Will the Paris Olympics 2024 deliver the boost the French economy needs?

Nations invest millions of dollars simply for the opportunity to host the Olympic Games, but if that process is mismanaged it can have a devastating impact on their economies for years.

France, with already high debt levels, muted economic growth and an inflation-driven rise in the cost of hosting this year's global sporting extravaganza, has been treading carefully in the hopes the Paris Games will break even or yield a small profit.

Hotel de Ville in Paris is decorated to mark the Games. Getty Images

Hotel de Ville in Paris is decorated to mark the Games. Getty Images

The role of Olympic host is very much a matter of pride. Although hosts hope for a short-term economic boost from the Games, it is really the long-term gains of being part of the 3,000-year tradition that they are after.

However, making the sporting event of this magnitude a success is a Herculean undertaking, not a low-cost proposition by any stretch of the imagination.

Hosting the Olympics successfully is a delicate balance between how much a host is willing to spend without taxing its economy too heavily and weighing the economic benefits the Games are likely to yield.

The Paris 2024 Games, running from July 26 to August 11, followed by Paralympics from August 28 to September 8, put France at the centre of global attention, bringing television audiences in the billions.

The Olympic rings are mounted outside a venue in Paris ahead of the Games. AP Photo

The Olympic rings are mounted outside a venue in Paris ahead of the Games. AP Photo

The task to organise the event begins years before the first athletes march under their flags and legions of fans arrive.

From setting up a multitude of committees that manage an army of volunteers to building facilities, refurbishing sports infrastructure, finding international partners and obtaining the vital private sector financing, the checklist appears endless.

Perhaps the most important task of them all is managing finances – the tab for holding the Olympics can run into tens of billions of dollars. No host city would want to foot a bill too big and trigger a financial disaster like the one Greece suffered after the 2004 Olympics.

The estimated $16 billion price of Athens Olympics, which many say, if not triggered, contributed to the Greek debt crisis which burdened the country for years.

Riot police clash with demonstrators in Athens in 2010, during a general strike against the government's austerity plan to tackle Greece's debt crisis. AFP

Riot police clash with demonstrators in Athens in 2010, during a general strike against the government's austerity plan to tackle Greece's debt crisis. AFP

For the Organising Committee of the Games, keeping the costs down is of paramount importance. Going over budget is not an option for France.

“We're actually OK for now but we have to keep on working very hard,” Samuel Ducroquet, the ambassador of sport for France, said.

“We're on track and we've respected the budgets approximately, which were fixed initially … so for now, we're very much satisfied with what we've been doing from an economic point of view,” he said.

Redrawn plans

The French economy is not in stellar health currently, with the international Monetary Fund forecasting less than 1 per cent growth this year.

The country's debt burden, which is more than 110 per cent of its gross domestic product, has recorded a consistent rise since the 1970s as a result of large budget deficits.

The €9 billion bill the French are footing for hosting the Games is much smaller than that of Greece and it is not going to add to the country’s debt pile.

Even then, Paris has drawn and redrawn its plans to host the Games several times since it won the bid in September 2017.

France's ambassador for sport, Samuel Ducroquet. AFP

France's ambassador for sport, Samuel Ducroquet. AFP

“The map of the venues, it has been reshuffled quite a few times, including for economic reasons,” Mr Ducroquet said.

The idea was to not build new infrastructures and to find ways to “maximise the existing competition venues” and that has contributed to reducing the expense, he added.

Roucas-Blanc Marina in the Mediterranean city of Marseilles is hosting Olympic sailing events. Photo: International Olympics Committee

Roucas-Blanc Marina in the Mediterranean city of Marseilles is hosting Olympic sailing events. Photo: International Olympics Committee

The French, when they won the bid, estimated the cost of hosting the Games at €8 billion but that figure has been revised higher on account of inflation.

However, the final cost is expected to be much higher, Andrea Zanon, chief executive of US-based WeEmpower Capital, said.

“The €9 billion is most likely underestimating the final total cost,” Mr Zanon said.

French President Emmanuel Macron delivers a speech after Paris won its bid to host the 2024 Olympic Games, in September 2017. AFP

French President Emmanuel Macron delivers a speech after Paris won its bid to host the 2024 Olympic Games, in September 2017. AFP

“I think the cost will rise to over €10 billion when all the upgrades and direct and indirect costs are accounted for.”

Paris 2024 is the third time France will host the Games after Olympics in 1900 and 1924. The latest iteration after a century is the sixth most expensive in Olympics history.

A French tennis player at the 1900 Paris Olympics. Getty Images

A French tennis player at the 1900 Paris Olympics. Getty Images

A water polo match at the 1924 Paris Olympics. Getty Images

A water polo match at the 1924 Paris Olympics. Getty Images

The cost for Beijing games reached $52.7 billion, Tokyo ($35 billion), Athens ($18.7 billion), London ($13.3 billion) and Rio de Janeiro ($13 billion), according to S&P Global data.

