money pit to end all Olympic money pits

The Winter Olympics are underway, which for me means sitting through lots of ice dancing and people falling down mountains on various contraptions, while hoping to catch some curling. And, of course, wondering how much all this is costing. CNBC’s Squawk Box has the answer, via our old frenemy Andrew Zimbalist, and it ain’t pretty:

Speaking to CNBC on “Squawkbox,” he said: “At the end of the day, they’ve spent $13 billion and they’ll get back about $2.5 billion. The only way you can justify that kind of a terrible balance is if, in the long run, it’s going to promote tourism, promote trade and promote foreign investments.”

“There’s no evidence from other Olympics that that happens,” he added.

He’s not wrong: Multi-billion-dollar losses are de rigueur in the Olympic world, and by all accounts the only Olympic host to see a significant rise in tourism after the Games was Barcelona, which may now be having some second thoughts about that strategy. Still, a negative-80% return on investment is pretty impressive no matter how you slice it, so how exactly is South Korea managing this?

A $109 million Olympic stadium that will be torn down after only four uses is a decent start. Selling only 60% of the available tickets (according to Zimbalist) also helps, though Olympic officials claim that number is now down to 16%. I don’t have numbers for much of that $13 billion expense is cost overruns, but it’s typically a whole hell of a lot. A $3.7 billion bullet train to connect Seoul to Pyeongchang? Now we’re talking!

With the most impressive Olympic construction being its massive sea of red ink, cities like Oslo and Boston have to be breathing sighs of relief that they bailed out of their Olympic bids, while potential 2026 bidders — I’m looking at you, Sion, Erzurum, Innsbruck, Calgary, Stockholm, Sapporo, Denver, and Almaty — may want to start having second thoughts. I’m not honestly sure whether the best solution here would be to rotate the Olympics permanently among a few cities with permanent venues (but what city would really want to have to keep a velodrome sitting around that’s only going to be used for three weeks every 16 years?) or scaling back the Olympics to where they only involve sports that can be played in multipurpose venues (curling and ice dancing, you’re all good!) or what, but something’s gotta give eventually if we don’t want our planet’s most renowned sporting event to be all about setting fire to a giant pile of money every two years. Though come to think of it, that wouldn’t require a specialized venue or even a bullet train, so bring on the Money Bonfire as an Olympic event!


31 comments on “South Korea’s Olympics may be the money pit to end all Olympic money pits

  1. Why have these tiny resort towns be the official host?

    South Korea has high speed rail, the ceremonies can be held actually before the games start and then everyone goes to the resort town. Therefore just doit in Seoul who have an outdoor stadium, have the host be the Country and it works.

    In reality it should just be Olympics 2020 Asia, 2024 europe etc. Pick a “host city” just for ceremonies then spread the impact.

    OR if sports like Speed Skating, Sliding (bobsled, luge, and skeleton can combine ) and Velodrome insist on being in the olympics they are required to build their stupidly complicated venues.

    If we had US as the host and called it the New England Olympics, it would be easy to spread out the cost, NH takes freestyle skiing they have the venues for it already since it is the birthplace of freestyle, Maine takes Nordic and the ski jumping federation pays for the ski jump and course creation for cross country, Vermont takes the Alpine events, Massachusetts/Rhode Island takes all arena events (Lowell Tsongas, 3 arenas in boston, and Worcester) . Then Speed skating could be built by a College in MA and re-purposed as a track venue after with the costs to repurpose being put on the federation, Sliding center can be the same way but olympics pay for it.

    This is a simple solution, the IOC doesnt want any accountability

  2. I am no expert, but from what I read the last Olympics to be profitable was LA (Atlanta broke even). I guess 2028 LA will be okay, because they have most of the facilities built or will be finished (The Rams/Chargers Stadium), but the past several Olympics (Russia, Brazil and Greece come to mind were disasters. It will be interesting.

    • LA 1984 was the *only* Olympics to be profitable. Atlanta 1996 wasn’t profitable per se; federal and local governments both kicked in taxpayer money to cover costs. Atlanta 1996 was unusual in that the initial allotment from the government was enough to cover the difference between revenues and costs–the AOCOG neither ended up with debt nor needed a bailout. (The same thing happened with Vancouver 2010.)

      Both Paris 2024 and LA 2028 are unusually well positioned to be much more like Atlanta and Vancouver than like Rio or Sochi or Athens, although an honest-to-goodness profit is probably unrealistic. It’s not at all a coincidence that the IOC made fiscal restraint a priority when awarding those Games, of course.

