Why Back The Bid?

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JASON REED / REUTERS A sparsely attended track event in Athens

And then there are the legacy issues: the high concentration of specialized world-class venues for sports such as archery and weightlifting can leave a herd of white elephants. Economists call it "the winner's curse": when the successful bidder at an auction so outbids the competition that he can never recoup the price paid. Many economists argue that cities should host the Olympics only out of national pride, their love of sports, the opportunity to regenerate deprived areas or to showcase themselves to the world — in short, for any reason other than money. "If you want name recognition, then it's worth it," says Rajeev Dhawan, director of the Georgia State University Economic Forecasting Center in Atlanta, where the 1996 Summer Games were held. "But if you're doing it for profit, I don't think that it's a good idea."

Of course, for some recent Olympic hosts, the Games seem to have had a magic touch. Before 1992, Barcelona, Spain's second-largest city, lacked decent road access, its airport was antiquated, and its coastline was one of the dingiest sections of the city. The Games gave the city an excuse to transform itself. A honeycomb of roads was constructed and many of them were pushed underground. But the Olympics' greatest legacy was the total makeover of Barcelona's seafront. Obsolete warehouses, freight railway lines and small factories were razed. The railway line was rerouted inland and stretches of it buried underground. The Olympic Village, built on the seafront, is now one of the most sought-after real estate locations in the city. The sandy beach and marina are favorite weekend spots for families, and at night, the bars, discos and restaurants are always packed. On the back of the Olympics, Barcelona has become one of Europe's top tourist destinations.

The Games left a more mixed economic legacy. Ferrán Brunet, professor of European economics at the Autonomous University of Barcelona, says they helped cut Barcelona's unemployment rate from 18.4% in 1986 to 9.6% in 1992. But they also drove up the cost of living, as shown by the three- to fourfold rise in housing prices during the same period. Organizers had a $3 million surplus on revenues of $1.6 billion, but the city and country spent $8 billion on capital projects and at the end were faced with $1.1 billion in debt through 2007.

Are there ways for cities to host the Games without creating red ink? The experience of the 1984 Games suggests that it's possible. Because of financial and security difficulties that plagued preceding Games, when it came time for the i.o.c.to choose the site of that year's Summer Games, it had only one bidder: Los Angeles. A private group led by businessman Peter Ueberroth leveraged that unique position, and Los Angeles refused to accede to the i.o.c.'s typical demand that the host city (or country) assume financial liability for the Games. Just a handful of new facilities were constructed; instead, most events were held at existing venues such as the Rose Bowl and the Coliseum, helping the organizers to keep a lid on spending. The organizers ended up with a surplus of more than $200 million on revenues of $619 million. According to an economic analysis by two American economists, job creation was limited to about 5,000 positions.

Dave Wilcox of Economics Research Associates in Los Angeles, which studied the economic impact of the 1984 Games on the area, says the event produced a small bump — around 2% growth — in the Los Angeles economy. "It was a one-time thing," he says. Wilcox credits private financing and "the clarity of contracting and management" by Ueberroth and his team for the success.

If decent management is one prerequisite for a successful Games, so is a determination that if you're going to shell out for fancy buildings and grounds, you've got a post-Olympic use for them. The 1996 Games in Atlanta were fraught: a nail-bombing by an anti-abortion protester that killed one person and injured more than 100 in Centennial Park, and a kind of hyper–corporate sponsorship was too much for even then i.o.c. president Juan Antonio Samaranch to stomach. Still, 10 permanent venues were built, and all but the tennis and shooting centers get regular use today. Ticket sales broke records at $426 million, two-thirds of them snapped up by out-of-towners. Poor Atlanta neighborhoods were redeveloped into good, low-income neighborhoods. The Olympic Village was converted into college dormitories and the Olympic Stadium is today the home of the Atlanta Braves baseball team. Centennial Olympic Park has become a new hub of downtown Atlanta. "Downtown prior to the Olympics was not an attractive place for investments," says Bill Howard, a vice president of the Atlanta Convention & Visitors Bureau. "You certainly would not have had the growth in central Atlanta because we would not have had the park."

Yet not all cities have a plan for what to do after the fun and Games are over. The 2000 Summer Games in Sydney were a triumph. And the city seemed to have got a boost from the attention. The airport was expanded, many main roads improved and Sydney — which is sports mad in any year — was left with new, state-of-the-art facilities, including the giant Telstra Stadium. The tourist industry expected that Australia's 4.9 million international visitors in 2000 would soar in the years after the Games as a result of the Olympic exposure. It didn't happen. Tourist numbers fell in the three years that followed, largely due to factors beyond local control such as 9/11, the Bali bombing and the 2003 outbreak of sars in Asia. Still, local tourism leaders accept that they didn't ramp up a campaign after the Games. "We saw the job as done," says Christopher Brown, managing director of Australia's Tourism & Transport Forum. "We should have put the foot down instead of taking it off the pedal."