Can the Olympic ever pay for themselves?

Every two years, we are reminded of why the Olympic Games are, by far, the most important all-around sporting event there is. With the recent wrapping of the 2026 Winter Olympics in Milan, we once again witnessed an event that, despite its 130-year history, still manages to captivate millions. However, behind all the spectacle, there have been consistent talks over the past two to three decades about how, despite all of its cultural relevance, the Games still cannot break even financially neither in the short nor the long run. In 2004, there were 11 official bids to host the Games. For 2024 and 2028, there were only 2 IOC (International Olympic Committee) certified bids that competed for both editions.

Why is it that such a massive event is not able to capitalize on its impact? The truth is that the Games have been through and recovered from a similar situation almost half a century ago and maybe, if we can understand what proved so successful in the past, we can adapt those measures to the future.

After the acts of terrorism and crippling debt witnessed in the 1970s during and because of the Olympics, almost no city was interested in hosting the event. In 1978, after Tehran pulled out their bid for the 1984 Games, There was only one backup bid left that was awarded the games: Los Angeles.

The city benefited from heavy bargaining power they gained on the IOC due to being the only city available to host the Games, and they used it to not have to build new stadiums and infrastructure that the IOC usually demanded and that would become unusable and expensive after the Games and instead reutilized existing ones, which helped cut costs significantly. Another measure taken by LA to help reduce the toll on taxpayers was to make the Olympics a private-funded event. Under the leadership of entrepreneur Peter Ueberroth, responsible for the Organizing Committee, the Games ended up having only about 38 million of the total 546 million dollars in spending coming from public funding. This feat was achieved by the heavy pursuit of corporate sponsors that invested in technology for the Games like AT&T and IBM, and dissemination of the Olympic image through its association with brands like Coca-Cola and Budweiser.

The LA84 Olympics turned a profit of around 230 million dollars. They were the first to be lucrative since 1932. The Games also proved to be a cultural success, bringing the Olympics back into the limelight and, more importantly, increasing the number of bids for future editions.

After somewhat successful editions from 1988-1996, the 2000 and especially the financial ruin of the 2004 Games showed that the Games were falling back into the same cycle of financial mismanagement that we see today after just 20 years of breaking out of it. This can be explained by two reasons: First, due to competition rising again after the success of LA84, the IOC got its bargaining power back, and started demanding more and more new infrastructure from candidate cities in order to have a chance to host it, and this led to the resurgence in white elephants, and overspending of public funds. The second structural reason that leads to this cycle is the lack of stake the IOC has in the funding process of the Olympics. This means that, because the IOC only incurs a very small part of the costs of hosting, they have every incentive to demand more than is financially feasible from host countries. Both of these factors have resulted in the financial failures we have seen recently in the Games.

Events of large-scale importance such as the Olympics have a hard time in quantifying certain aspects it influences like tourism: it is impossible to know exactly how much surplus from consumer spending was caused by the Olympics compared to a regular summer. This makes it harder to truly spot the flaws in the Olympic system and to provide answers to them.

To conclude, to get out of the current financial slump the Olympics are in, despite the subjective nature of the problem, the IOC should look into reapplying a model reliant on existing infrastructure and private funding, which both proved successful in the past with LA84, and make reforms to their unbalanced funding structure between the Committee and the host country. These are all actions that could add to the cultural impact of the Olympics, a lucrative model that incentivizes hosting one of the most important sporting events in the world.