      • Vancouver’s alleged “break even” did not, as I recall, include the costs of security (which were never publicly revealed).

        Further, the athlete’s village (which was not considered part of the cost of the Olympics since it was assumed that the developer would sell the condos for huge profit afterwards) was “less than fully subscribed” after the Olympics. I believe this was ultimately resolved with the BC Gov’t taking over the units and selling them (at a loss).

        Furlong and co said the 2010 olympics turned a small profit, but I think they were only able to say that because quite a number of olympic costs were not included in the total bill.

      • I’d also like to note that a bunch of stuff for Atlanta was provided basically free of charge by Turner Broadcasting. The entire media center was a CNN building that CNN was going to take over once the games were finished, so it made the actual costs of the Atlanta games a lot less than some other locations.

        Paris and LA both have existing venues for most everything that are already in use all year anyway so minor upgrades to these facilities for the games isn’t a big deal.

        This is probably the easiest way to host the games, but except for times when there are literally no bidders due to costs the IOC looks down on it pretty badly. 1984 and 2024/2028 are those times so you’re looking at cost effective games. Hopefully the IOC learns and stops trying to going to new cities all the time.

  3. I have a solution: just cancel the Olympics. I think most sports would be better off without them anyway. The NHL turned its back this year and baseball didn’t exactly suffer when the Olympics dropped them for a decade or so.

  4. The KLF are available as coaches/consultants on the Money Bonfire.

    https://en.wikipedia.org/wiki/K_Foundation_Burn_a_Million_Quid

  5. Someone should start up a “real Olympics”. Just a few events, not many gimmicks/equipment. People compete naked. No shoes or equipment arms races. No men’s and women’s divisions, just the best in open divisions.

    People running a short distance
    People running a long distance
    People swimming a medium distance
    People throwing a ball
    People throwing a stick
    People fight with bare hands
    People fight with sticks
    People jump a long way
    People jump high
    People climb a wall

    Something like that.

    10 events, no 82 different swimming events.

    Maybe you could even have an 11th event which was the best score across all 10 like the decathlon. You could do it all in one stadium, probably in a day.

    • There is something to be said about this. One does notice in Olympics that poor countries seem to do fairly well when the challenge is “who can run the fastest” but rather less well when the challenge is “who can participate in this elaborate contest that requires $10k of gear.”

  6. My suggestion would be to combine both of your ideas: rotate the Olympics permanently among a few cities *and* scale back the Olympics so that there are fewer sports, and especially fewer sports that require white elephant venues. (It would also help to shorten it from 16 days to 9 days, and scale back expectations in terms of stadium size.)

    I would make Paris either one of a very small number of rotating hosts, or just make Paris the permanent host. You mention the velodrome as a great example of an Olympic venue that would usually be a white elephant after the Olympics leave town. But unusually, Paris (or technically its suburbs) *already has* the existing Vélodrome de Saint-Quentin-en-Yvelines, which hosted the 2015 World Track Cycling Championships and will host Olympic cycling. (It even has a BMX track already in place next door.) Paris actually has a shocking amount of Olympic infrastructure already in place: Stade de France for athletics, Roland Garros for tennis, etc. But Paris is one of the biggest, richest metro areas in the world, so it would be expected that it would have far more pre-existing sports architecture than did Rio or Athens, both of which were unmitigated financial disasters.

    Good candidates for sports (or disciplines) to drop because they involve sport-specific stadiums and don’t generate a lot of revenue include, roughly in order, modern pentathlon, sailing, canoe/kayak slalom, equestrian event, shooting, archery and mountain biking. That’d be a decent start.

    • “…they involve sport-specific stadiums and don’t generate a lot of revenue include, roughly in order, modern pentathlon, sailing, canoe/kayak slalom, equestrian event, shooting, archery and mountain biking.”

      Hmm, the “sport-specific stadiums” required for most of those sports you’ve listed are commonly known as “flat patches of earth” or “bodies of water”, with a few temporary stands thrown up beside them. Not exactly budget-busting in Olympic terms.

      • You’d be surprised. Most Olympic host cities aren’t located near natural whitewater rapids, so they usually have to build artificial rapids, which does get quite expensive.

        The equestrian event venues tend to involve higher costs because you also need stables and such for the horses.

        Sure, all of these venues combined still won’t cost as much as one brand new athletics stadium, but over time they add up. And whereas athletics and swimming are huge money earners, the other sports listed don’t bring in nearly enough revenue to cover their costs. So if you’re looking for savings, that’s one good place to look.

