Paris Olympics: Prioritizing Future Tourism Over Immediate Profit

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As an international sports extravaganza, the Olympics not only encapsulates the dreams and glory of athletes from around the globe but also serves as a prime opportunity for the host country and city to showcase their charm and stimulate economic growth.

From infrastructure upgrades to tourism expansion, and from increased employment opportunities to an enhanced international image, the Olympic Games have historically acted as a significant catalyst for the economic development of many host countries. This economic impact is a major point of interest for global observers concerning the Paris Olympics.

With the 2024 Paris Olympics on the horizon, the world’s attention is riveted on Paris, a city where romance and art coexist. What are the spending plans for the Paris Olympics, and what potential economic impacts could they have?

Paris Olympics Organizers: Aiming for a Memorable Event with a Balanced Budget

As a global sporting event, the cost of organizing the Olympic Games often involves substantial public funds and is closely tied to the financial situation of the host country. For instance, the total expenditure for the 2020 Tokyo Olympics soared to four times the initial budget. Drawing lessons from Tokyo, a primary focus for this year’s Paris Olympics is cost control.

The organizers of the Paris Games have committed to creating the most sustainable Olympics ever, which is evident in their choice of venues. Reports indicate that 95% of the competition venues for the Paris Olympics will utilize existing structures or temporary constructions, with the Olympic Aquatic Center being the sole new construction project.

Plus, 96% of the budget to organize the Paris 2024 Olympic and Paralympic Games comes from the private sector, namely the IOC, partner companies, the Games ticket office, and licensing. 

Recently, several research institutions have analyzed the overall investment in the Paris Olympic Games. According to foreign media reports, a professional organization has estimated that the cost of organizing the 2024 Paris Olympics will be about €8.8 billion. This budget primarily covers the renovation of stadiums, the opening and closing ceremonies, and the operating costs of catering services and wages.

Notably, during the preparatory stage, the French government has already invested about €3.2 billion upfront for infrastructure upgrades in the Paris metropolitan area. Additionally, €1.4 billion has been spent on improving the water quality of the Seine River over the past few years. However, the OCOG considers these types of infrastructure investments as non-sports related, and therefore, such “non-direct sports” costs are not included in the official budget.

In response to concerns about the costs of the Games, Étienne Thobois, chief executive of the Paris Organizing Committee, expressed cautious optimism. “Every euro counts, and we must be careful not to spend money on superficial things. Frankly, it’s a challenge,” Thobois stated in an interview with foreign media. He acknowledged that the budget for the Paris Games is increasing, but emphasized that organizers aim for the Games to at least break even.

“The goal is not to make money, but to have a great Olympics with a balanced budget,” Thobois said.

Short-Term Economic Boost from the Paris Olympics

While estimating the input costs, there has been significant speculation and discussion about the economic benefits of the Paris Olympics.

Recently, the French National Institute of Statistics and Economic Studies (INSEE) released a report predicting that the Paris Olympics will stimulate the French economy in the short term, contributing 0.3 percentage points to France’s economic growth in the third quarter. This mirrors the impact of the 2012 London Olympics, which saw the UK’s real GDP grow by 1.0% in the third quarter of 2012, with the Games contributing an estimated 0.2 to 0.4 percentage points to GDP in that period.

The report highlights that ticket sales and broadcasting rights revenues during the Paris Olympics will be the primary economic drivers, contributing an estimated 0.25 percentage points to France’s economic growth in the third quarter. Additionally, the tourism boost from the Olympics is expected to enhance local revenue in accommodation, transportation, and catering, adding another 0.05 percentage points to economic growth.

Furthermore, the infrastructure development associated with the Paris Olympics has positively impacted local employment. The construction of facilities for the 2024 Paris Olympics is estimated to have created 4,300 jobs in 2023, with an additional 1,600 jobs in 2024.

However, the report also indicates that the positive impact of the Paris Olympics on the French economy will be “one-off” and will dissipate by the end of this year. It predicts that the French economy will grow by 0.5% in the third quarter but decline by 0.1% in the fourth quarter. For 2024, the “Olympic effect” is expected to contribute only 0.1 percentage points to French economic growth.

A report from another professional financial services group supports this view, suggesting that the Paris Olympics may “produce very limited economic benefits in the medium term.” While the macroeconomic impact is expected to be minimal, the Games will likely trigger positive economic responses at the microeconomic level and in specific sectors such as media, hospitality, leisure and entertainment, catering, beverages, consumer goods, real estate, and transportation.

Estimates from the Center for Law and Economics of Sport (CDES) at the University of Limoges in France are relatively optimistic. Commissioned by the IOC, CDES’s May report estimates that the Paris Olympics could bring between €6.7 billion and €11.1 billion in net income for Paris. However, it also highlights the uncertainty in the tourism industry and the unknown return on the substantial investments made.

The wide range of forecast results primarily stems from the high degree of uncertainty in the tourism sector.

The Paris Tourist Board anticipates that the Paris Olympics and Paralympics will sell a combined total of 13.4 million tickets and attract approximately 15.3 million visitors, including about 1.88 million foreign tourists. Faced with such a large influx, CDES expects the French tourism industry may experience a “crowding out effect,” where some tourists postpone their trips due to the crowds during the Games. 

This phenomenon adds another layer of uncertainty to the actual impact on the tourism industry. In the most pessimistic scenario, the tourism sector could generate about €1.4 billion in economic benefits, whereas in the most optimistic scenario, it might contribute around €3.563 billion.

The potential returns on subsequent investments are also a significant challenge for France. To organize the Olympic Games, the French government and enterprises have heavily invested in venue construction and urban renewal. However, whether these investments will yield sufficient returns in the future remains uncertain.

Despite these uncertainties, the economic potential of the event continues to attract numerous companies to the Paris Olympics. Last July, the French luxury goods conglomerate LVMH Group committed €150 million in sponsorship fees, becoming the largest sponsor of the Paris Olympics. 

Several of its brands will play prominent roles in various aspects of the Games. For instance, its jewelry brand Chaumet has designed medals for both the Olympic and Paralympic Games, the leather goods brand Berluti will provide clothing for French athletes at the opening ceremony, and the luxury brand Louis Vuitton has created medal boxes and torch boxes for the events.