Money Rehab with Nicole Lapin - The Money Trail of the 2024 Olympic Games

Episode Date: July 22, 2024

We assume that the Olympic Games bring a sweet economic benefit to the host country. The truth is that the lucrative financial picture is questionable at best. Nicole follows the money trail of the Olympics and unpacks some of the biggest expenses and why some countries go bankrupt over the games. Plus, she shares a financial solution that may change the Olympics forever. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Brokerage services for alternative assets are offered by Dalmore Group, LLC, member FINRA & SIPC. Brokerage services for treasury accounts offering 6-month T-Bills are offered by Jiko Securities, Inc., member FINRA & SIPC. Banking services are offered by Jiko Bank, a division of Mid-Central National Bank. Securities investments: Not FDIC Insured; No Bank Guarantee; May Lose Value.  Brokerage services for Regulation A securities are offered through Dalmore Group, LLC, member FINRA & SIPC. Risks at public.com/disclosures/alts-risk-and-conflict-of-interest-disclosure See public.com/#disclosures-main for more information.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. it's time for some money rehab. The 2024 Paris Olympics opening ceremony is this Friday, and while many people are planning on following their favorite summer Olympic sport, I am planning on following the money trail because there is a lot of money here to follow. And I've been wondering for a long time whether or not the Olympics really is a moneymaker for the country

that hosts. The assumption is that it is a moneymaker. That's why there's such fierce competition to host. So I followed the numbers and, breaking news, the ROI is questionable at best. Today I'm going to show you what I found and give my solution. Yes, International Olympic Committee, please hire me to do your budget. Thank you. So let's start with the pro column. do your budget. Thank you. So let's start with the pro column. The people that argue that hosting the Olympics helped the national economy say that the games boost tourism and create jobs in the

short and long term. But most economists are skeptical and show that the financial benefits are overstated. The 2002 Salt Lake City Games, for example, created only 7,000 jobs, and those jobs were only temporary. As for tourism, cities like Beijing and London actually saw declines in the years they hosted the Games. So while these benefits are questionable at best, the costs certainly aren't. Hosting the Olympics is freaking expensive, and most of the time, these cities blow past what they budgeted. I'll get to that in a second, because before a host city can even start the budgeting process, they have to win a bid. And that is freaking expensive too. Cities invest millions of dollars to just bid to be the host city. According to the Council on Foreign Relations, the cost of bidding after hiring consultants,

organizing events, and travel is between 50 million and 100 million bucks. And again, that is just for the bid. Tokyo spent 150150 million on its bid for the 2016 Olympics and didn't even win. But if you do win, the bidding expenses are just the tip of the iceberg. And back to the budgeting problem I mentioned, the 1976 Montreal Games projected to cost $124 million. But Canada spent over 10 times that, $1.5 billion, which was debt that took nearly 30 years to pay off. And who paid the debt? You guessed it, Canadian taxpayers. Fast forward to more recent games, Sochi 2014,

the most expensive Olympics in history, cost $50 billion, and Rio 2016 wasn't far behind at $20 billion. In fact, after the Olympics, Rio required almost a billion-dollar bailout from its federal government and wasn't able to pay all of its public employees for their work on the Games. And Greece famously went billions into debt after hosting the Olympics, which was a big contributor in the resulting national bankruptcy. Paris aims to buck this trend and has budgeted the equivalent of $8.2 billion for this year's Games, although the running tally has increased to about $1.5 billion more than what they originally budgeted. All things considered, Paris said that their financial goal with the Olympics isn't to make money, it's simply to break even. The main cost-saving strategy that they're taking is using existing venues and temporary structures as arenas for the games. Building infrastructure has historically been one of the biggest costs for host cities. Not only is it expensive, but also, frankly,

can be a waste. These new builds sometimes lead to what are called white elephants, expensive facilities that are built for the Olympics and rarely used afterwards. Like Beijing's Bird's Nest Stadium, which costs $10 million annually to maintain, but is mostly unused. And cities aren't only spending on buildings. Beijing's 2008 game saw half of its $45 billion budget go to infrastructure like railways and roads, not even arenas, just transportation for the athletes and fans. Cutting costs on new infrastructure has been a proven way to help host cities stick to their budget. My home city of Los Angeles, for example, hosted the 1984 Summer Olympics, the year I was born, and the city was able to use almost

entirely existing stadiums and infrastructure. That, combined with a jump in television broadcast revenue, made Los Angeles the only city to turn a profit hosting the Olympics. That, combined with a sharp jump in television broadcast revenue from my birth and the Olympics, That, combined with a sharp jump in television broadcast revenue from my birth and the Olympics, made Los Angeles the only city to turn a profit hosting the Olympics, a $215 million operating surplus, in fact. Another big expense for host cities are operational costs like security. Sydney spent $250 million on security in 2000, while Athens spent over $1.5 billion in 2004. while Athens spent over $1.5 billion in 2004. Also, the International Olympic Committee, or IOC,

requires host cities to provide housing for all athletes and team officials in the Olympic Village. Meals in the Olympic Village are also covered for athletes and officials, and it's the host city's responsibility to ensure that athletes have access to food that meets their dietary needs throughout their stay. Let's talk about the rest of the world, shall we? Because it's not just the host city that spends a ton of money on the Olympics. The countries sending athletes to compete also face gigantic expenses. While accommodations are paid for by the host city generally, the National Olympic Committees, also known as NOCs, cover the travel expenses for the athletes. As the name suggests, these are committees that

are run by the countries that participate in the Games. NOCs are responsible for paying for flights to and from the host city and some miscellaneous costs during the trip. For countries with larger contingents, these costs can add up quickly. Plus, many countries set up pre-Olympic training camps to help athletes acclimate to the host country's time zone, climate, and facilities. These training camps, which can last several weeks, are an additional expense that NOCs must budget for. The cost of specialized sports equipment and team uniforms is another significant expense. These costs are typically also paid for by NOCs, often with the help of sponsors. The entourage that supports athletes, the coaches, medical staff, nutritionists,

psychologists, also incurs travel and lodging costs, adding to the financial burden on NOCs. In 2022, the United States' NOC, for example, spent $327 million. Whew! That is a lot of money, and not every country has the budget for it. The IOC does provide some financial assistance to NOCs, particularly those from smaller or less wealthy countries. This support comes from grants and subsidies, but sponsorship deals and partnerships with brands can also help mitigate some of the expenses for the NOCs. While NOCs cover most major expenses, individual athletes sometimes incur personal costs, particularly if they need to

extend their stay, buy personal gear, or hire private coaches and support staff not covered by their NOC. So net-net, pretty much every player, from individual athletes to individual countries, and especially the host city, pays a ton for the Olympics. I just can't conclude that the value of participating in the Olympics is actually monetary. But I guess the opportunity to showcase your country's athletes on an international stage is indeed priceless. For today's tip, you can take straight to the bank. Here's a fun fact that you can throw out at your Olympics watch party if you want. In the face of sky-high costs for the game, some economists have argued that there should be a permanent Olympic city built that can be used every single year. After the high inflation and supply chain issues of recent years,

this might be a solution that's considered more seriously. So maybe we'll all be traveling to Olympic City. And if so, you can say you heard it on Money Rehab first. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening

and for investing in yourself, which is the most important investment you can make. Thank you.