The Olympic host bidding process is exactly backward. It’s the suite-dwellers at the Lausanne Palace and Spa Hotel Luxe who should be begging capital cities to host them, between their bites of sea bream carpaccio. It’s the International Olympic Committee members who ought to be making concessions, while trying not to bruise the gin with too much vermouth. They should be making anxious pitches to heads of state to allow them to come to town, with their archduke manners and lavish spending habits.
On Tuesday, representatives from Paris and Los Angeles went to Lausanne to bid for the 2024 Games, a process that mainly consisted of trying to convince a lot of Olympic yachting blazers, over dinner at the Beau Rivage, to please let them plunge their cities into incalculable debt. But why should the burden be on French President Emmanuel Macron or the mayor of Los Angeles, Eric Garcetti, to sweeten proposals in a “race” for 2024? From now on, the burden should shift to the IOC to make fiscal guarantees that putting on an Olympics won’t imperil the local economy on the level of Athens or Rio. After years of IOC abuses, the leverage belongs to the prospective hosts, not to the Campari sippers. Cities are in a position to make demands, and they should start by demanding a larger cut of the TV and sponsor money as the price of doing business.
The IOC has created a veritable financial dust bowl with its epic waste and costs, until only these two cities will have anything to do with them. Whoever loses out on 2024 will get 2028 — and inevitable overruns. The price of Tokyo 2020 already has doubled from its original estimate to $12 billion. Hamburg, Rome, Boston and Budapest all dropped out of 2024 bidding because their citizens wouldn’t stand for the excesses and corruption. Another half-dozen countries bailed out of contention for the 2022 Winter Games. The IOC, apparently realizing that it has run out of pockets to pick, launched something called Agenda 2020 to try to rein in waste and to stress “after-use” and “sustainability.”
Funny though. The IOC hasn’t addressed one very large reason the Olympics are such a burden: its hoarding of the lion’s share of TV and sponsor-marketing revenue that could relieve some of the financial pressure. The IOC does almost none of the work, yet strictly controls what economists Robert Baade and Victor Matheson term the “monopoly rents.”
Study after study shows that hosting an Olympics enriches only a few local industrialists, while making cities poorer. Whoever is designated to host in 2024 — the IOC will make the announcement in September — will be left with a river of graft from building and renovation projects, a huge security bill and potential white elephants. So the real question for Paris and Los Angeles is not who gets to host first, but how to offset the damage when they do?
By far the main source of Olympic revenue is TV rights fees, which amounted to $4.1 billion in 2016. The IOC pockets fully 70 percent of that. Why? For what? Shouldn’t host cities command a larger cut — because their citizens’ safety will be imperiled, their skylines provide the beauty shots, and they are required to provide 40,000 hotel rooms, including five-star accommodations for NBC, and an endless supply of black fig confit for the 115 members of the IOC?
Unless it drives a harder bargain, the city that hosts the Summer Games can expect only fractional help from the IOC. The price tag for the troubled Rio Games was about $13.1 billion according to a recent analysis by the Associated Press. The IOC contributed just $1.5 billion in one form or another — a lot of that was goods and services. Which doesn’t touch the size of the circus it brought to town. Rio stadiums are sprouting weeds while there is still a lingering $35 million to $40 million in debt. Yet in a meeting of the IOC executive board this week, it declined further help, during a pause between the courgette souffle and the lavender risotto. Meanwhile, Brazil’s recession is so bad schoolteachers and hospital workers are going unpaid.
And Rio is not an outlier. Every Olympics from 1968 to 2012 has been over budget, by a median of 150 percent. But that’s just part of the financial damage, which starts in the incredibly expensive bidding process — Chicago spent $70 million on a failed plea for 2016 — and lasts for years. After the 1994 Winter Olympics in Lillehammer, 40 percent of the full-service hotels eventually went bankrupt. As Garcetti cautioned in Tuesday’s formal presentation, which stressed a low-risk budget and fiscal conservatism, “None of us can afford more of the same.”
The IOC gives lip service to reform. This week, it announced the results of a governance review by an independent evaluator in Lausanne, which recommended 33 changes it should make to keep up with “societal expectations.” Among other things, it recommended that money distribution be linked to “minimum standards of good governance.” The IOC would not commit.
Real reform of the IOC won’t come from within. Rather, it will come from heads of state such as Macron who have a strong enough hand to pry concessions from the IOC as well as greater accountability and transparency. Where does all that money go? The IOC claims it sends 90 percent of its funds down the chain to the members of its “Olympic movement,” sports federations and national Olympic committees. Try finding it. The federations are as infamous as the IOC for their taste in luxury, and for preferring to do their business in countries with banking privacy laws, where they do not have to provide public accounting. A 2016 Washington Post inquiry found that only a tiny percentage ever makes it to the athletes.
At its core, the IOC is not a “movement”; it’s an operation, a racket. Its existence depends entirely on business contracts — and those can be renegotiated. For example, the IOC soon will benefit from even greater cash flow, thanks to its hard dealings with the U.S. Olympic Committee, which will see its rights fees paid by American networks cut from 12.5 percent to 7, and its share of marketing revenue slashed from 20 percent to 10 starting in 2020.
Once the 2024 host city is announced, it will be presented with a contract to sign by the IOC. Currently, the deal only promises Paris or Los Angeles $1.7 billion in various kinds of support, including goods in kind, and the language in it is incredibly arrogant.
Cities could and should get more. You’ll know the IOC has truly reformed only when they give up their entrecôte and stop demanding hotels that once served as residences for Empresses. You’ll know it when they open their numbered accounts for public inspection. And you’ll know it when they revise the Olympic contract to give the host city a fairer cut to defray the cost and risks they take on.