CAT 2017 Slot 1 VARC · Question 22

Do sports mega events like the summer Olympic Games benefit the host city economically? It depends, but the prospects are less than rosy. The trick is converting...several billion dollars in operating costs during the 17-day fiesta of the Games into a basis for long-term economic returns. These days, the summer Olympic Games themselves generate total revenue of $4 billion to $5 billion, but the lion's share of this goes to the International Olympics Committee, the National Olympics Committees and the International Sports Federations. Any economic benefit would have to flow from the value of the Games as an advertisement for the city, the new transportation and communications infrastructure that was created for the Games, or the ongoing use of the new facilities.

Evidence suggests that the advertising effect is far from certain. The infrastructure benefit depends on the initial condition of the city and the effectiveness of the planning. The facilities benefit is dubious at best for buildings such as velodromes or natatoriums and problematic for 100,000-seat Olympic stadiums. The latter require a conversion plan for future use, the former are usually doomed to near vacancy. Hosting the summer Games generally requires 30-plus sports venues and dozens of training centers. Today, the Bird's Nest in Beijing sits virtually empty, while the Olympic Stadium in Sydney costs some $30 million a year to operate.

Part of the problem is that Olympics planning takes place in a frenzied and time-pressured atmosphere of intense competition with the other prospective host cities — not optimal conditions for contemplating the future shape of an urban landscape. Another part of the problem is that urban land is generally scarce and growing scarcer. The new facilities often stand for decades or longer. Even if they have future use, are they the best use of precious urban real estate?

Further, cities must consider the human cost. Residential areas often are razed and citizens relocated (without adequate preparation or compensation). Life is made more hectic and congested. There are, after all, other productive uses that can be made of vanishing fiscal resources.