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Fool's Gold?
Lionel Beehner
03/01/2008
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The 2008 Summer Olympics in
Beijing are going to be the most expensive games in history, with a price tag
soaring above $34 billion, according to city officials. But outside analysts
predict a much higher amount. The Chinese government considers the figure a
worthy investment in what it hopes will be a coming-out party, showcasing the
country as an economic powerhouse. Politically, the Chinese also want to change
what remains the image of Beijing to many outsiders: the lone man defying tanks
out-side Tiananmen Square in 1989. The centerpiece of Beijing’s new
construction, and one that boosters hope will become a more flattering symbol,
is the $400 million Bird’s Nest, a stadium that resembles a twisted mass of
twigs and that will have room for 100,000 fans to roost.
"Everyone has to outdo everyone else and promise the International Olympic Committee the world." |
A boost to China’s economy is beside the point. In fact, a
recent study by JPMorgan predicts that the Olympics will have virtually no
effect on Beijing’s economy, much less on that of China as a whole. Victor
Matheson, an assistant professor of economics at the College of the Holy Cross
in Worcester, Mass., who specializes in the economic role of major sporting
events, has seen no evidence that hosting the Olympics does anything to improve
a locale’s long-term capital inflows. The upside is that if Beijing loses money,
it will be less than a blip in China’s continued growth. However, because this
particular Olympics is so very symbolic of China’s new prestige, if the games
leave the city in debt, or if political problems mar the athletic competition,
it will be a national embarrassment in a culture that puts great emphasis on
dignity and decorum.
Though the emotional stakes in other locations that seek the
Olympics are not quite as high as Beijing’s, the cities still grapple with the
question of whether the benefits will justify the costs as they jockey to host
future games. London won the 2012 Summer Games, and Rio de Janeiro and Chicago
are vying as frontrunners for 2016, followed by Tokyo, Madrid and Doha, Qatar.
In the best-case scenario, a host city captures the world’s attention in a
positive way and the games fuel urban revitalization and economic growth by
attracting tourist dollars and deep-pocketed foreign investors. The most
sterling example of that kind of economic jump-start from the Olympics is
Barcelona, which hosted the 1992 Summer Games and recouped its costs in a burst
of tourism that spurred the creation of 20,000 jobs. Thanks to the publicity
surrounding the Olympics, tourists "discovered" a cultural mecca, and one that
had up-to-date telecommunications, transportation, retail stores and hotels in
place.
TOP VIEW
Hosting the Olympic Games costs a city billions of dollars, and
pays off only if all of the stars align: if the construction is already a
fixture in the landscape; corporate sponsors are waiting in line; and no one
interrupts the games to make a violent political statement. Beijing expects to
reap more than $2 bil-lion from sponsors, but it still risks a monumental post-Olympic hangover. |
Budding Barcelonas
Since then, cities around the globe have competed to host the
Olympics, largely hoping to become the next Barcelona. But there was a time when
the International Olympic Committee (IOC) had a difficult time finding hosts.
That was partly because the games were not profitable from the Depression-era
1932 Olympics (when the Winter Games were in Lake Placid, N.Y., and the Summer
Games in still-remote Los Angeles) right through 1980. The 1972 Munich games
turned tragic when guerrillas killed 11 Israeli athletes and coaches. The 1976
Summer Games left Montreal saddled with $1.5 billion in debt that it finished
paying off just a year ago, while the dilapidated eyesore officially named the
Olympic Stadium continues to mar the city’s skyline. Locals referred to it
mockingly as the "Big Owe," a play on its original nickname, the "Big O."
But cities began lining up after Los Angeles hosted the 1984
Summer Games and earned roughly $250 million in profit. L.A.’s formula involved
financing the games with private capital, a bold strategy at that time.
Corporate sponsors ponied up large amounts of cash to underwrite the games in
exchange for exclusive advertising rights.
The bidding process has changed significantly since 1984, when
Los Angeles was the lone entrant. "Now, with five to 10 bidders, everyone has to
outdo everyone else and promise the International Olympic Committee the world,"
Matheson says.
The IOC is not supposed to be in the business of marketing the
games to potential hosts, but, not surprisingly, it will cast a positive spin on
the rewards of holding the Olympics. "Hosting this once-every-four-years
spectacle grants the imprimatur of being anointed into an exclusive club of
top-tier international cities," says Curt Hamakawa, the former director of
international relations for the U.S. Olympic Committee. "Public officials must
contemplate not just the short- and long-term economic impact on their cities of
hosting an Olympic Games, but also the value and importance of being regarded as
an Olympic city." Pressed further, however, he says he would not rule out the
IOC’s sometimes privately dropping hints to cities to throw their hats in the
ring.
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