Over 10,000 competitors, over 8 million tickets sold,
and about 3 billion people tuning in to watch what most of us consider the pinnacle of sports - the Olympics. Here comes the first. And this time it's in Paris. But the Olympics is a lot more than just this and this
and this. It's an extremely expensive undertaking, in many cases
causing more harm than good to its host city. And I covered it before. Cities are dropping out because they were spending tens
of billions of dollars on the hosting process. This chart shows the host city's initial budget versus
what they ended up spending. They're quite different. Like this or this or this. The London 2012 Olympics ended up being nearly four
times more than what they initially set out to spend. That's detrimental to a host's budget, especially
problematic for cities and countries with an already weak economy and extreme inequities like the state of
Rio that defaulted as a result of a heavy debt load in

2016. Or Greece, whose debt crisis became so
catastrophic it was put on a fiscal monitoring by the European Commission just a year
after hosting the games. But Paris is looking to be a bit different. The city budgeted $9.7 billion, spending about half on
infrastructure and the other half on operating costs, and so far it's looking good. We expect the Paris 2024 Summer games would be the
cheapest of the 21st century because the needs were really limited, so other events
were not as high as previous games. So how did France pull it off and can they become the
blueprint for future host cities projects? This is Thomas Bach, the president of the
International Olympic Committee. It's a clip from 2017 when he announced Paris as the
host city of the 2024 Summer games. We are all therefore delighted to see that your plans
include a record number of existing and temporary venues.

The key here is the record number of existing and
temporary venues. Paris's initial budget was set to $6.97 billion when
it officially won in 2017. It revised its budget to 8.1 billion. The city ended up with 9.7 billion, still well below
the past five Olympics. Olympic budgets are split into two parts: operating
costs and infrastructure costs. Operating costs are typically the more manageable of
the two. It's essentially the necessary cost to get the games
up and running, like security, transportation, medical services, customs, immigration, and more. Paris was already strong in many of those areas. The IOC set an operating budget of $4.8 billion. As a result, infrastructure costs have always been a
bit of a thorn in the side of host cities. In the past, prior cities have overspent by billions
of dollars on construction of new venues, Olympic villages, and building new or expanding existing public
infrastructure for the games.

To get all of that construction done before the opening ceremony starts, it becomes an expensive race against time. In Paris's case, construction costs were manageable at $4.9 billion. 95% of the venues were already in place. Only three were built. There is the Olympic Village that is the largest project for the game, and you have a new swimming pool in Saint-Denis. I think it's a bit less than 200 million. And then you have a new sport facility within the city limits of Paris. The Olympic Village will be turned into housing and student accommodation. They expect to have 2800 units after the games, so that will be a huge boost for the local areas. You may be wondering who pays for all of this. It's generally split into private and public funding. It's when the weight of public funding becomes too heavy that a host fails, like in Rio and Athens cases. For Paris and France's case, it hasn't been so, at least for now.

That's because 96% of the total operating budget is funded by things like ticket sales, TV, and marketing deals. Paris won its bid in 2017 amid a time of immense turmoil for the IOC. Up until then, every Olympics since the 1960s had run over its budget by an average of 172%. Rio is perhaps the most eye-popping example, at 352% over budget. A problematic subway line that was supposed to connect fans to the Olympic venues cost the city about $3 billion. It was overbuilt by 25%. The renovation project of a neighborhood cost $4.2 billion, and neither were on time. Brazil hosted the games as it went into its deepest recession in nearly a century. The same reason why it didn't make sense to build them before the Olympics is the reason why, after the Olympics, they're underutilized or unused. And what are they doing there?

Well, first of all, they cost hundreds of millions of dollars to build. Secondly, they cost tens of millions of dollars to maintain over time. These so-called white elephants are an ongoing problem for for host cities. As we saw earlier, a big part of the pair's bid was. It's the record number of existing and temporary venues. While Paris hasn't avoided the usual overspending, it's a fraction of what other cities deviated from their original budget. The method of the government has always been this would be cheap games, the cheapest in recent history, and they would not burden our public deficit or our debt and would benefit everyone. If you compare the size of the budget to French GDP, it's only 0.3%, so that's rather limited. And it's much lower than, let's say, a Athens in 2004 that represented a larger share of Greek GDP. Paris is also uniquely positioned to host a big event, with its 100 million annual visitors accounting for 7

to 8% of its GDP. Paris has an extensive metro network, but also many
train lines, and I think this was a really positive for the gains, meaning that most
people, tourists will use the transportation infra to go to the different venues. With mounting criticism, the IOC adjusted its bidding
process. In December 2014, the IOC released the Olympic Agenda
2020, the goal to make hosting easier on cities. What agenda 2020 did at the time was to restate a
policy or policies that the IOC started in the 1990s, and the
intention was to promote financial security for the host city and
also to promote sustainability. Promoted a little bit of greater flexibility on the
part of the IOC in terms of allowing host cities to use existing venues rather than to build new
venues, and that was, at least on the margin, a good thing for the host cities. Under the Olympic Agenda 2020 and its 2016 amendment
the new norm if a city needs new venues, new

