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The costs of the Olympic Games can be compared to “deep disasters” such as epidemics, earthquakes, tsunamis and war

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New Oxford University research reveals the causes of the spiraling cost overruns associated with the Olympics and suggests that cities shun hosting them altogether.

The authors’ findings and proposed cost-cutting strategies come as Tokyo grapples with the impact of delaying the event until 2021, which could make the games the most expensive yet.

Previous research by lead author Bint Fleifberg, professor of major program management at the Said Business School, has demonstrated that all Olympics experience significant cost overruns, with an average of 172% above budget.

The authors, Professor Flyvbjerg and Dr. Alexander Budzier, outlined the reasons why hosting the Olympic Games was so problematic, explaining in detail the flaws of a mega-project like no other.

For hosts, there is no option to reverse their decision, and no opportunity to save costs by trading outside of budget against schedule and the legal obligation to cover all costs. Meanwhile, the International Olympic Committee (IOC) does not incur any costs itself, regardless of how much the project is bypassed.

Our data shows that the expenses of hosting the Olympics are constantly increasing. We’re seeing costs multiplying by the billions

The authors also uncovered an astonishing result: Instead of a “regression to average” in overriding the cost of the Olympics over time, there are what they call “the regression to the tail” – with the excesses of individual games so variable that the potential outcomes for the host stretches countries to infinity.

The authors say: “Deep disasters like earthquakes, tsunamis, epidemics, and wars tend to follow this type of distribution.”

Professor Flyvbjerg said: “ After Beijing, which is slightly over budget, many Olympics supporters like to see cost overruns as a thing of the past: We’ve shown that this is not true. Our data shows that the expenses of hosting the Olympics are constantly increasing. We’re seeing costs multiplying by the billions.

The 2020 IOC agenda claims to have set between $ 1 billion and $ 2 billion in cost savings per game; Our data shows that this is barely a drop in the ocean.

The idea that learning from previous games (the Olympic Games Knowledge Management Program), begun with Sydney 2000, would take the pain out of hosting is not entirely proven. In this sense, the program should be seen as a failure.

The authors suggest six solutions to save future Olympiad hosts from cost overruns:

Hosts and the International Olympic Committee must understand the true risks of hosting the Games larger and more realistic cost contingencies should be created. The IOC should have an “in-game appearance” when it comes to cost, with a minimum of 10%, preferably more. Games should be shortened to reduce risks; semi-permanent host sites should be considered, or alternatively, two consecutive games should be granted to the same host, so that the facilities can be used twice.

Their sixth recommendation is that cities simply avoid hosting the games in the first place.

The authors say: “The high average cost of incremental costs of the games, combined with the existence of outliers, should be a cause of caution for anyone considering hosting the games. This overshoot could have financial implications for host cities for decades to come.”

Read “The Descent to the Tail: Why the Olympics Are Blowing Up” in the SSRN.

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