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Does the Olympics Help Host Nations in the Years After?
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The 2016 Summer Olympics in Rio, Brazil begin on Friday, August 5th. The storied event is a source of prestige for host nations, however over the years the economic element of the Olympic equation has come under fire.
Some believe the Olympics make for an economic disaster, while others see it as a growth catalyst. Which is it? In order to come to a conclusion, let’s take a look at some recent Olympic host nations and how they have performed in the years that followed.
On August 8, 2008, the Summer Olympics in Beijing opened with a bang. The games went on to become the most watched in history, with over 4.7 billion worldwide viewers. Overall, the games were considered a success and it ended smoothly, but how has China done since then?
First, one should note that China invested heavily in the games, building 12 venues for the specific purpose of use in the games. The Bird’s Nest, where the opening ceremony was held, cost $480 million by itself, and now carries an $11 million annual maintenance charge as well. The Water Cube, where swimming events were held, is still in use today, although sees decreasing yearly visitors as well.
When discussing the effects of the Olympics on China, it is worth noting that it took place during the so-called Great Recession. Although China did not enter a recession, it did experience slowed growth due to decreased exports to struggling buyers.
Since 2008, China has continued its unprecedented growth, and although the annual GDP growth rate has decreased (was a double digit rate as of 2008), the current goal sits at a respectable 6.5% as per the country’s 13th Five-Year Plan, which applies to 2016-2020.
China’s economic growth has been driven by many different factors. This type of growth has never been seen before, and is something we discussed in our piece on the country’s resurgent middle class. Although many Olympic facilities remain unused, the nation has somewhat of a reputation for building unused complexes and even full cities to create jobs and pump up the economy.
FXI, the iShares China ETF, reflects how stocks in the country have performed over the years. The chart is shown below:
The 2010 Winter Olympics was hosted in Vancouver, and came during the aforementioned Great Recession, a time during which many developed economies were hurting. According to a report from PriceWaterhouseCoopers, the Olympics gave the Canadian economy a $2.3 billion boost.
The report analyzed a period the years between 2003 and 2010, and noted that 45,000 jobs were created as a result. Furthermore, Canada’s otherwise stagnating tourism sector was dramatically boosted as a result of the Olympics. According to an official follow up from the Olympic Committee, the games have resulted in 2,500 full-time jobs and generated about CAD 1 billion in “Advertising Value Equivalency.”
Vancouver has also improved their transportation infrastructure, and the country as a whole has performed well since 2010. For Canada, the Olympics appear to have paid off.
In 2005, London beat out Paris in bidding for the Summer Olympics, and 7 years later the games were held. The 2012 Summer Olympics drew over 4 billion viewers and 20 million visitors to London. According to the British government’s report in 2014, the Olympics resulted in a trade and industry boost in excess of £14 billion, beating the four-year target of £11.8 billion.
The report also indicated a 6 percent increase in international visitors to Britain since the games. A report from the guardian on July 27 highlighted that Newham, an Olympic borough in East London, continues to see job boosts, with unemployment having fallen 1% between 2011 and 2014.
However, a 2014 report form NPR states that although the 1,000 page consultant report that the government contracted, which was overwhelmingly bullish, was a bit fishy. Those who reviewed the report before it was published did not have access to the economic models used to calculate the supposed gain that the Olympics provided, which is noted as unusual.
Economists have differing opinions on just about everything, including the Olympics. It seems that it will still be some time before we find out if it was profitable for the U.K. Furthermore, the potential damage of the Brexit vote of June 23rd, which jeopardizes thousands of jobs and sent the pound to a 32-year low, may make it harder to see the benefit the games have caused.
Take a look at the chart for EWU, Britain’s ETF, below:
The 2014 Sochi Olympics are a bit messy because of events leading up to and following the event. The most expensive Olympic Games in history, Russia spent $51 billion on preparations and facilities, although much of it was unfinished by the time the games began. Leading up to the games, there were concerns over safety, human rights violations, and plenty of other fun stuff that people bring up when discussing Russia.
The Olympics themselves were successful, but things fell apart after Russia annexed Crimea and got kicked out of the G8, which was supposed to meet in Sochi. According to the Olympic Committee follow up report from this February, all facilities except for the Fisht Stadium have been repurposed. The stadium is being reconfigured for the 2018 World Cup.
Although the report is positive, a report from the Wall Street Journal paints a gloomier picture. Russia’s heavily oil-based economy has had troubles due to the recent glut. Resort owners still can’t repay loans and Russia had suspended repayment until late 2015.
Some laud the leftover Olympic village for becoming Russia’s ski resort, but I’m not so sure the Olympics have been great for Russia.
