The Cost of Hosting the Games

Sept. 21 -- The contest to host the Olympic Games has become almost as competitive as the individual rivalries themselves. But, as some cities have found, the honor can come with a hefty price tag.

Past cities have lost millions. The Lake Placid games in 1980 cost that city $11 million. Montreal, host of the 1976 Olympics, is still paying off the billion-dollar debt it fell into more than two decades ago. And Barcelona, which staged the games in 1992, took four years to make up for its losses.

Yet, by applying lessons learned from past fiscal failures and success, economists project Australia stands to gain more than a billion dollars with the Sydney games currently under way.

A Change in Ideology

Los Angeles paved the road to Olympic prosperity in 1984. Despite concerns that the city would turn the games into a glitzy Hollywood-style event, L.A. not only delivered a respectable competition, but the first commercial success for a host city.

One key reason for the success was the city’s innovative partnership with corporate America. The Los Angeles Olympic Organizing Committee — headed by business and sports executive and former commissioner of baseball Peter Ueberroth — approached the games as a business venture. It hired a group of consultants to study past hosts and develop a five-year financial model with the goal of putting on the games debt-free.

Instead of relying on support from the government, the LAOOC saw in the games the quintessential marketing opportunity and decided to pitch the idea to corporate America. Coca-Cola, Anhauser-Busch and nearly 30 other companies hopped on board, paying approximately $126 million to sponsor the games — well above the $116 million projected by the consultants.

Although the city did not need to build many new arenas to accommodate various sports and spectators, the corporate sponsors covered the necessary construction.

Los Angeles also marked the first time television networks paid a fee just to be able to bid on broadcasting rights, a process that ultimately provided the LAOCC with $2.5 million in start-up cash. Overall, 156 countries paid more than $286 million for rights to show the games — three times the revenues collected in the Montreal Olympics just four years prior.