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The Cost of hosting the Olympics

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Sunday, July 4, 2021

/ by Avishek Bera

 

The News Cover: When the final games were played in the 2016 Rio Olympics, it was one of the most expensive summer games ever. In 2018, it was estimated that the total cost was over $20 billion, far beyond the Rio organizing committee's initial estimate of $2.8 billion. Rio had big stadiums, impressive athletic villages and top of the line training facilities, all of which significantly impacted the game's bottom line. 

But that big spending didn't just end with the cost of just hosting the games. The city of Rio had to pay for a new subway lines or renovated shipping port, a doping testing lab and environmental cleanup costs in the Guanabara Bay. But just seven months after the games, the once grand Olympic venues look like this. These crumbling facilities left vacant are the byproduct of a city struggling with debt and colossal maintenance costs, often billions of dollars in overrun costs. 

Most of the facilities built for the Rio Games were not supposed to last longer than the lifecycle of the games itself. But the change in local government left the venues in limbo, when to be used or dismantled. Now the question of the venues and especially those that are that are still up there in the park. We're not supposed to be there. We're supposed to be dismantled cities going over budget when hosting the Olympics isn't unique to just Rio. 

According to the Council of Foreign Relations since 1960. Every Olympics all significant overrun costs, all except one, the Summer and Winter Games have struggled to stay within their estimated costs of hosting the Olympics. Winter Games have done a better job of managing that. However, the Sochi games was an outlier. And economists argue hosting the games does very little for the betterment of a city. 

If you're looking at this as an investment, you don't want to make an investment something where you have a one chance at a 10 to have the outcome that you're looking for. That's not a good investment. That level of risk is ridiculous to undertake. Well, other experts believe that the games are vital for the city's infrastructure for its future, better roads, maybe it's Metro having a development of the metro or it could be the Hoss having housing that's put in place. 

As overhead costs become a growing concern. several cities withdrew their 2022 Winter Olympic bids. So how did the Olympics grow from its humble beginnings into a massive and expensive international event? And how can the Olympics prevent even more potential host cities from withdrawing their bids? In 1896, the Olympic Games became a truly international competition as a modernized becoming what it looks like today, a bi annual event with Summer and Winter Games. in its infancy, the gains were relatively small, how cities would use public funds for the games with ticket sales generating revenue to offset costs. Very first Olympic Games were in 1896. 

How much did the rio olympics cost

No women were able to compete in those games and certainly over time now as we look at his recent 2018 on the games look a lot different feel a lot different. This is Dr. Nicole Forrester. She's a former Olympic athlete in track and field who competed in the 2008 Beijing games. The Olympics is like the the pinnacle or the Everest of that sporting experience, both for the athlete and also for the viewers at home. The Olympic Games didn't see a rise in popularity until the evolution of telecommunications. 

The 1936 Berlin Summer Games were famously the first to be live broadcasted. At the time, only about 50,000 viewers were able to watch from a nearby Stadium by 1948. The radius grew even wider for the London Summer Games. 500,000 people watch live up to 125 miles away in the 1960s. With the Rome games, they were the first genuinely international broadcast, reaching millions worldwide. 

By 1968. About 17% of the world's population had access to the game's cost balloon. As viewership grew over the years, more prestigious white whales were being built to showcase a country's national pride, draw and tourism, create jobs and bolster local businesses. Since the 1960 games in Rome, both Summer and Winter Games saw over one cost on their estimates, things began to get dire in 1976 with the Montreal games. Andrew Zimbalist is an author and economics professor at Smith College in North Hampton. One of the things he specializes in is the economics of the Olympic Games. 

Famously, the mayor of Montreal declared that the Olympics This is before the games started, but he declared the Olympics can no more have a cost overrun than a man can have a baby. Well, it turned out that the Montreal Olympics had a cost overrun that was almost tenfold over the initial price. The Canadian government shelled out $1.5 billion in overhead costs in the Montreal games well over their estimated cost of $120 million. 

The Canadian government finally paid off that debt in 2006. At that time in Canada, we were under a cultural war of sorts. The other issue that happened is the price of steel had skyrocketed. And then the year before the games are hosted, you had workers walk off on a strike, which then cause more of a delay, and then again added to the cost itself of posting these games. By 1984, no country wanted to host the games, only the United States kept their hats in the ring for the 84 games in Los Angeles, it became the first and only Summer Olympic Games to have an operating surplus of $215 million. 

