Hosting an Olympics typically does not come cheap. But the City of Paris won its bid on its already-solid infrastructure, for sports and transport, and with predominantly private financing. This stands to limit the budgetary impact on Paris (AA/Negative/A-1+) and the French state (AA/Negative/A-1+). Nevertheless, the organizational stakes remain high, and the millions of expected visitors will pressure the already very busy Parisian transport network.

When Paris hosted its second Olympic games in 1924 it was a popular success but a financial flop. A century later, Paris will become only the second city to have hosted three games (after London and before Los Angeles). Although the city is used to hosting major events--recently the 2023 Rugby World Cup, the 2022 UEFA Champions League Final, and the 2016 UEFA European Football Championship--the volume and concentration of activity in just one month presents multifaceted challenges.

Games-Related Spending Should Remain Reasonable And Mostly Private Funded

We do not expect the games to weigh significantly on French public-sector entities, including Paris and the central government. 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 (chart 1). Ninety-five percent of its Olympic venues were already in place and required limited refurbishing or will be temporary. The investment budget included only three main construction projects--an Olympics Village (estimated at about €1.5 billion), the Aquatics Centre (€175 million), and a new arena that will host the badminton and gymnastics (€138 million). The overall budgeted cost is well below that of the three previous games (London, Rio, and Tokyo).

Chart 1

Recent updated budgets put the total cost of Paris' games at €8.9 billion (0.3% of French GDP in 2024). This is split between new infrastructure--sports venues and facilities (€4.5 billion)--and operating expenses related to the games (€4.4 billion). Overall public spending (including by the French state and local and regional authorities) will be only 28% of the total and has been directed toward investment needs. For instance, the capital budget comprises €2.3 billion from the public sector, while public entities will only contribute €171 million to operating costs (charts 1 and 2). Ticket sales and TV and marketing deals should bring in €4.2 billion and could cover up to 96% of total operating costs, according to the International Olympic Committee (IOC). Nevertheless, the central government has agreed to guarantee up to €3 billion (0.1% of GDP) to the IOC. Therefore, the impact on the French government's fiscal consolidation trajectory should be muted.

Chart 2

Chart 3

The tax windfall linked to peak tourism activity should also partly cover the bill for the French government. The government estimates the economic benefits of the games could reach €10 billion. Nevertheless, compared to previous games, the economic legacy will be less significant for Paris. Whereas the 1992 games put Barcelona on the world tourism map, France, and Paris in particular, already lead global tourism with almost 100 million visitors a year (with tourism receipts 7%-8% of GDP) and are unlikely to experience the same economic boost.

The Games Are Unlikely To Burden The City's Coffers

The central government is making the lion's share of the public sector contribution--67% of public investments and 47% of public operating expenses. The city estimates its cost, net of grants received or rental revenues for the use of sporting venues, at about €405 million. During 2019-2024, Paris' total net games-related capital investment has been about €290 million, including €170 million in capital grants. This represents only 3% of its total capital expenditure during this period. It estimates games-related operating expenditure at €97 million in 2024, or 1.2% of the city's budget.

The city stands to benefit somewhat from games-related increases in tax revenue. The surge in tourist arrivals and related spending will be channeled to the city via its share of national VAT receipts. We expect these will grow 4.9% in 2024. Paris will also benefit from an uptick in tourist tax receipts. The city has budgeted €185 million in revenues in 2024, compared to only €100 million in its 2023 budget. If these projections materialize, the boost to the city's revenues should cover almost all its games-related operating costs (net of rental revenues).

The spending breakdown does not explicitly identify other indirect costs. These include security, renovations to areas around venues, and higher personnel expenditure. We understand that these are largely woven into the city's budget, albeit some modest overruns could occur. Paris' budgetary performance has remained resilient and will be supported by increased tax and nontax revenues. Also, while relatively large, its debt burden should remain broadly flat as percentage of its operating revenue. In the lead up to the games, the city has been able to keep its financial ratios aligned with our 'AA' issuer credit rating.

Pressure Will Build On Paris' Already Saturated Transport Network

Absorbing 10 million visitors could be a challenge for Paris' transport network but higher ticket prices should cover extra spending. Ile-de-France Mobilités (IDFM; the public body managing the Parisien transport network; not rated) will expand existing metro and train capacities to match increased demand. IDFM is temporarily raising public transport ticket prices for the games and expects to collect €200 million, or 1.6% of its operating revenue budget for 2024. Nevertheless, operating risks remain high and extra capacity could prove insufficient to match demand, leading to network disruptions, higher costs, and reputational risks. The Grand Paris Express, a €35.6 billion extension of the metro network comprising 200 kms of new lines, should have boosted network capacity. But significant delays, partially pandemic-related, have meant that only some of it has opened to the public. We note that the project was launched before the decision to award the games to Paris.

Overruns Remain A Risk If Past Games Are Anything To Go By

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 (table 4). The State of Rio defaulted in 2016 after a sizable debt intake, notably to fund additional infrastructure (including transportation and sporting venues for the games), which added to the state's financial pressures.

While Paris' infrastructure spending overshot the initial budget by 37.5%, compared to its 2016 projection, this becomes a reasonably moderate 14 percentage point overspend after inflation. Its operating expense budget grew 15% compared to 2019 estimates. The largest cost increases related to higher allocations to headcounts, IT systems, and administrative fees. With the games yet to happen, budgetary slippages are still a risk and will depend notably on attendance figures. We note that Paris is highly unlikely to suffer the same setbacks as Tokyo, when pandemic delays cost an extra $2.8 billion and mobility restrictions kept visitor numbers down, depressing revenues.

Editor: Julie Dillon

Digital Design: Tim Hellyer