Olympic Games: Warning: playing host can still be expensive: Robert Block reports on the mixed fortunes enjoyed by Olympic Games hosts of the recent past

THERE was a time when the Olympic Games spelt financial disaster, but Los Angeles rewrote the rules in 1984, showing that with imagination and marketing know- how they could be made to pay. There is, though, still no guarantee that gold medals in your city mean gold coins in your coffers. The people of Quebec are still paying special taxes, including a one-cent levy on every cigarette they smoke, to pay off the debts of the 1976 Montreal Games.

When he was bidding to get the games for Montreal, the colourful former mayor Jean Drapeau promised the Games would pay for themselves. The Olympics could no more run a deficit than a man could have a baby, he declared. In reality, construction costs, initially estimated at dollars 178m ( pounds 123m), eventually reached dollars 1.2bn, to which interest has added dollars 1bn. The building work was marred by bribery scandals, strikes, lawsuits and huge overtime bills. At one point there were so many building cranes on the main stadium site the delays were exacerbated by skyhook gridlock.

Los Angeles' bid was originally a source of controversy. With Montreal still fresh in the memory, the strongest objection was that the Games would be ruinously expensive. Critics passed an amendment to the city charter forbidding any expenditure of tax dollars on the project. Step forward the private Los Angeles Olympic organising committee and its now celebrated chairman Peter Ueberroth. He promised that by substituting corporate patronage and private salesmanship for public subsidy, he could stage the Games at a profit.

Los Angeles used existing facilities and built only two new venues. It also signed up commercial sponsors and concluded a television contract early on. The result was about pounds 131m profit. Enter Ueberroth into the pantheon of great capitalist heroes.

Corporate donations and good management also turned the 1988 Seoul Olympics into a business success with profits supposedly surpassing those of Los Angeles.

Barcelona's bad luck was to emerge from the Olympics into a deep European economic crisis. Barcelona's residents may find themselves paying for the Games until 2000 unless Spain can pull itself out of the slump quickly. Yet despite a pounds 1.6bn debt the overall experience was positive. The city's stock of assets is larger than before and Barcelona did not have to cover all the costs by itself. The Games effectively forced the central and regional authorities to pour money into the city.

Barcelona's deputy mayor, Joan Clos, believes that in the mid-term the Olympics will prove to have been a very good thing for the city. 'If the local market can react to what we have done,' he said recently, 'we will not only not lose money but make it on a very big scale. It's a risk.'

There is speculation that the Olympics enhanced Barcelona's chances of becoming the seat for a European community central bank if it ever becomes a reality.

Many analysts agree that costs incurred in hosting the Olympics, particularly big investments in infrastructure, can be justified only if the host can succeed in putting the region on the map for multinational investment.

Atlanta, keen to outdo Los Angeles, has started by trying to copy its success. Ten months after winning the bidding to stage the centenary Games of 1996, Atlanta announced its first big deal, a complex joint marketing and sponsorship venture with the US Olympic Committee designed to bring as much as dollars 700m from the domestic market alone.

But Ardy Arani, a legal adviser to the campaign committee which won the Atlanta Games, has said he believes 1996 will mark the high point of Olympic commercialisation. The Games, Arani asserts, are facing complex problems: a sensitive and declining market place and a television audience, especially in the US, which is reacting adversely to professionalism in an arena formerly perceived as amateur.

The television audience is the cornerstone of the modern Olympic Games. Television rights in Barcelona brought in about dollars 635m. Big sponsors like Visa, Mars and Coca-Cola paid up to dollars 30m apiece for the right to nail their names to the mast flying the Olympic banner.

However, the US network NBC paid in excess of dollars 400m for the right to broadcast the Barcelona Games and ended up losing dollars 100m because of poor advertising response and a sharp drop in viewing figures during the 16-day screening of the Games.