South Korea likely to lose more than $10 billion for hosting 2018 Winter Olympics

Leave it to Andrew Zimbalist to throw cold water on an even colder Winter Olympics. The Smith College economics professor and long-time Olympics skeptic hopped on CNBC’s “Squawk Box” to spill the beans on the pitfalls of the PyeongChang Games.

The most stunning nuggets? That South Korea is staring down a loss north of $10 billion for hosting this year’s international festivities.

“At the end of the day, they spent $13 billion. They’ll get back about $2.5 billion,” Zimbalist said. “The only way you can justify that kind of a terrible balance is if, in the long run, it’s going to promote tourism, promote trade and promote foreign investment.

“There’s no evidence from other Olympics that that might happen.”

That astronomical bill stems, in part, from building scantly used Olympic venues — and not just the $109 million ceremonial stadium in PyeongChang. The organizers also spent untold sums to clear 58,000 trees from a sacred forest on Mount Gariwang, where the Alpine skiing course was subsequently constructed.

Beyond that, South Korea spent billions on infrastructure to connect PyeongChang to the South Korean capital of Seoul. Even with the addition of high-speed rail, the commute still clocks in close to two hours.

Some of these costs might be justifiable if the host country’s citizens were enthusiastic about snow and ice activities. But to hear Zimbalist tell it, “The South Koreans are not very fond of winter sports in general.”

The Olympic Alpine skiing course in South Korea.
The Olympic Alpine skiing course in South Korea.

That helps to explain the shortfall in revenue that accounts for these games ranging so far into the red. Per Zimbalist, the organizers only sold about 60 percent of tickets to this year’s Olympic events.

It doesn’t help that PyeongChang is home to fewer than 44,000 people, making it the least populous host of the Winter Games since Lillehammer, Norway in 1994. Had all the locals turned out for the Opening Ceremony, they still wouldn’t have filled the Olympic stadium, which seats about 50,000.

Backers of the PyeongChang Olympics would likely argue that the short-term pain pales in comparison to the long-term gains. As Chery Kang relayed during the interview, the South Korean government and various think tanks pegged the overall economic benefit anywhere between 20 and 65 trillion Korean won, which comes out to about $18.5-60 billion.

Those figures assume that these games will bring in money by painting a flattering portrait of South Korea. Trouble is, that may not be the case, what with frigid temperatures and a norovirus outbreak diverting attention from the actual athletics on display.

“I hope there is a feel-good effect, I hope that the games go off very well,” Zimbalist concluded, “but either President Moon [Jae-in] or any other politician in South Korea who’s promising the people that this is going to be a wonderful thing for the economy really should be more cautious.”

All this said, the PyeongChang Games won’t come anywhere close to the costliest and most debt-ridden Olympics in history. That honor might forever belong to the 2014 Winter Olympics in Sochi, Russia, which ran up a reported tab of $51 billion, thanks in no small part to rampant corruption and graft benefiting President Vladimir Putin and his cronies.

Olympic games don’t usually translate into an economic boom from CNBC.

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