While there have been “some cost overruns” for the Paris Games, the scale of over-budgeting is nowhere close to some of the earlier Games.

The Paris Games are 25 per cent over the initial budget so far. The London Games in 2012 overran the budget by 76 per cent, Tokyo by 238 per cent, and Rio by 352 per cent, S&P said.

The infrastructure spending by Paris has overshot by 37 per cent compared with estimates it submitted in 2016. However, considering inflation, the rise is a more moderate 14 percentage points. Operating expense budget has risen 15 per cent compared with 2019 budget expectations.

“While Paris has not avoided the usual cost overruns, we expect them to remain limited compared to recent Games. Its overall bills have not ballooned, especially compared to previous Olympics – London overspent by more than $5 billion and Tokyo by nearly $26 billion,” according to S&P global ratings’ analysts Hugo Soubrier and Marko Mrsnik.

The opening ceremony of the 2016 Rio Olympics. The city took on sizeable debt to improve infrastructure to host the Games. Getty Images

The opening ceremony of the 2016 Rio Olympics. The city took on sizeable debt to improve infrastructure to host the Games. Getty Images

“The State of Rio defaulted in 2016 after a sizeable debt intake, notably to fund additional infrastructure [including transport and sporting venues for the Games], which added to the state's financial pressures,” they wrote in a note on the economic impact of the Paris Olympics.

Keeping a lid on costs

The city of Paris won the bid on the basis of its already-solid infrastructure for sports and transport and its predominantly private financing arrangements.

The OCOG has €4.4 billion at its disposal to organise the competitions, and private sector accounts for about 97 per cent of that budget.

Images projected on the Arc de Triomphe illustrate the themes of the Paris Olympic bid, in January 2017. AFP

Images projected on the Arc de Triomphe illustrate the themes of the Paris Olympic bid, in January 2017. AFP

The organisers have another €4.4 billion at hand, which has been provided to Société de Livraison des Ouvrages Olympiques, (Solideo), the body responsible for overseeing the construction and renovation of sports and non-sports infrastructure.

Half of this budget has been provided by public funding.

Most competition venues were already in place and required limited refurbishing. The investment budget was spent on three main construction projects – an Olympics Village, with an estimated cost at about €1.5 billion, the Aquatics Centre, which took €175 million to build, and a new arena that will host the badminton and gymnastics at a cost of €138 million.

Paris has also invested €1.4 billion to clean up the Seine, where triathlon and marathon swimming events are scheduled to take place. The city has built infrastructure to catch more stormwater when it rains to keep the river clean.

The Seine has been cleaned so swimming events can be held in the river. EPA

The Seine has been cleaned so swimming events can be held in the river. EPA

“About 95 per cent of the infrastructure was either existing or [built] temporarily. Only 5 per cent of required facilities were built. All the infrastructure has been delivered and nothing was delayed … nothing substantial at all, which has kept us on budget,” Mr Ducroquet said.

S&P said it does not expect the Games to weigh significantly on the French public sector.

“Additional costs will likely remain limited. Large-scale events can often burden a host city or country, but Paris already had most of the required infrastructure – hence the relatively low-price tag, which should prevent financial distress,” S&P analysts said.

Delivering on all fronts

Although the expected €10 billion-plus final price tag accounts for a rather small 0.4 per cent of French GDP, the government expects a big impact from Paris 2024, with benefits across all segments of the economy.

From job creation to a boost for the small and medium-sized enterprises across sectors, policymakers expect the Games will further strengthen the country’s robust tourism.

Posing for a photo in front of the Eiffel Tower adorned with the Olympic rings. Getty Images

Posing for a photo in front of the Eiffel Tower adorned with the Olympic rings. Getty Images

The event has already created 181,000 jobs, 89,000 of which were related directly to the organisation of the Games, while 30,000 were created in the construction sector.

Paris 2024 is set to generate between €6.7 billion and €11.14 billion in net economic benefits, with an intermediate scenario projecting €8.9 billion in net economic impact, according to a report published by the Centre for Law and Economy of Sport (CDES) of the University of Limoges in France.

The CDES, which has been monitoring the Paris Games for the International Olympic Committee and the Paris 2024 organisers, said the external injection of funding since 2018, which would not have happened without the Games, has already yielded desired results.

“The impact revolves around tourism, construction and the organisation of the Games, constituting 30, 28 and 42 per cent of the net economic impact respectively”, the report said.

However, Bruno Cavalier, chief economist at investment firm ODDO BHF, said in terms of the overall macroeconomic impact, Paris 2024 will be a “non-event”.

