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Mismanagement and unexpected costs left the city's citizens with a $1.5 billion debt that took three decades to erase. The final payment on the debt was made in 2006.

Not only is a tourism decline hurting the city's revenue; London is already in debt because the cost of Olympics hosting starts with the bidding process.

"Our business is down by about 20-40 percent depending on the time of day," Steve McNamara, general secretary of the Licensed Taxi Drivers Association, told the AFP. "Normally about 90 percent of our customers are Londoners but they've all left the city and haven't been replaced by tourists.

This process is driven by private interest groups supporting construction, architecture, bankers and lawyers who care little for London's fiscal well-being and more for their own pockets. That means they pressure the city to overbid.

host cities tend to be captured by private interests who end up promising much more than the city can afford." 

Chicago, during its three-year bid process, spent $100 million on advertising, preparing venues for inspection, and promotions

The British government has raised its 2012 London Olympics budget estimate to nearly $15 billion - almost four times the initial amount of $4 billion.

And each year, the cost of hosting gets higher.

It is a common trend for host cities to understate budgets.

Atlanta spent $2.4 billion in 1996. Sydney spent $6.8 billion in 2000 and is still trying to fill the rooms it built. Athens, which spent $16 billion in 2004, has venues that are in disrepair because it cost hundreds of millions to maintain them. 

Then there's always the fear the exposure will cast an unappealing light on the city, driving away future tourists.

"Should the Games be plagued by disorganization (e.g., the current security snafu in London), the pervasive pollution of Beijing, the violence of Munich, Mexico City or Atlanta, or the corruption scandals of Salt Lake City and Nagano, then the PR effect might be negative," said Zimbalist.

Bottom Line: "I think the Olympics is and should be a great sporting event, but it is not and should not be considered a major economic event," said University of Michigan's Szymanski.  "It's a lot like having a party. It's a good time but it doesn't make you rich."

“In terms of purely measurable economic variables the Sydney Olympics had a negative effect on New South Wales and Australia as a whole.” According to Giesecke and Madde

“Diverting scarce capital and other resources from more productive uses to the Olympics very likely translates into slower rates of economic growth than that which could be realized in the absence of hosting the Olympic Games.” 

There appears to be little evidence of any benefit to tourism of hosting an Olympic Games, and considerable evidence of damage

But except for a dedicated few, there will be little desire to visit them subsequently. Instead, within a few months, all eyes will be on Rio de Janeiro, host of the 2016 Games

In 1996 in Georgia, home state of host city Atlanta, hotel occupancy rates fell from 73 percent in the previous year to 68 percent.

“Olympic visitors effectively scare other visitors away. Regular tourists assume that congestion and increased prices are a feature of Mega-Events.”

“During the Olympic period, the entire bed-stock of a destination is devoted to the travelling officials, the press and spectators. These visitors are unlike “regular” tourists, having different spending and behavior patterns. They are not interested in “tourism”—they are interested in sport. They tend not to spend money on leisure and entertainment, and when not in the stadia they watch events on TV rather than engaging in other activities.”

Any financial benefit from Olympic tourism is almost exclusively short-term and hotel-specific, jacking up the room prices for a few weeks for a clientele who are unlikely ever to visit again, as they move on to the next major sporting event.

Spend billions that should go to schools, roads and other infrastructure?