The Economics of Attending the Olympics – Medhat Nafie

There are many studies examining the economic viability of countries hosting the Olympics, since host countries incur many of the direct and indirect costs of hosting the world’s largest sporting event. While such studies are difficult and inconclusive, there is another type of cost that competing countries incur that has not been analyzed in any significant way in these studies.
Of course, in this article I will not conduct an analytical study on the economic feasibility of a country like Egypt participating in the Olympics, nor will I proactively analyze the returns and costs of an Egyptian Olympic team participating in the Olympics, given the multiple costs and unforeseen returns of such participation, as the games are currently being held in Paris. But I will use some of the research that deals with these aspects of the host country, which inherently intersects with some of the economic impacts of all participating countries.
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Host cities often experience positive social and psychological effects before and after major events. For example, in a BBC poll conducted in 2021 (soon after the Olympics), 80% of respondents said that the event “made them feel more proud to be British”. Many studies have attempted to quantify the intangible benefits of the Olympics by using probabilistic valuation methods, which construct a set of survey questions designed to estimate the monetary value people place on an event. Atkinson et al. (2008) and Walton, Longo, and Dawson (2008) adopted this approach and conducted a sophisticated evaluation study of the 2012 London Olympics using best practices. They found that people in London and across the UK were willing to pay more for hosting the Olympics than for actually attending any Olympics-related activities. The total intangible value to the UK population identified in the study was approximately £2 billion. Clearly, this is a significant amount, but it is much less than the cost of hosting the Games.
Economist Andrew Zimbalist (author of three books on the economics of the Olympics) argues that the 1970s marked a historical turning point, with the Olympics growing rapidly, with the number of participants in the Summer Olympics nearly doubling since the early 20th century, and the number of events increasing by a third during the sixties. However, the massacre of demonstrators by security forces before the 1968 Mexico City Olympics and the attack on Israeli athletes by the Black September group at the 1972 Munich Olympics led to a decline in countries’ interest in incurring the huge costs and debts required to host the Olympics. In 1972, voters rejected additional public spending for the Olympics through a referendum, with Denver becoming the first and only host city to “refuse” the opportunity to host. An Oxford 2024 study estimates that since 1960, the average cost of hosting an event has been three times the price quoted by the bidding city.
The 1976 Montreal Summer Olympics became a symbol of the economic risks of hosting the Games, as they were estimated to cost a whopping $124 million! Billions of dollars less than they actually cost! This was largely due to construction delays and the cost of building a new stadium, which left the city’s taxpayers with a debt of approximately $1.5 billion that would take nearly three decades to pay off.
Los Angeles was the only city to apply to host the 1984 Summer Olympics, which enabled it to negotiate favorable terms with the International Olympic Committee. More importantly, Los Angeles was able to rely almost entirely on existing stadiums and infrastructure rather than the promise of expensive new facilities to attract the selection committee. On the other hand, television broadcast revenue increased significantly, bringing the city its first profit among Olympic host cities, with an operating surplus of $215 million at the end of the year.
Business Insider estimates that the 2014 Sochi Winter Olympics cost more than $50 billion, the 2016 Rio de Janeiro Summer Olympics cost $20 billion, and the 2022 Beijing Winter Olympics cost $39 billion. These costs have prompted some cities to withdraw their bids for subsequent games. In 2021, Brisbane, Australia, the host of the 2032 Summer Olympics, became the first city to win an unanimous bid for the Olympics since 1984.
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Many economists have confirmed that the estimated returns from hosting the Olympics are exaggerated, if not completely nonexistent, as the Games bury host countries in debt and maintenance obligations that are beyond their means. However, the IOC and its supporters claim that hosting the Olympics can enhance a city’s standing among the nations of the world and generate extraordinary economic benefits through tourism and infrastructure investment.
Economists argue that the so-called “hidden costs” of the Olympics must also be taken into account. These costs include the opportunity cost of public spending on other priorities, but which is overlooked because of the interest in hosting the Olympics. In addition, servicing existing debts after hosting the Olympics can burden public budgets for decades. Montreal did not pay off the last debt incurred from hosting the 1976 Olympics until 2006, and billions of dollars in Olympic debts also bankrupted Greece. At the macroeconomic level, economists Stephen Billings and Scott Holladay did not find any long-term effects of hosting an Olympics on GDP.
If participating countries bear the costs of preparing, equipping, traveling and accommodating teams participating in the Olympic Games, in addition to the costs of rewarding outstanding medal winners, the most significant reward these countries can get by participating is the positive psychological impact of winning medals or leading in various competitions, which will be reflected in the productivity of individuals. It is also related to the reputation and marketing impact of the country that raises the flag during the competition and repeatedly plays the national anthem on various screens because the country’s participants have won one of the top three places. And so on, there are negative costs in the reputation risk and the spread of negative spirit (nationwide) due to the decline of competition results, or even the dishonorable performance of some participants, or the opposite behavior. Morals and values. This negative impact is related to the size of the participating sports delegations, because the larger the number of participants, the higher the expectations of people in and outside the participating countries that a large number of athletes will win Olympic medals.
The Ministry of Youth and Sports allocated a budget of 1.1 billion pounds for the preparations for the Paris Olympics, as the Egyptian delegation to the 2024 Paris Olympics will include 164 male and female athletes in 22 different sports, including 148 starters and 16 substitutes. Taking into account the support provided by the private sector to the Egyptian delegation to the 2024 Paris Olympics of about 60 million pounds, the cost of the delegation increased by 777 million pounds. The 2020 Tokyo Olympics will be the Olympic Games with the most medals in Egyptian history. In addition, the Ministry of Youth and Sports provided 263 million pounds. In addition to this (in the rare case of victory) the gold, silver and bronze medalists received 4, 3 and 2 million Egyptian pounds respectively, which are unprecedented figures in the history of Egyptian Olympics, according to the minister. Description.
If the expenditure of (scarce) hard currency must be matched by a direct or indirect economic return to justify and support its expenditure, then the results of the Egyptian missions to the date of writing these words have not been at the level hoped for and have not been achieved given the scale and cost of the participation. In addition, the negative impact of an ignominious defeat (lack of parity) or the exclusion of a player due to a weight difference! Or one of the members of the mission deviates from the rules of commitment and puts his own reputation and that of the mission at risk! These are net losses in addition to the preparation and travel costs of the sports delegation.
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The small size of the sports delegations that won the gold medals (such as the Bahrain and Dominican delegations, which consisted of 4 people) makes the return on the investment of the participants in preparation and travel very high. It is not allowed to protest against the maximum number of participants, because the participants are already excellent on the continent! Because the competitions in continents such as Africa, many competitions cannot reflect the global level. The claim that the large participation is to allow players to achieve international contact is also strange! Because friction is improved by participating in less important international and regional competitions, not by competing in the Olympics!
With so many athletes participating in the Paris Olympics, the reputation of Egyptian sports has been greatly damaged and all sports federations must be held accountable for the fulfillment of their mission. Accountability in sports archives and elsewhere has to do with the selection and allocation mechanisms, the conditions for continued tenure, and the methods of evaluation… All of these are part of an institutional process that requires holistic reform.