The Olympic Games have always been surrounded by an air of zeal – after all, the quadrennial extravaganza celebrates the best in sport. But what often remains unseen, is the extensive planning, organizing and financing that goes behind making those 16 days a success.

The Olympics have a rich history that dates back 3000 years. The first Olympic games are believed to have been conducted in 776 BC at the Peloponnesian peninsula to honour Zeus, the Ancient Greek God of the sky, lightning and thunder. The games however were eventually banned in AD 393 by Theodosius I as part of his campaign to impose Christianity as the state religion of Rome. It was only about 1500 years later that a Frenchman named Pierre de Coubertin sought to revive the Olympic tradition with a vision to promote physical education which led to the convening of the first ever Olympic games at Athens, Greece in 1896. From a meagre 280 (all male) participants hailing from 13 nations competing across 43 events, the games have grown exponentially to host more than 11,000 athletes from 206 countries competing across 339 events now (and that is without taking into account the winter & youth Olympics!).

Naturally, any event of this magnitude requires a governing body that would oversee its planning and execution.The International Olympic Committee (IOC) acts as the apex institution in the Olympic movement which comprises of National Olympic Committees (NOCs; 206 in totality) and International Sports Federations at the forefront along with Organising Committees for the Olympic games (OCOGs), athletes, judges, referees as its constituents. The host city is nominated by a secret ballot 7 years prior to the games and soon after, the NOC of the host country and the host city create the OCOG that works in tandem with the IOC to organize the games in compliance with the Olympic charter. It takes 7 years of continuous and collaborative planning with the host city for staging the games which merely last for 16 days.

The Costs

To put it simply, the IOC along with the host city foots the bill of this extravagant event, a bill which eventually burns a hole through their pockets. It consists of two components – the OCOG Budget and the Non OCOG Budget. The former is privately funded with a chunk of the contribution stemming from the IOC. The IOC pumps a part of the money from the revenues that it earns through the sale of broadcasting rights and its The Olympic Partner (TOP) programme. Being entirely privately funded, it relies heavily on the contribution of commercial partners towards the Games. It has increased its contribution towards the staging of the Games by 60% between 2004-2016 by allocating USD 1.53 billion for the Rio Olympics 2016. On the other hand is the Non OCOG Budget, which is entirely the burden of the government and local authorities of the host country, and indirectly the taxpayers. The 2012 London Olympics are testimony to how the tax payers ended up paying a whopping USD 4.4 Billion out of the total expenditure for the games.

The costs incurred during the Games are of varied nature and are covered under the following heads :

1. Submitting a Bid: As silly as it may sound it takes between $50 million to $100 million in the whole process of submitting a bid for obtaining hosting rights. Tokyo spent a whopping $75 million for its successful 2020 bid.

2. Infrastructure costs: These range anywhere between $5 billion to $50 billion. This includes the creation or upgradation of state-of-the-art sports facilities like stadiums, pools, cycling tracks and venues for the ceremonies as well as the construction of the Olympic village which essentially requires over 40,000 rooms to house the contingents. Transportation facilities such as roads, railways, airports that undergo renovation are also covered under these costs.

3. Operational costs: These constitute the cost of medical services, customs & immigration, security costs. In the aftermath of the 9/11 attacks the security costs have risen considerably and remain in the $1-$2 billion bracket.

4. Implicit costs: The money utilised for the Games could have been spent on other pressing priorities, the Greece Olympics adding to the country’s bankruptcy serves as an apt example.

5. White Elephants: These facilities end up being a massive burden to the host city for years to come as they lack sustainability due to their reduced usage post the Games.

Beijing’s renowned Bird Nest stadium worth $460 million sits unused today with an annual $10 million bill for maintenance. The facilities constructed for the 2004 Athens Olympics added to Greece’s debt crisis and lie in a derelict state today.