The reason as the only bidder, Los Angeles had the leverage to negotiate its contract with the IOC. And the infrastructure was already there, together with with the fact that Los Angeles, the second largest city in the United States, arguably the entertainment capital of the United States, meant that they didn't have to do hardly any building, basically, everything was in place, little building had to do but not very much. There was such a surge in revenue that was derived through the media coverage itself that actually went straight to the to the Los Angeles games. 

And so like the IOC realized, okay, now, we should, we should make sure that we make sure that we get that big cut of the media revenue that's generated. The IOC saw the ELA games as an opportunity to restructure their television revenue distribution. Before the IOC auction its TV rights to the games local hosts, were able to keep about 90% of the revenues generated. In the 1980 Moscow games, the IOC only took about 10% of the revenue. But all that changed in 1984 when the IOC took 33% of the LA games TV revenue. 

Over the years broadcast revenue for the IOC increased the 9084 Summer and Winter Games generated $287 million and $103 million, respectively. Fast forward to 2016 and 2018, Rio generated $2.9 billion, and Pyongyang generated $1.4 billion. But it wasn't just the TV revenues that skyrocketed. So did the percentage of the IOC takes broadcast rights revenues for 2016 games in 2018. 

Games were 73%. over its lifetime, the Olympics has grown as more and more nations participate and more sports are added creating the massive competition we see today we're seeing there's more sports that have been added to the program plan. So we look at the Games in 1896. And how many sports were there and versus what it's gonna look like for Tokyo it is night and day difference in vastly larger for for these games. As the games become more expensive, the price tag of hosting the games becomes more of a burden. Before host city begins constructing elaborate venues, putting in a bid to host the games itself can cost 10s of millions of dollars. 

All these cities would come together and would bid and then it would be narrowed down to say like five other cities and then you've got people within the IOC visiting during these site visits, help decide like what where we're going to go and then it narrows down to like two cities and then so on. This used to be a very costly process to do. With no Garrett with a very small guarantee that that city would be successful through the bidding process. Just take the Tokyo bid to host the 2016 Summer Games $150 million was spent by the Japanese Olympic Committee for expensive consulting firms city planning, event organizing architecture firms and much more. 

Eventually, that bid went to Rio. However, Tokyo did have a successful bid for the 2020 games, but spent an additional $75 million for an update and valuation and planning. winning an Olympic bid comes with a steep price tag, largest single facility it has to get built. This is the Olympic Village. This is for the Summer Games. This is a village that has to accommodate 11,000 athletes and about 5000 additional coaches and trainers. In addition to having the lodging. 

You need to have athletic training facilities, you need to have tracks you need to have weight rooms you need to have other facilities. You need to have restaurants, you need to have entertainment facilities for the athletes, you need to have clinics, medical clinics. So you're actually building a village. You know, this is a full full service village. So what else needs to get built? Then you have the Olympic Stadium infrastructure road infrastructure telecommunications, infrastructure, also potentially billions of dollars their security costs these days easily run one and a half to $2 billion. While both the summer and winter games are expensive to host. 

The Summer Games are typically more costly and expensive. There are more athletes More competitions and events that require more specialized facilities. Winner games usually stay within their cost estimate threshold with minimum overrun costs. However, the Sochi games was an outlier and peaked an estimated $40 billion in 2014. And it's over on costs coming in at a total of $51 billion since 1980. The average cost overruns for hosting the games is 252%. For the Rio Games, it was estimated in 2017. 

That $13.1 billion went into hosting the Olympics, well over its initial $2.8 billion budget. economist, however, put the actual numbers somewhere north of $20 billion in 2018. An estimated $2.06 billion actually went towards sports related venues, while an estimated $8.2 billion went towards legacy builds, or builds intended to live well beyond the Olympics three week lifecycle, legacy builds went towards things like an updated infrastructure highways a renovated port, and cleaning the polluted Guanabara Bay. Of that $8.2 billion. A delay riddled subway line cost an estimated $2.98 billion and the renovation of Porto malamala was an estimated $4.2 billion to meet the iocs requirement of 40,000 rooms for accommodations, where you had to lay out the construction of an additional 15 to 18,000 rooms, intended to be used after the games as luxury apartments. 

