Another Deficit Olympics Looms... Avoided the 'White Elephant' but Struggling with Soaring Security Costs [Paris Olympics]

Using temporary stadium without air conditioning installed
Concerns over deficit due to soaring Olympic security costs
Paris with no tourists... Airlines forecast revenue decline

[Image source=AFP Yonhap News]

The 2024 Paris Olympics, which aimed for a profitable event by minimizing new stadium construction and utilizing the entire city as venues, is now facing a crisis of turning into a deficit due to increased security costs. This is because a large-scale armed security force of over 70,000 personnel must be deployed for an extended period in response to various terrorist threats that have spread since the early days of the Olympics. The special economic benefits expected from the Olympic Games are also forecasted to be smaller than anticipated due to soaring accommodation prices and inflation in Paris.

Large-scale Security Forces Hampering a Profitable Olympics

[Image source=Reuters Yonhap News]

The French government set the security budget for the Paris Olympics at $348 million (approximately 480.8 billion KRW), based on deploying 35,000 security personnel. However, more than 75,000 personnel were mobilized for the opening ceremony alone, including about 55,000 French military and police officers and 20,000 private security guards. This is the largest security force ever assembled for the Olympics.

Olympic security costs have significantly increased since the 9/11 terrorist attacks in the United States in 2001. Security expenses for the 2000 Sydney Olympics were around $250 million, but the following Summer Olympics in Athens in 2004 required $1.5 billion. Since the Paris Olympics are being held amid two wars?the Ukraine conflict and the Israel-Hamas clashes?terrorist threats have reached their peak, making security costs inevitably higher than those of the 2004 Athens Olympics held shortly after 9/11.

In addition to security costs, cyber security expenses to prevent cyberattacks during the Paris Olympics are also rising. According to IT market research firm IDC, the French government has allocated 86 million euros (approximately 123.8 billion KRW) for cyber defense this year, which is more than a 2% increase compared to the previous year.

Paris Olympics Spending Target '8.8 Billion' Dollars... Temporary Venues Built in City Center

[Image source=AP Yonhap News]

According to AFP, the Paris Olympic organizing committee initially set a goal to spend only $8.8 billion on hosting the Olympics. They expected to generate about $11.6 billion in revenue from ticket sales and tourism, resulting in a net profit of around $3 billion after deducting the $8.8 billion in expenses. However, if security costs increase by 3 to 5 times the original estimate, the expected profits from hosting the Olympics could significantly decrease or even turn into a deficit. The Tokyo Olympics previously had a spending target of about $7.3 billion before the event, but actual costs after the closing ceremony were estimated between $20 billion and $35 billion, representing a 2.7 to 4.7 times increase over the target.

Critics also point out that the French government’s decision to minimize construction costs by installing most venues as temporary structures in the city center rather than on the outskirts of Paris inevitably led to a sharp rise in security expenses. Business Insider noted, "The Paris Olympics drastically reduced construction costs by using over 95% of existing venues or temporary structures built in the city center. However, because the entire city center became a venue where controlling crowds is difficult, the number of security personnel increased exponentially."

Residents and Tourists Leaving Due to Soaring Prices in Paris... Airlines Fear Losses

Interior view of the 2024 Paris Olympic Korean national team accommodation located in Saint-Denis, Paris. [Image source=Yonhap News]

There are also concerns that the anticipated tourism boom from the Olympics will fall short of expectations. Accommodation prices and overall living costs in Paris have surged before and after the Olympics, causing a decline in summer tourists.

According to CNBC, Air France, the French national airline, expects its third-quarter revenue to decrease by 150 million to 170 million euros (approximately 225 billion to 255.1 billion KRW) compared to the same period last year due to weak demand for travel to Paris this summer. Air France explained, "Air traffic to and from Paris is lagging behind other major European cities. Not only has interest in Paris declined, but there is also a noticeable trend of avoiding Paris in the international market."

U.S.-based Delta Air Lines also anticipates a $100 million (approximately 138.1 billion KRW) profit decline due to reduced French travel demand influenced by the Paris Olympics. Delta CEO Ed Bastian told CNBC in an interview, "If people are not going to the Olympics, they are not going to Paris."

The lodging industry’s attempt to capitalize on the Paris Olympics by raising accommodation prices has intensified tourists’ reluctance to visit Paris. According to the Paris Tourism Office, the average hotel rate in Paris in July was 342 euros (approximately 510,000 KRW), a rise of over 70% compared to the same period last year. Estimates from the travel price comparison website Trivago show that average accommodation prices in Paris increased by 85% year-over-year, with some popular areas seeing rates more than double.