Hosting new stadiums. The Olympics in Barcelona

Hosting a major sports event like the Olympics or World Cup can be
seen as an economic gamble in recent years. These major sports events have the
potential to bring in big revenue, but more often than not the host city is
left with a huge deficit. Economist Andrew Zimbalist has commented that
‘prudent city governments should avoid the contests at all cost’.

 

The Olympics and World Cup should make a high return with
television rights being sold worldwide, major sponsors, entry fees and license.

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The London 2012 Olympics generated $5.2 billion in revenue, as it had
acceptable hotels, transports and athletic infrastructure in place. The Los Angeles
Olympics in 1984 was a major success as it had the pre-existing infrastructure
in place and was a tourist hub. In recent years the IOC has increased their
share in the income. Between 1960 and 1980 they received less than 4% of the
income generated from the television revenue, today they now revise surplus of
70%. There is little evidence to prove that the Olympics is a tourist
attraction. London and Beijing both suffered a loss in the number of visitors
during the Olympics compared to previous years. Tax-payers are the ones who
fund the cost of building new stadiums and facilities, private business knows
that the benefits of these structures are short-lived and cannot justify the
cost associated with it. The Los Angeles Olympics were such success because
they averted building any new stadiums. The Olympics in Barcelona in 1992
helped with the cities renewal. Though the revival of Barcelona would have
happened anyway without the Olympics as the rule of Francisco Franco ended.

 

During the London Olympics, there was a decrease in the number of
visitors to the British Museum, the number fell from 617,000 to 480,000. The
West End cancelled performances of “Sweeney Todd’ as a result of the Olympics.

The Olympics discouraged certain tourist and many locals left the area also. A
study showed that hosting major sports event has no real impact on people
perceptions of the countries hosting.

 

Even though the International organizations subsidize the cost of
the staging the event, it doesn’t have that big an impact on the overall cost
of running the event. The entire operating budget of the World Cup is funded by
FIFA. The main cost of the event is spent on construction and infrastructure,
building stadiums and developing transport systems. The burden of those cost
stands on the host city. The IOC and FIFA favour cities that have the most
impressive plans, which include modern and customised facilities. As a result,
cities bidding for these major sports event feel the need to invest large
amounts of money into new facilities for this singular event. Budget estimates
go anywhere from 4 times to 11 times over the original budget, caused by the
need to build so much in so little time. The burden of all this cost falls on
the tax-payers who will still be paying the cost overrun long after the
pro-athletes have left.

 

The host city justifies the larger-scale expenditure on
infrastructure and facilities by arguing it will benefit the community after
the tournament is over. These claims are often misguided as it is so often
seen. An example of this is the decaying and abandoned sports venues that are
to be found in Athens from the 2004 Olympics. The modern football stadium which
seats 40,000 is now used by a second division soccer team in Brazil and the
rotting cycling track from the 2008 Beijing Olympics. This image can damage a
countries reputation and shine a negative light on the country. Not only have
these costly facilities been left to waste but they also cost millions to
maintain.

 

Host cities are now more aware of the potential risks included in
hosting such events. There has been a decline in cities bidding for the events.

There were twelve different cities bidding for 2004 Olympics, there were only 5
applicants (Istanbul, Tokyo, Madrid, Baku, and Doha) for the 2020 Olympics. The
Dutch government stated that in the future only non-democratic counties will
pay to host the games. The could contradict the Olympics message of peace and
harmony worldwide.

 

 

Brazil spent $250million on a new stadium Arena Amazonia which is
meant to look like the woven basket, for the 2014 World Cup. The stadium is
located in a rain-forest city which has a low-density population, the
professional soccer team only attract 2,000 fans to games. Brazil plans to
splurge another $25 million on infrastructure for the 2016 Olympics. Brazil
justifies this spending by claiming it will promote the country and highlight
them as a comic powerhouse.

 

The concept that these major sporting events could boost a city’s
growth is a recent development. The Australian officials believed that hosting
the 1956 Olympics would attract more visitors and hopefully some would settle in
the country. It was believed that the higher the cost of hosting the Olympics
was the more benefits to take advantage of. Planners of major sports events
often ignore the opportunity cost involved. What the money could have been
spent on other than hosting a major event. In Brazils case the government could
have spent the money that was used on hosting the World Cup and Olympics on the
homeless issue they have or on a better education service, that would benefit
the entire country and have a positive long-term effect.

 

A benefit of hosting a major sports event is that an increase in
trade can be seen, which helps with economic growth. Not only does the hosting
country benefit from the trade increase, but so do the countries that bid for
the event. They receive a boost without having to spend billions in preparation
for the event, like the hosting country.

 

The economist Mr. Zimbalist suggest that the IOC ignore the need
for custom built structures and build on pre-existing structures. He also
suggested splitting the television income, to courage bidders and there is a
more transparent voting system.

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