The Revenue

The revenue generated from the games has several sources (mostly private in nature) but the sale of broadcasting rights to various media is the largest contributor. Sale of tickets, licensed products of sponsors, international as well as national sponsorships together constitute the total revenue earned in an Olympic cycle. Ticket revenues, licensing fees and domestic sponsorships are pocketed by the host city whereas revenue from international sponsorships is split between the IOC and Organising committees. The IOC holds the absolute power over these revenues and uses it as it deems necessary. IOC is a Non Profit Organisation which dedicates itself towards the betterment of sport, and in order to achieve that vision it directs 90% of the revenue towards the Olympian movement, distributing about USD 3.4 million every day to support NOCs, Federations, Athletes, Paralympics and even WADA. Through Olympic Solidarity, IOC channels its revenues to assist in the development of sport in the 206 countries where the Olympic committees are present.

The Cost-Benefit Analysis

Earlier, the Games were only hosted by developed nations that were equipped with modern infrastructure as well as a resilient economy that could bear the high costs that accompanied the duty of hosting. If not kept in check, the costs of conducting and hosting the Olympics tend to spiral out of control. The 1976 Montreal Olympics revealed the massive financial burden that hosting led to (a $1.5 billion debt that taxpayers had to pay for three decades). Beijing spent over $45 billion back in 2008 and earned a paltry revenue that did not cover costs. Los Angeles is the only host city to have made a profit hosting the Summer Games which was a result of less expenditure on construction due to availability of the required infrastructure.

Countries for long have chased after the title of the host in hopes of increased tourism and employment, enhancement of reputation, urban development, boost in economy (due to ticket sales, sponsoring, broadcasting right revenues) and to be a part of the rich legacy associated with the Olympic Games. But they fail to take into account the debt that arises from construction, white elephant projects, wasteful expenditure on bidding, among countless other financial burdens that the responsibilities as a host bring. Added to that, IOC gets to keep a major proportion of all television revenue leaving the host city in a pile of debt that at some instances takes years to repay. Various studies have also shown the failure of the games in generating long term employment as well as have highlighted the uncertainty of a definite rise in tourism as a result of the games.Beijing in fact witnessed a decline in tourism post the Olympics.

Tokyo Olympics – The COVID Challenge

A once in a century pandemic which claimed 2.53 million lives worldwide stood in the way of the 2020 Tokyo Olympic Games. The postponement of the games added to the woes of the government by further contributing to the already surging costs of hosting. Despite visible reluctance shown by residents, preparations for the 2021 Tokyo Olympics are in full swing. In December 2020, Tokyo unveiled the version five budget for the games which comprised the OCOG budget and the Non OCOG budget (that the Tokyo metropolitan government and Government of Japan have to foot). This revised budget reflected the measures undertaken to reduce any futile spending. The original costs were projected at $7.5 billion back in 2013. The latest budget revealed the increase in the official cost of the postponed game from $12.6 billion (2019) to $15.4 billion, a 22% increase, attributed to renegotiation of contracts as well as measures to combat the pandemic. What is even more worrisome is that an audit by the Japanese Government indicates the costs to be at least $25 billion and that the Government entities are responsible for all costs leaving $6.7 billion. Domestic sponsors are being persuaded to recover the rising costs,with a record $3.3 billion already received as contribution from 70 sponsors. The CFO of the organizing committee, Gakuji Ito stated how insurance coverage might pay up to $500 million and in addition how the leftover expenses would be borne by the Tokyo metropolitan government. The IOC’s contribution would remain restricted to $1.3 billion only, and as per Ito IOC would not be called upon by them to increase their contribution. The pandemic has brought with itself added expenses of rebooking venues & transportation for retaining the organizing committee, renewal of sponsorships, cancellation expenses, Covid-19 prevention measures on top of a certain fall in ticket sales cause by a drastic reduction in the number of attendees, making these Olympics a heavy burden on the Japanese economy.

All being said, it is commendable that Tokyo has shown resilience and has decided to hold the games in the midst of a pandemic that will most certainly drain its resources. This helps in highlighting the key lesson that the Olympics,however tempting, must only be indulged in by the ones capable of affording it. This very lesson was put forward by the Mayor of Boston who said that he “refused to mortgage the future of the city away” when he dropped out from the bid for the 2024 games.

By Mahika Singh