      • Crazy as it sounds, the “temporary” idea has only started to gain traction recently. London had several temporary venues–more than the norm–and this Olympics is noteworthy for the main stadium being temporary.

        One big money pit I always see are the athlete’s villages. It seems like everywhere tries to turn them into housing afterwards but they’re frequently not where people would want to live plus their typical dorm-like design limits their appeal or forces major renovations to make them more appealing.

        • I totally agree with you on the temporary venues. It may psychologically *feel* more wasteful to spend millions of dollars to erect a building for a few weeks and then tear it down, but in the long run it’s often the least wasteful option available.

          I equally agree about the athlete’s village being a huge money pit (although it’s possible Paris and LA have found solutions for that, too). That’s another reason why all these minor sports like modern pentathlon and sailing are a major money suck: You’ve got to build the rooms to house the athletes in the Olympic Village. Ultimately, the IOC is going to have to either significantly reduce the number of athletes competing, or rethink its policy of letting athletes live there for all 16 days, or both. The nuclear option, of course, is that the IOC just pays to rent hotel rooms for its athletes, the same as literally every other athletic competition everywhere in the world.

  7. If the world were actually sane, the Olympics would not cost host cities anything. In fact, the IOC would be paying to use facilities in host cities and either generating a profit on their own ticket sales or learning to limit costs in order to make turning a profit easier. Instead they siphon off most of the revenue and leave the hosts with a staggering bill to pay for venues and security.

    The reason the Olympics is such a money pit for host cities is that the IOC is able to convince fools in power that their districts should bid/bribe the delegates to win the right to lose billions hosting a 2 week party for rich people who don’t pay taxes in your district.

    In simpler times, this was called (and is) grifting.

    As the man said in ‘Bridge on the River Kwaii’,
    “Madness! Madness!”

  8. “…which for me means sitting through lots of ice dancing and people falling down mountains on various contraptions…”

    How dare you say this kind of stuff when I have a mouthful of coffee, you jerk.

    • I wrote that line at like 4 am your time. If you failed to take the reasonable precaution of reading this site before pouring yourself coffee, you have only yourself to blame.

  9. $11Bn in red ink is nothing compared to the total loss in Sochi, surely?

    I know most of that was allegedly private money, but I would imagine the Russian patriots who funded same will expect some, um, consideration down the road for their generosity and patriotism.

    In that, I guess, they aren’t much different from our staggeringly wealthy, um, patriots.

    • Yeah, seconding this. Sochi supposedly cost like $50 billion, of which $30 billion is unaccounted for (i.e. in the offshore accounts of Putin’s cronies).

  10. A good way to pare down the Olympics would be to get rid of the “subjective” sports – that is, any event decided by judges rather than athletes. So, goodbye to all the ice skating except the speed events, as well as all the absurd made-up teenage snowboard events.

  11. I’m equally entranced and annoyed with curling. Fascinating to watch, but the scoring system is baffling.

    Ice dancing, synchronized swimming and rhythmic gymnastics can all go.

    Hard to take an organization that refers to itself as a “movement” seriously.

    • Wrt to curling, the 2 person version was specifically created for TV. Much faster tempo, six stones per team per end with a clock for between shots..similar to chess.

  12. Olympic Organizers Say Tickets Are Sold, but Where Are the People?

    https://www.nytimes.com/2018/02/15/sports/olympics/olympics-venues-empty.html

  13. That $109 million temporary stadium is something I would argue they got right with these Games. Lesser of two evils, to be sure, but a permanent structure would have cost several times that amount and would have left them either paying upkeep (with no future use in mind) or having it fall into instant disrepair and likely still being torn down eventually.

    Most every Olympics ends up with white elephant facilities they don’t know what to do with just wasting away. Rio is particularly amazing because those Games were less than two years ago but many of their facilities look so bad you’d swear they’d been rotting away for decades.

  14. As other already pointed out, Sochi was the money pit to end all money pits, which is why (almost) no one really wanted the 2022 Olympics.

    Also, both Paris and LA already have velodromes and therefore don’t need to build new ones for the 2024 and 2028 Olympics. Yes, this boggles the mind.

  15. summer games should be held in Greece .they could use the facilities for all time. having Olympics anywhere else is like having an automobile race in Rio and calling it the Indy 500.
    Give Nordic games back to Scandinavians and cities around the Alps.