Brazil itself has been loaded with controversy coming into the 2016 Summer Olympics. The Zika virus has run rampant in the region and become a source of concern for many Olympians. Our team covered the companies working on the cure, but those won’t make it in time for the games. Some athletes fell ill after test competitions in Rio’s heavily polluted water as well.
Brazil is in the midst of one of its worst recessions since the 1930s. Its economy was booming when the nation first won the Olympic bid, but has struggled since then. Brazil has also had a hard time politically, with President Dilma Rousseff currently suspended from office amid charges that she manipulated government accounts.
Corruption charges have also extended to many of the major Brazilian construction firms responsible for Olympic projects. Officials claim that the Olympic village is operational, however the Australian Olympic delegation recently made news by moving out, citing dysfunctional plumbing and exposed wires as part of the many issues with living facilities.
As if the list couldn’t get longer, the Russian national team came under the spotlight leading up to the Olympics due to doping charges, with 113 of its members banned to date. Security in the region is also a concern, with violence in Rio’s favelas, and disgruntled policemen going on strike due to unpaid wages.
All in all, things are looking messy going into the Olympics. Brazil is working towards getting everything together, but how it will work out is an answer that the world eagerly awaits.
The Olympics make for a very difficult and controversial topic. The Olympic Committee and host nations do everything in their power to fudge the numbers in their favor and convince their citizens that it pays off. However, it is never as simple as handing a “good” or “bad” verdict.
Just as the Olympics are lauded for bringing the world together, it brings others apart. Locals face the strain of handling an influx of people and spiked government spending, amongst other issues. In some cases, it’s clear to see that the Olympics paid off, but recently it has become significantly more difficult to decide.
The true answer will come in the many years after the Olympics, when we can see how former host nations are running, and if they appear to be on the right track. For now, all we can do is wait and see.
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Does the Olympics Help Host Nations in the Years After?
The 2016 Summer Olympics in Rio, Brazil begin on Friday, August 5th. The storied event is a source of prestige for host nations, however over the years the economic element of the Olympic equation has come under fire.
Some believe the Olympics make for an economic disaster, while others see it as a growth catalyst. Which is it? In order to come to a conclusion, let’s take a look at some recent Olympic host nations and how they have performed in the years that followed.
China (FXI - Free Report)
On August 8, 2008, the Summer Olympics in Beijing opened with a bang. The games went on to become the most watched in history, with over 4.7 billion worldwide viewers. Overall, the games were considered a success and it ended smoothly, but how has China done since then?
First, one should note that China invested heavily in the games, building 12 venues for the specific purpose of use in the games. The Bird’s Nest, where the opening ceremony was held, cost $480 million by itself, and now carries an $11 million annual maintenance charge as well. The Water Cube, where swimming events were held, is still in use today, although sees decreasing yearly visitors as well.
When discussing the effects of the Olympics on China, it is worth noting that it took place during the so-called Great Recession. Although China did not enter a recession, it did experience slowed growth due to decreased exports to struggling buyers.
Since 2008, China has continued its unprecedented growth, and although the annual GDP growth rate has decreased (was a double digit rate as of 2008), the current goal sits at a respectable 6.5% as per the country’s 13th Five-Year Plan, which applies to 2016-2020.
China’s economic growth has been driven by many different factors. This type of growth has never been seen before, and is something we discussed in our piece on the country’s resurgent middle class. Although many Olympic facilities remain unused, the nation has somewhat of a reputation for building unused complexes and even full cities to create jobs and pump up the economy.
FXI, the iShares China ETF, reflects how stocks in the country have performed over the years. The chart is shown below:
ISHARS-CHINA LC Price
ISHARS-CHINA LC Price | ISHARS-CHINA LC Quote
Canada (EWC - Free Report)
The 2010 Winter Olympics was hosted in Vancouver, and came during the aforementioned Great Recession, a time during which many developed economies were hurting. According to a report from PriceWaterhouseCoopers, the Olympics gave the Canadian economy a $2.3 billion boost.
The report analyzed a period the years between 2003 and 2010, and noted that 45,000 jobs were created as a result. Furthermore, Canada’s otherwise stagnating tourism sector was dramatically boosted as a result of the Olympics. According to an official follow up from the Olympic Committee, the games have resulted in 2,500 full-time jobs and generated about CAD 1 billion in “Advertising Value Equivalency.”
Vancouver has also improved their transportation infrastructure, and the country as a whole has performed well since 2010. For Canada, the Olympics appear to have paid off.
