Abacus: The Potential Benefit Of Hosting The Olympics
As the PyeongChang Winter Olympics in South Korea came to a close last month, many might have been reminded of our nation’s past successes in the Olympics. Looking at the U.S. past participation in the games, some could argue the longest-lasting effects from participating in the Olympics came from hosting them. Using various data on past U.S.-hosted Olympic Games, we can see how hosting the Olympics has influenced local and national economy.
In preparation for the games, the PyeongChang government commissioned for an Olympic stadium and similar venues to be built with hope that these would generate revenue even after the games ended. The South Korean Hyundai Research Institute predicted the return on these venues would be close to $40 billion, but their predictions strongly anticipate post-Olympic tourism. PyeongChang could face difficulty in this endeavor given its remote location and limited accommodations, unlike with Seoul which is South Korea’s most popular tourist destination. Though there remains room for growth as this is only the second time South Korea has hosted the Olympics, their first being the 1988 Seoul Summer Games.
In comparison, the U.S. has hosted the Olympics a total of eight times and is the only country to have hosted the most Olympic Games thus far. The most recent games hosted in the U.S. were the 2002 Salt Lake City Winter Olympic Games. Before Salt Lake City, the games were hosted much more frequently. The 1996 Atlanta Summer Olympics, 1984 Los Angeles Summer Olympics and 1980 Lake Placid Winter Olympics took place just before Salt Lake City hosted the games in 2002.
Since the 1996 Olympic Games, the cost of advertising during the games has increased considerably. According to a report by the Nielsen Monitor-Plus, the seller prices from advertising went up by 40 percent in the span of ten years. Their data for the 2006 Torino Winter Games showed that each 30-second advertisement cost $350,000 on average – up $100,000 from the cost of the same service during the 1996 Atlanta Olympics.
The Nielson report is backed up by industry data the Bureau of Labor Statistics (BLS) collected on local cable system advertising services for the same 10-year timeline. Furthermore, the BLS industry data for advertising placement services showed a 1.6 increase in the two months leading to the Salt Lake City Olympics in February. This was also the first time the prices increased consistently since December 2000. These increased seller prices for the 2002 Olympics resulted in a $740 million profit in advertising revenue, which was more than previously estimated. However, it’s very likely that the larger revenue is from last minute decisions to watch the Olympics from home instead of in-person due to fear caused by the September 11 terrorist attacks.
Other industry areas experienced shortfalls due to these unfortunate events that occurred only a few months prior. Still reeling from the attacks of September 11th, the Salt Lake Olympic Committee (SLOC) and the Olympic teams, both national and international, scoured for liability insurance with the best coverage to purchase for themselves on top of the security maintained by the local and federal government. While previous Olympics did put great efforts into maintaining security, the Salt Lake City Olympics served as an example for future measures to ensure safety of both the athletes and spectators.
The attacks also negatively influenced revenue from the hotel and food services industries. Prior to the attacks in September, the expectations were for larger profits in hotel accommodations and sales by restaurants and retail businesses local to Salt Lake City. Counting on this increase in demand, some hotels had raised their rates for the duration of the games. In similar fashion, theaters, restaurants, and retail stores near the Salt Lake games hired more employees in the time leading up to the Olympics. Unfortunately, these industries did not see much of the expected increase in revenue. However, the same could not be said for cabs and taxis. Taking advantage of the limited supply of shuttles to and from the games, commercial drivers made a huge profit from hiking up their rates.
Despite the external circumstances unique to that time, Salt Lake City was not the only city in the nation to lose revenue from hosting the Olympics. A little over two decades before, the 1980 Winter Olympic Games left Lake Placid with a $8 million deficit that necessitated the assistance of New York State legislature in paying off creditors. This made Lake Placid the Olympic host city with the second largest deficit to be accrued from the games, the first being Albertville, France with a $57 million deficit from the 1992 Winter games.
Nevertheless, host cities have still experienced success from the Olympic Games. As touched on before, the advertising prices during the 1996 Atlanta Summer Olympics increased by 0.3, which was the second largest sharp increase since January of that year. Furthermore, residents in Atlanta were welcome to sharp increases in employment. The leisure and hospitality industry added 14,600 jobs, which was the sharpest increase in jobs that the city experienced that year.
Additionally, there are valuable investments that come from hosting the Olympics for local communities. Namely, the venues used for the Olympics can also serve for other large events in the future. For example, Lake Placid built their Olympic Stadium and Bobsled Track for the 1932 Winter Games. The efforts by the local government to keep up maintenance for these venues enabled them to be used for the 1980 Winter Olympics as well. Besides being used to host the Olympics, Lake Placid’s venues were also used to host the 1972 Winter World University Games and was recently announced to be hosting those games again in 2023.
Similarly, Los Angeles has used the LA Memorial Coliseum as a venue to host both the 1932 and 1984 Summer Olympics. The city expects to use the coliseum again as one of their venues when hosting the 2028 Olympics. Last September, the International Olympic Committee announced Los Angeles as the Host City for the 2028 Summer Olympic and Paralympic Games. It’ll also be interesting to see how technological advances will play into games’ expected revenue. For all Olympic games that took place between 2000 and 2008, NBC refused to allow any live streaming of the Olympics. However, those rights have now expired and we can expect the latest improvements made to streaming services to play a huge roll in viewership. You can stay up to date for the nations next Olympics on the LA 2028 website.