Written by Arda Bora Karahan
Since the first organization of the modern Olympics in Athens in 1896, the Games have been held every 4 years with a sprawling popularity by surviving argumentations such as wars or boycotts (1, 2). As the Summer Olympics are growing with wider media coverage and promotion over the years, policy-makers increasingly use the financial implications of the Games except the socio-cultural and environmental areas to stimulate the economic development of host cities. In recent years, the International Olympic Committee (IOC) has allocated its events based on the potential of promoting their context of economic growth (3). As the discussion for the 2024 Paris Olympics between the Olympic advocates emphasizing the substantial economic impact of the Games with the perception that it helps attract tourists and generate income and potential host communities positing the question of whether these pledged benefits are exaggerated pragmatic numbers continues, different calculation and measurement systems have emerged from each side to determine the amount of economic contributions. This article will give an overview of the various approaches and demonstrate their differences, without concluding which approach is the most favorable.
Overall Understanding of the Selection Process and IOC
Being awarded hosting the Olympics is important for governments trying to attract tourist revenues with the expectation of high money flow into the host economy (4). Thus, the selection process of the host city for the Olympics is interfered with by various aspects. While the internal system such as the members, finances, funds, sponsors, or voting body of the International Olympic Committee (IOC), the sports governing facility, is highly asserted to affect the host city selection, a brief explanation for each will be a great start for a full understanding of IOC and selection.
International Olympic Committee Members
IOC members constitute the voting body of the International Olympic Committee with 107 individuals (4,5). As stated in the Olympic Charter, members of the IOC promote the interests of the Olympic Movement in their countries. The members are elected as individuals by the IOC, not assigned by the governments of the nations from which they originate (5). Thus, the decisions made by members are not driven by the interests of their home countries but are formulated with complete independence to serve the overarching objectives of the institution.
International Olympic Committee Finances
Before the mid-1950s, the IOC’s expenses were funded through its voting members (3). After the first sale of television rights in 1959, television rights emerged as a crucial delegate to be the primary revenue source for the IOC. The biggest transformation in the economic dynamics of the IOC occurred in 1984, in Los Angeles. After Los Angeles won the bid, local political leaders promised that not a single penny would go to the Olympic venture which was the first step of a catastrophic collapse for the Olympic Games. As a consequence of concerted actions opposing the support and funding of the 1984 Olympics—encompassing propaganda, boycotts, and even terrorist activities culminating in the tragic death of 11 civilians—the anticipated financial income from the targeted surge in tourism was largely forfeited, thereby transforming the Los Angeles games into a boondoggle (6). Upon concluding that physical interaction with tourists was unfeasible, the committee— guided by the sports entrepreneur Peter Ueberroth— swiftly embraced the innovative proposal of televising the Olympics and monetizing broadcasting rights. Ueberroth’s branched idea vastly expanded the market value of the Games with additional revenue as even nations that boycotted the 1984 Games— East Germany, Poland, and the Soviet Union— purchased broadcast rights. In the following Olympics, 1992 Barcelona and 1996 Atlanta, this advertising method was utilized with growing expenses; by 1995, the IOC awarded the rights for the 2000 and 2002 Games for $1.25 billion (4).
In addition, Olympic sponsorship has also been a significant element of marketing for a long time. The IOC accumulates additional funds by selling the Olympic emblem licensing rights, called “The Olympic Programme (TOP)” to their sponsors (3,7). While numerous criteria must be satisfied by the sponsors chosen to sell this license, these will not be elaborated upon in detail to avoid diverting from the main topic. Nevertheless, the main factor in this context is the prospective company's purchasing capacity and advertising potential (7).
Host City Selection
For each Olympic, the International Olympic Committee selects the host city 7 years before the games. To choose the best city for the Games, the IOC has held country elections following different policies every year. After selecting possible delegate cities, governments of delegate cities are expected to constitute National Olympic Committees (NOC) to communicate with the IOC. In this stage, the IOC expects the NOCs to select one city to compete against a group of foreign cities for the privilege of hosting the games, then it eliminates those cities until choosing the best ones, known as the “Candidate Acceptance Procedure Phase” occurring 8 to 10 years before the Olympic Games (4). 7 years after the Olympics, the IOC members select the best country by voting in successive rounds until one candidate receives a majority of votes. Thus, the process of selection has been completed by considering various factors.
For economic concerns, the first preference of the International Olympic Committee is growing and stable economies, as reflected in superior growth rates of GDP as well as low rates of inflation and unemployment (8). On the other hand, the host cities are highly asked to demonstrate their possession of the legal and political structure, environmental conditions, financing, marketing, sports venues, security, accommodations, transportation, technology, and media (8).
Regarding the political and social system of host cities, the International Olympic Committee generally intends to select countries with governance promoting freedom, democracy, and social globalization (7). IOC also takes the tourism potential and accommodation capacity for the IOC family, media, sponsors, broadcasters, and visitors (8). Special to the 2024 Paris Olympics, organizers have also attempted to make it the first carbon-neutral Olympics in modern history which was also an additional factor to be considered in host city selection (9). The multifaceted contributions of the Olympic Games to the selected host city adhering to all stipulated conditions will be elucidated in the subsequent sections of this article.
Although various sides are arguing about the infinite positivity and contribution of the Olympic Games to the host city, it is a gospel truth that the Games support the cities in both tangible and intangible ways, and the International Olympic Committee provides the first support with a fund of over 1 billion dollars which can be used to either make remediations in services or cover the expense of the Games (10). Moreover, the substantial investments not only catalyzed the rapid development of the national economy but also stimulated significant economic growth within the specified region, thereby creating various job opportunities. The sustained vibrancy of local businesses is also maintained through the influx of tourists and spectators who flock to the city to attend the Olympics, thereby ensuring a steady stream of economic activity and engagement. For instance, in Atlanta, the host city of the 1996 Olympic Games, a substantial investment of $2 billion was allocated to Olympic-related projects. This influx of capital generated a significant number of new jobs during the same period; it also resulted in a cumulative economic impact of $5.1 billion. The Olympic cities also undergo long-term transformations including the reconstruction of sports facilities, sports arenas, transportation systems, hotels, and other infrastructures such as energy and water supplies. The development of these additional facilities brings about notable enhancements in the daily lives of the host city's inhabitants, while also serving as valuable legacies that boost local, regional, and national tourism. As mentioned previously, because the Olympics’ contribution is a bilateral correlation, the negative reflections of the Games will be expressed in the following paragraph.
As the design of the city is planned based on the Olympics under the control of the International Olympic Committee, the main structure of the host city may be corrupted due to overbuilding. These facilities may prove to be excessively large and costly to maintain, potentially clashing with long-term urban planning policies and not addressing the cultural and leisure needs of local inhabitants (10). The opportunity that the Olympic Games presents can also lead people to make wasteful investments in urban areas which both suffer people’s budget and damage to the local economy of the city (4,10). Except these, sometimes the high benefits clumped in a distinct area of a country can establish a huge gap between the host city and the rest of the country. Even if these are the possible negative outcomes of the Olympic Games for the host city, they are regarded to be considerably low when compared to the positive outcomes.
References:
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