Olympic bidders face harsh reality of costs heavily outweighing benefits | Sean Ingle

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The IOC may find fewer cities eager to host the Games with experts agreeing that staging the event is economically damaging despite a larger revenue cake

These days even the Olympics is going on the 5:2 diet. Less than 18 months ago, the political leaders and panjandrums of Hamburg, Rome, Budapest, Paris and Los Angeles all craved the right to host the 2024 Games. Now, following Budapests withdrawal last week, merely Paris and Los Angeles remain. But it is simply reflective of a bidding process that is getting worryingly slimmer.

Twelve cities fought over the 2004 Olympics. Yet merely two were in the running for the 2022 Winter Olympics. And now here we are again. Even LA, one of the last pair standing for 2024, was a replacing for Boston after a concerted populace campaign forced a rethink at the US Olympic Committee.

The great recession of the past decade has not helped. Nor has the rise of social media, which stimulates it is easier for protestors to generate energy and noise. But there is something else. Something more fundamental.

For more than 30 years the Olympics has been sold not only as a month-long celebration of sport but as a wondrous infrastructure programme: a sort of one-stop economic pharmacy that could regenerate run down parts of a city, boost growth, turbo-charge a nations fitness and get tourists flocking in.

The International Olympic Committee, and the concentric circles of consultants and advisors that surround bidding cities, will always argue that a sceptical public will see the light once the glory of the event hoves into view. But people increasingly dont buy it. They know the numbers do not match the rhetoric.

David Forrest, an economic prof at the University of Liverpool, puts it bluntly. There is an absolute consensus among sports economists that it is economically damaging to host the Games, unless one puts a very high value on the local population enjoying the party, he says. The only publications attributing benefits to hosting are by consultancies paid by politicians to validate their vanity projects.

Forrests reading is that the Los Angeles Olympics in 1984 was profitable for the city but that was because it was the only bidder and the IOC had no choice but to accept it would use existing facilities. The gain at LA seduced other cities into bidding. As the IOC has a monopoly, bidders will compete with each other in the beauty contest[ lavish facilities, incorporated into IOC demands, bribes] until they have given away any hope of a profit and indeed the price extracted by the IOC will go higher than that since politicians are willing for their taxpayers to take a big loss.

The scale of the problem is made abundantly clear by Running for the Gold: The Economics of the Olympics, written by the US economic professors Robert A Baade and Victor A Matheson. Soberly and efficiently they analyze every piece of research into previous Olympic Games and, in most cases, find a gaping gap between the promises and reality.

From 1968 to 2012, for instance, every single Olympic Games aimed up expensing more than originally estimated. Who can forget that Londons initial bid was 2.4 bn? That figure was rewritten upwards within two years to 9.3 bn.

As Baade and Matheson note wryly, when costs came in at a mere 8.77 bn the organisers laughably claimed the event had come in under budget.

The forecasts of economic growth are usually wide of the mark too. When Salt Lake City hosted the Winter Olympics in 2002, for instance, it created between 4,000 -7, 000 tasks roughly one-quarter to one-tenth the number claimed by Utah officials. And, according to Baade and Matheson, the federal government expend $342 m on the 2002 Winter Olympics and at least another $1.1 bn on infrastructure improvements leading up it – which amounts to about $300,000 in federal government spending per job created.

As they put it spikily: If one wishes to know the true economic impact of an event, take whatever numbers the promoters are touting and move the decimal point one place to the left.

It does not help a citys chances of making a profit when the IOC pockets more than 70% of Olympic television revenue compared with less than 4% between 1960 and 1980. Or that even making a bid costs millions. Chicago, for instance, ploughed more than $70 m into trying to host the 2016 Games, merely to come last in a four horse race.

On his election in 2013 the IOC president, Thomas Bach, promised that his Agenda 2020 programme would find ways to reduce costs by allowing cities to use more of their existing venues, and potentially spread bids between more than one location, but there is little sign that it is having any practical impact yet.

So what does this mean for the future of Olympics? According to Michael Payne, who was the IOCs director of marketing and Tv for 20 years and is now a consultant for the Los Angeles bid, we should not get carried away. I would be very cautious in saying its the end of the world, he tells me. Sure there is a problem. But this isnt like Fifa having Qatar and Russia as its next hosts for the World Cup. Los Angeles and Paris are two very strong candidates, from two countries who have been repeatedly bidding for the Games.

He believes the likes of Barcelona and London have shown the Olympics can still inspire people and change cities. And while he concurs the IOC is taking a higher slice of revenue than in the past, he says it is coming from a much bigger cake. I only negotiated a bargain last month for the IOC for one top partner for close to a billion dollars, he adds. When I launched the Top programme, 10 partners paid $100 m. So the cake is much bigger. That much is true. The question is, given that the Olympics are more bloated than ever, how many cities in the future will still want to eat it?

Read more: www.theguardian.com

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