Nearly five years after the games, most of those long term use buildings sit vacant. They're also expensive to maintain about $14 million a year it goes into maintenance costs for real venues. Real screams Moroccan a stadium built in 1950, which held the opening ceremonies of the 2016 Summer Games had its power cut off in 2017. After falling behind on payments during a tendancy dispute from the games. After two months of no power and left vacant, the stadium reopened for football matches and concerts in all cases. And in all cities, not just Rio reason why the venues didn't exist before the games. This because it didn't make sense to build them economically. 

Nobody wanted to build them. The IOC has an active changes for cities who wouldn't have much of a use case for certain sports venues. In the future. One of the simple change is you don't need to build venues anymore. Either they needed by the community in the long term, you don't build. And if you don't build you have different choices, you can have temporary structures which work extremely, extremely well in the majority of sports right now. Or go abroad. Real isn't alone with its overspending. 

Government spend billions of dollars on these extensive upscale facilities, hoping for job growth or revitalizing infrastructure to become a new tourist hub. However, this big spending on legacy builds and infrastructure for the future is outside the scope of requirements from the IOC to host the games. where there have been problems in the past is some of the venues that were designed to be especially for for the after games, and too expensive. And let's be clear, this is absolutely not something we are demanding what we are doing now, to make sure that that we don't have these problems they will not repeat is that at the time, when we are speaking about the future gains like it is the case now in Brisbane. 

We decide together about the venue the master plan, what makes sense or what doesn't make sense, so that we can not be accused of any problems in the long run. While Rio invest heavily on infrastructure that didn't pay off as expected. That doesn't always mean that big spending is the death knell to a city's future. Things like a newly established metro line can pay off in the long run. Just take the 1976 Montreal games, one of the greatest things that the Montreal has has a legacy from the games is the metro system and aisle council committees that are bidding to host the games to speak less than the sports themselves because the general public isn't gonna all have access to like the sporting venues. But it's more like the field that day in and day out. 

A resident of that city can really experience the idea of new business development, new technology, better roads, you name it, whatever is required for that city has come into place because of the games and but for the games, those things would not be in place. As of 2014 the IOC enacted the Olympic agenda 2020. It's a strategic roadmap for the future of the Olympics. It signals cost concerns, adapting the game to the host cities, it limits expenses on future bids and establishes the foundation for a more economic and sustainable Olympics. We reviewed entirely the approach of the bidding process to simplify it to make to make it more collaborative as well. 

We came with 118 measures to save on the cost of organizing the games. Let the capital costs No investments are needed. No constructions are needed. But just the operations of the games 118 measures. And the third strength was to simplify games organization by allowing the organizers to be creative, innovative, not to impose to heavy requirements. We as IOC are providing much more ready made solutions, turnkey solutions, so that you can reuse some of these over time. 

But in 2020, the Olympics were thrown another curveball how to host the games amid a pandemic crippling economies worldwide. guys want to bring you some news right now there's something that's just crossing according to the NHK wires of Japan's Prime Minister Ave is set to propose a one year delay for the Olympics. And a call with the IOC is Thomas Bach. Again, this is NHK citing this on the wires, this has been something that's been widely speculated about whether or not the Olympics would be able to go forth coming up this summer. Right now, though, it looks like the Japanese Prime Minister delete tech tacked on billions of dollars on an already expensive Olympics $2.8 billion for the initial delay, and another $1 billion in preventative measures against COVID-19. 

The Tokyo games surpassed its original estimated cost of $7.3 billion dollars. As of April 2021. It is estimated that the games will be $30 billion. The IOC faces another issue with the Olympic Games for the 2022 Winter Games, five cities withdrew their bids. So what happens if no country wants to host the games? Well, the IOC got ahead of that issue by doing something out of the ordinary for the Olympic governing body. In 2017. The IOC four went the bidding process and chose Paris for the 2024 Summer Games, and Los Angeles for the 2028 games, effectively placing a pause on bidding, with the IOC defaulting to Los Angeles in 2028, like they did in 1984. It can add a much needed boost for both the IOC and the games themselves, the Olympic Games 32 and 84. And now we building on on this very rich heritage. 

Whether the games of Los Angeles will be transformational the way the 84 were, I don't know yet for sure. What I know is that the spirit of innovation has never changed. And what was worth in 1984 in this respect, is still absolutely the case now. While the gains are a financial burden for most cities, it continues to serve its original purpose as a symbolic event, making the world smaller as athletes from nations all over the world come together to compete

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