Construction must have long-term legacy post-Olympics. The overall economic and environmental impact was not changed very much, and as a result of that, they continued to have more and more problems. In fact, worsening problems with getting potential host cities to actually express an interest in hosting. We finally got to the point in 2017 where five cities dropped out of the competition to host the 2024 games. The ones that are about to happen, only Paris and Los Angeles remained in the competition in 2017. It was the first time in IOC history that two hosts were chosen for back-to-back Olympics. By locking in two cities at once, the IOC wouldn't have to worry about facing another mad dash to land a host after cities dropped their bids. When you have a fully developed city like Paris or Los Angeles hosting the games, and they already have the vast majority of the venues, this is obviously a smaller problem. And that's good news.

That's good news. In 2019, the selection process changed altogether, this
time by closing off the bidding process. While Paris is considered to be one of the
cheapest modern Olympics, it all hinges on what kind of economic
windfall the games will see. While the IOC estimates that the games will generate
7.3 to $12.1 billion, other estimates are much more modest. One study estimates GDP growth of 0.5% in the third
quarter, before falling back to 0.1% for the following three months. S&p Global Projects Paris tourism and spending related
to Olympic activity will grow tax income by 5%. Paris projects its 2024 revenue to hit over $200
million, about an 85% jump from 2023. But being a major tourism hub and holding the world's
biggest sporting event may have some adverse side effects, like increased pressure on Paris's already
busy metro lines. Tourism not being high as expected, or security costs
becoming increasingly more expensive as the games

progress. The main pain point would be the transportation
network, because many people would go at the same place at the same time for the different competition, and
this could add a pressure to the network that is already saturated. The transportation authorities said they would add
extra capacity on metro lines and train lines, but maybe this won't be sufficient to absorb higher
ridership, so we could see network disruptions from time to time. I think this is expected. Air France estimates a loss of about $200 million from
June to August, as traffic to and from Paris lags behind other major European cities due to the
Olympics, and some tourists are avoiding the city altogether. But economists like Zimbalist believe the
biggest risk to Paris's cheap budget is security. They say that the security costs in the budget are
approximately $340 million. I don't think that number is realistic. They have already admitted to having more than 50,000
security personnel who will be working the games.

But beyond direct personnel costs, we know that there
are a lot of other costs you're involving. You're engaging heavy military equipment for for the
games. You're buying equipment to, to contest any drones that
are being used by terrorists or other people. You're doing all sorts of things that go way
beyond the security costs. And previous Olympic Games have been known to spend
over a billion, up to $2 billion in security. So they're giving us a number 340, $350 million. And it's just not a realistic statement of of what the
security costs are. The Olympics have their host cities locked up until
2034 so far. Each city's plan will get an insight into whether or
not the new guidelines are sustainable. Paris and LA will follow similar blueprints with
little to no building needed. Brisbane in 2032 will test how flexible the IOC's new
recommendations truly are. Brisbane will have 11 new venues, with about half
being permanent since the Olympic Agenda 2020 and the

new Norm plans were enacted. The bidding process might be more challenging for
potential host cities trying to win the 2036 games and beyond. Previous hosts used the Olympics to put their
emerging cities on the world stage, showcasing large-scale infrastructure projects in the hopes of
attracting tourism and commercial business. With decades of overspending from both emerging and established
cities, the IOC may avoid picking a city that may need a lot of new infrastructure to host. And now that the bidding and selection process is done
behind closed doors, bidders won't know who they're up against or even if their bids were seriously
considered. Zimbalist believes that the solution for hosting the
Olympics may not depend solely on whether or not a host city has the existing infrastructure or the capital
to spend on large-scale projects. The real solution, he says, is one central location
for the Olympics. So I think the logical longer-term solution is to have
one permanent host for the Winter games

the Summer games. So, it doesn't have to, we don't have
to rebuild it every time, and the city would have more and more experience to be able to handle all of
all of the very, very complicated operational and security issues that surround the
Olympics. Now, that's not an easy thing to do overnight
politically, but I think it's important to start discussing that. Maybe initially, you have 2 or 3 cities that are in a
rotation. That's the direction in which I think this whole
process should be moving.

How Paris Pulled Off One Of The Cheapest Olympics

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