Countries, Global Events, and Spending

Sep 9

By Samarth Singh

Australia bid $4.4B for the 2000 Olympics. In 2012, London bid $12.2B for the Olympics and Paralympics. Russia spent $11.6B on the 2018 FIFA World Cup. The UAE spent $11B on hosting a six-month Expo. But most striking of them all, Qatar spent a whopping $220B on the 2022 FIFA World Cup. Spending large amounts of money on international events has become increasingly common over the years. The question is, why do countries do this, and is it really helpful?

Events such as the Olympics, Paralympics and World Cups have a massive fanbase, and in some cases, a long history surrounding them. Just take the recent 2022 FIFA World Cup: 5B people were engaged, with 1.5B people seeing the finals. The Olympics have been around for 3000 years. These major events attract millions of visitors each time they happen. In some cases, hosting such events boosts tourism and the economy of a country. For example, in 1992, Barcelona rose to the 6th most popular destination in Europe after the city hosted the Summer Games.

Needless to say, these events come at a cost, and countries are willing to pay the price.

Hosting major events has expenses more than just bidding or constructing stadiums. Since 1960, on average, the cost to host the Olympics has tripled the amount spent on bidding. That means for every $1B spent on a bid, a country is likely to spend $3B extra. This is because every time such an event occurs, there is a massive influx of tourists. The host cities' roads, hotels and other infrastructure need to be able to handle that, which means that countries have to build new roads, stadiums, housing facilities and other infrastructure just for a six-month period. This explains the staggering figures (mentioned above) that countries spend.

How is spending so much money good for a country? Firstly, tourists splurge money during the event. In the 2024 Paris Olympics, tourists will be spending 200% more tourist tax per night. Average hotel prices in the area have risen by more than 50%. The country is expected to have 10 million more visitors when compared to 2023. Second, sometimes such events grow a country in the long run too. Increased infrastructure will help a country with tourism demands in the future too. In the case of Dubai, the Expo 2020 is expected to contribute $42.2B to the UAE economy and generate 35,000 full-time jobs in the country (over 30 years). There is an increase in employment as well: the Paris Olympics has created around 150,000 jobs worldwide. Lastly, this helps improve the image of a country in the world. Mass media can be used to shape public opinion about a country (for or against, that depends). Pop culture, art, news, development of a country: all these account for how people see and think about a country. Hosting major events, especially in sports, can increase people’s approval significantly, since sports events have some of the highest viewerships in the world.

Despite the benefits, a different trend can be seen lately: most countries are opting out. For example, FIFA (responsible for hosting the Football World Cup) received only one bid for the 2034 FIFA World Cup.

This is because not every major event brings in profits. Different sources claim different numbers, but here are some of them. The London 2012 Olympics barely broke even. Some countries even have booked losses. In 2008, Beijing only generated $3.6B in revenue, less than 10% of its cost of $40B. In 2020, Tokyo saw a revenue of $5.8B, way short of its expenditure of $13B. Even worse, the Olympics has pushed some cities into recessions. The Rio de Janeiro Olympics in 2016 cost the city $13B, however, it was unable to pay its public employees and eventually required a $900M bailout. Moreover, the budget for the Olympics has almost always overshot. Countries spend an average of 122% more than what they initially planned for (figures over the past 26 years).

Moreover, most of the developments due to such events are temporary. For example, only 10% of the jobs created in the 2012 London Olympics were filled by previously unemployed people. Add to that the remaining unwanted infrastructure. While housing facilities, roads and public transport help a country, after a major event, most stadiums are abandoned. The Los Angeles Olympics in 1984 is celebrated as one of the most financially successful Olympics. The city was the only bidder for the event, and it used previous infrastructure to conduct the event. However, most cities do not have that luxury: infrastructure development costs heavily to some.

Research about the economic impact of hosting such events often contradicts each other. For example, the Olympics gives optimistic figures on their website, but seeing pictures of old abandoned stadiums is not uncommon.

So what does this mean for future events? The 2034 FIFA World Cup bid seems like a singular case. Most countries are still willing to spend the money required to host such events. The Olympics has been booked way till the 2034 Winter Olympics (won by Salt Lake City). The bidding for Expo 2030 is underway, and we may soon see a bid by Berlin, the capital city of Germany, for the 2035 Expo. Even the 2030 FIFA World Cup bid has been won mutually by Morocco, Portugal and Spain. This trend may or may not continue in the future, but as far as the present is concerned, countries are willing to spend money. Whether it is profitable or not, we don’t know - but it is entertaining for sure.

Sources:

Kathleen Xie

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