In watching the Olympics this year, I could watch some competitions on TV, but I caught snippets of the games on TikTok. It was in the comments section of these TikTok videos where the entire internet vowed to visit Paris to catch a glimpse of the athletes and bask in the romance of the city of love that I started to wonder how many people actually went to Paris for the Olympics. How much did Olympic event tickets cost? And following that train of thought, where did all the money generated from the Olympics and its spectators go?
About 136,000 Americans visited Paris for the Olympics, and while Americans made up the largest group of foreigners, they only made up 15% of the total. Olympic competition tickets ranged from around $25 to over $1,000. And while a substantial amount of the revenue generated from the games goes back to the International Olympic Committee (IOC), which distributes the money around the world to help athletes and sporting organizations, part of the revenue generated stays in the city…but that doesn’t necessarily mean the hosting city profits.
Olympic losses
Historically, the cost of hosting the Olympics has always gone over budget. Jobs created by Olympic construction have been lower than estimated, temporary, and have had little impact on the local economy. Some cities, like Athens and Rio De Janeiro, went into debt building infrastructures that are now derelict and abandoned, and other cities like Sydney and Beijing now spend millions on annual maintenance for their Olympic infrastructures. Ultimately, there’s been little evidence (except Los Angeles in 1984) of an overall positive economic impact for cities hosting the games.
That was disappointing to discover, and I admit it dulled the excitement around the games a little. Some may argue the Olympics aren’t about the money generated; they’re about so much more than that. And sure, they are, but they’re also about the money. An event of that magnitude can change a city’s development trajectory, and it should change it for the better.
How business theories can be leveraged for Olympic wins
Economists agree that future Olympic games must be more affordable and sustainable for hosts. Paris, for example, only built one new permanent sports facility and opted to rely on existing stadiums outside of the city. The city also plans to convert and reuse the Olympic Village as housing and office buildings. Los Angeles, following similar sustainability plans, also seems to be on the right path for 2028, especially when analyzing their business models through an RPP and push vs. pull strategy framework.
Resources, processes, and priorities (RPPs) determine an organization’s capabilities and limitations. Let’s look at LA28’s RPPs (the private nonprofit organizing the Los Angeles 2028 Games). We need to consider the resources they have at their disposal, the processes they are setting up to follow, and the priorities that will guide their decisions to ensure fiscal responsibility and sustainability.
LA28 has an estimated $7 billion to cover the event, existing sports venues in Los Angeles, Carson, and Long Beach, and college dormitories to house the athletes. By leveraging these existing venues, the city has no reason to push the building of new infrastructure into a context that won’t be able to sustain it in the long term.
The nonprofit will also allocate the majority of its hiring and spending locally. While they aren’t planning on investing in venue infrastructure, it’s a priority to invest in transportation development, which wouldn’t only ameliorate conditions for the event itself but also for the city long after the event is complete. The city has already secured funds for zero-emission buses, electric charging stations, new train routes, and public transportation out of LAX, which should only pull in the resources needed—in this case, the infrastructure itself and the jobs created to build it. LA28’s current RPPs seem to align with hosting a more affordable and sustainable event (if the group stays within budget). However, it’s important to note that these RPPs don’t necessarily translate to sustainable long-term jobs.
Although LA28 promises to hire locally, and transportation development would create local jobs, according to a study by the European Bank for Reconstruction and Development, jobs created by Olympic construction are temporary and often go to people who already have jobs, decreasing any impact on the broader economy.
From The Prosperity Paradox: How Innovations Can Lift Nations Out of Poverty, we know a sure way to create local sustainable jobs is through market-creating innovations (MCIs). So, it would be a smart decision for LA28 to frame Olympic investments as investments into MCIs. Market-creating innovations transform complicated and expensive products and services into simple and affordable ones, making them accessible to a whole new segment of society that previously didn’t have access. For example, the new transportation infrastructure created for the Olympics must be accessible to the average Angeleno who struggles in traffic, carpools, and expensive rideshares so that once Olympic visitors leave, Angelenos can continue to make use of these investments, ensuring continued employment for at least the operators of the new transport systems.
Furthermore, Los Angeles (that includes airlines, housing developers, policymakers, restaurant owners, and any L.A. innovator) should take advantage of all the visitors that the games will draw to the city to look for further MCI investment ideas. These visitors may be temporary, but hosting them will, and already has, started to shed light on existing struggles within the city. Solving for these struggles with innovations that serve nonconsumers is an opportunity to create not only new markets in our communities but also profit, wealth, and long-term jobs.
In the past, hosting the Olympics was mostly compared to throwing an expensive party. Paris spent over $8 billion, and although early reports on lodging and restaurant spending indicate increases, it’s probably too soon to know whether the city generated a profit. However, it’s not too soon for Los Angeles and future host cities to start rethinking their business models to ensure that the Olympics become a catalyst for sustainable development rather than an economic burden.