“Neither the empirical literature on the economics of sport, nor the case studies, suggest that the Paris Olympics will have a lasting effect on France's economic performance in 2024 and beyond,” Mr Cavalier wrote in a report.

“There may be a few transitory effects [a one-off increase in spending, then a fall], which at the macroeconomic level are probably almost indistinguishable from statistical noise.”

Shops across Paris have been selling Olympic memorabilia ahead of the Games. Getty Images

Shops across Paris have been selling Olympic memorabilia ahead of the Games. Getty Images

Mr Zanon said Olympics or World Cup events are generally not “money-makers”.

“They are branding opportunities which can be monetised over a long time if the event is well executed,” he said.

“You have to think of a physiological effect of the French Olympics. If managed well, it can improve the international image of France, ultimately catalysing new investments and more deal-making.”

A police officer on duty for the Games checks a woman's QR code. AFP

A police officer on duty for the Games checks a woman's QR code. AFP

Mr Ducroquet said the expected impact on average of the Games is around €9 billion, which is also the level of the estimated expenditure.

“We'll see what the real impact will be when we measure it after the Games,” he added.

Hospitality boost

The city will welcome 10,500, athletes, thousands of team officials, millions of French spectators, as well as 20,000 accredited journalists from around the world during the Olympics and Paralympics.

Broadcasters from around the world have been setting up equipment at Olympic venues. Getty Images

Broadcasters from around the world have been setting up equipment at Olympic venues. Getty Images

Mr Ducroquet said the government expects to 1.6 million international visitors to fill the streets of Paris, the banks of the Seine and sporting arenas during the Games, which will boost the tourism and hospitality sectors and associated businesses.

The CDES estimates that between 2.3 and 3.1 million unique visitors with Games tickets are expected to visit Paris during the Paris 2024, some 64 per cent of them French. An estimated €2.6 billion will be spent by tourists travelling to Paris during the Games, with or without tickets.

“What is clear is that hosting the Olympic Games does bring added visibility to the host city as a tourism destination, enhancing its tourism prospects and destination image among potential tourists for quite some time after the Games have ended,” Mr Zanon said.

A Paralympic Games volunteer takes a photo ahead of a training session outside the Grand Palais in Paris. AFP

A Paralympic Games volunteer takes a photo ahead of a training session outside the Grand Palais in Paris. AFP

Paris 2024 has created 61,000 jobs in the tourism sector, which accounts for about 8 per cent of the country’s economy, according to the CDES report.

France is set to keep its pole position as the world’s most popular destination for international arrivals this year, with arrivals set to almost reach pre-pandemic highs of 90 million this year, the World Travel and Tourism Council said earlier this year.

International arrivals to France have surged in the first half of this year, providing a boost to the tourism sector which at its peak contributed €220 billion to the national economy and supports 2.7 million livelihoods, according to WTTC data.

One last push

There is still some time before the Paris Olympics and Paralympics conclude and to extract the maximum economic benefit from the two events, Paris needs to make the last push.

Most of the €7 billion in private funding for the Games comes from media rights, sponsorship and ticketing, but also private investment in long-term infrastructure projects, and includes an IOC contribution of $1.7 billion in cash and services, according to the IOC.

Car maker Toyota is one of the major sponsors of the Games. Getty Images

Car maker Toyota is one of the major sponsors of the Games. Getty Images

“When it comes to sponsorship, we're almost where we wanted to be. Sales are also going pretty well, but we need to make an effort on the Paralympics ticket sales,” Mr Ducroquet said.

Political chaos

Hosting the Olympics was the cherry on the top for French President Emmanuel Macron’s broader plans of positioning France as fast-resurgent economic hub of Europe. However, his call for snap elections and the resultant hung parliament has taken some shine off the event.

“Macron’s core focus has been on economic growth and making France a more attractive investment destination – hosting the Olympics is a part of that strategy … [however] the uncertainty from the French election has potentially pulled the needle in the opposite direction,” Mahmoud Alkudsi, senior market analyst at Abu Dhabi-based ADSS, said.

Mr Macron exits a polling booth during the second round of France's legislative elections in Le Touquet, on July 7. AFP

Mr Macron exits a polling booth during the second round of France's legislative elections in Le Touquet, on July 7. AFP

Although the tug-of-war between the Right, Left and Centrists in France will continue, it is unlikely to have a material impact on the Games and the resulting economic boost.

“My view is that the Olympic-induced boost will outweigh the short-term troubles brought by the surprise election results,” Mr Alkudsi said.

“The economic benefits of a spectacle as big as the Olympics will triumph over a longer time period, by which point the French market will regain some of its stability as the political wrinkles are ironed out.”