The chart for EWC, Canada’s ETF, is shown below:
ISHARS-CANADA Price
ISHARS-CANADA Price | ISHARS-CANADA Quote
United Kingdom (EWU - Free Report)
In 2005, London beat out Paris in bidding for the Summer Olympics, and 7 years later the games were held. The 2012 Summer Olympics drew over 4 billion viewers and 20 million visitors to London. According to the British government’s report in 2014, the Olympics resulted in a trade and industry boost in excess of £14 billion, beating the four-year target of £11.8 billion.
The report also indicated a 6 percent increase in international visitors to Britain since the games. A report from the guardian on July 27 highlighted that Newham, an Olympic borough in East London, continues to see job boosts, with unemployment having fallen 1% between 2011 and 2014.
However, a 2014 report form NPR states that although the 1,000 page consultant report that the government contracted, which was overwhelmingly bullish, was a bit fishy. Those who reviewed the report before it was published did not have access to the economic models used to calculate the supposed gain that the Olympics provided, which is noted as unusual.
Economists have differing opinions on just about everything, including the Olympics. It seems that it will still be some time before we find out if it was profitable for the U.K. Furthermore, the potential damage of the Brexit vote of June 23rd, which jeopardizes thousands of jobs and sent the pound to a 32-year low, may make it harder to see the benefit the games have caused.
Take a look at the chart for EWU, Britain’s ETF, below:
ISHARS-UTD KING Price
ISHARS-UTD KING Price | ISHARS-UTD KING Quote
Russia (ERUS - Free Report)
The 2014 Sochi Olympics are a bit messy because of events leading up to and following the event. The most expensive Olympic Games in history, Russia spent $51 billion on preparations and facilities, although much of it was unfinished by the time the games began. Leading up to the games, there were concerns over safety, human rights violations, and plenty of other fun stuff that people bring up when discussing Russia.
The Olympics themselves were successful, but things fell apart after Russia annexed Crimea and got kicked out of the G8, which was supposed to meet in Sochi. According to the Olympic Committee follow up report from this February, all facilities except for the Fisht Stadium have been repurposed. The stadium is being reconfigured for the 2018 World Cup.
Although the report is positive, a report from the Wall Street Journal paints a gloomier picture. Russia’s heavily oil-based economy has had troubles due to the recent glut. Resort owners still can’t repay loans and Russia had suspended repayment until late 2015.
Some laud the leftover Olympic village for becoming Russia’s ski resort, but I’m not so sure the Olympics have been great for Russia.
The chart for Russia’s ETF, ERUS, is shown below:
ISHARS-MS RUSSA Price
ISHARS-MS RUSSA Price | ISHARS-MS RUSSA Quote
So, Brazil? (EWZ - Free Report)
Brazil itself has been loaded with controversy coming into the 2016 Summer Olympics. The Zika virus has run rampant in the region and become a source of concern for many Olympians. Our team covered the companies working on the cure, but those won’t make it in time for the games. Some athletes fell ill after test competitions in Rio’s heavily polluted water as well.
Brazil is in the midst of one of its worst recessions since the 1930s. Its economy was booming when the nation first won the Olympic bid, but has struggled since then. Brazil has also had a hard time politically, with President Dilma Rousseff currently suspended from office amid charges that she manipulated government accounts.
Corruption charges have also extended to many of the major Brazilian construction firms responsible for Olympic projects. Officials claim that the Olympic village is operational, however the Australian Olympic delegation recently made news by moving out, citing dysfunctional plumbing and exposed wires as part of the many issues with living facilities.
As if the list couldn’t get longer, the Russian national team came under the spotlight leading up to the Olympics due to doping charges, with 113 of its members banned to date. Security in the region is also a concern, with violence in Rio’s favelas, and disgruntled policemen going on strike due to unpaid wages.
All in all, things are looking messy going into the Olympics. Brazil is working towards getting everything together, but how it will work out is an answer that the world eagerly awaits.
The chart for EWZ, Brazil’s ETF, is shown below:
ISHARS-BRAZIL Price
ISHARS-BRAZIL Price | ISHARS-BRAZIL Quote
Bottom Line
The Olympics make for a very difficult and controversial topic. The Olympic Committee and host nations do everything in their power to fudge the numbers in their favor and convince their citizens that it pays off. However, it is never as simple as handing a “good” or “bad” verdict.
Just as the Olympics are lauded for bringing the world together, it brings others apart. Locals face the strain of handling an influx of people and spiked government spending, amongst other issues. In some cases, it’s clear to see that the Olympics paid off, but recently it has become significantly more difficult to decide.
The true answer will come in the many years after the Olympics, when we can see how former host nations are running, and if they appear to be on the right track. For now, all we can do is wait and see.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>