The Business of the Olympics

Photo by zhang kaiyv on Unsplash

As thousands of viewers tune in to watch the Beijing 2022 Winter Olympics, new business ventures are created, offering insight into how the Olympics affects businesses as well as the economy of the host country. 

Beijing originally estimated the 2022 Winter Olympics to cost $3.9 billion USD. However, the actual cost of the games is projected to be more than $38.5 billion USD, according to Business Insider. Beijing is following in the footsteps of other countries who overspent their initial budget. The London 2012 Summer Olympics and Paralympics cost $14.6 billion; Beijing spent $42 billion on hosting in 2008; Athens spent $15 billion in 2004. Additionally, it is highly costly to make a bid for the Olympics which countries are not guaranteed to win. 

Tokyo spent $150 million on its failed bid for the 2016 Olympics and $75 million on its successful 2020 bid, indicating the potential for a significant economic loss for bidding countries. Moreover, once a country wins the bid, its budget is spent on developing the infrastructure to host the Olympics. Commonly, cities must build roads, expand their airports, and build additional public transportation services to accommodate the athletes and spectators. 

However, cities host the Olympics in hopes of generating revenue from increased levels of foreign investment and tourism. Additionally, the money spent on hosting the Olympics can improve the quality of life for the city's residents. In 2008, Beijing spent over $22.5 billion building public transportation and nearly $11.25 billion on environmental cleanup. 

However, while an improved economy may appear to be a benefit of hosting the Olympics, oftentimes the residents of the host city do not directly benefit or feel the improvements. Oftentimes the profits earned by the hotels, restaurants, and construction companies are earned by international corporations instead of local businesses in the host cities. In the Salt Lake City 2002 Winter Olympics, the city added 7,000 jobs that were filled by workers who were already employed, thus having no benefit to unemployed workers. 

While there may be little economic benefit for cities hosting Olympic games, there is a significant economic benefit for the athletes competing. Through sponsorships and prize money, competing in an Olympic game can greatly benefit an athlete. For example, in the 2021 Tokyo Summer Olympics, the three highest-paid athletes earned $75 million (Kevin Durant), $60 million (Naomi Osaka), and $40.5 million (Damian Lillard). The press and attention the Olympics can bring relatively unknown athletes can increase their earnings as well. For example, 2022 breakout star Eileen Gu made $31.4 million in endorsement deals in 2021 alone. With her increased popularity resulting from her achievements in the 2022 games, she is set to make at least an estimated $2.5 million before tax per endorsement. 

While Beijing's 2022 Winter Olympics may not see a large profit, many of its Olympic competitors will.