Tokyo

The Olympic Economy: we're weighing the benefits of hosting vs. the massive costs

Monday, July 19, 2021 by Snacks

Cue: Tokyo Drift from Fast & Furious... Except, not so fast. After a year-long pandemic postponement, the 2020 Olympics kick off this Friday in Tokyo — and they're now called the 2021 Olympics. Some key numbers:

  • 0: Number of fans attending. All spectators have been banned, after Japan declared another state of emergency amid rising Covid cases this month.
  • $15.4B: Cost of the Tokyo Olympics, according to organizers. That's 22% higher than planned due to extra pandemic-related costs.
  • $3B: How much Tokyo has raised from 47 domestic sponsors, a record from host nation businesses at the Games.
  • -90%: How much spending tied to the Games is expected to drop with zero spectators — and that doesn't include spillover tourism spend (think: hotels).

You don't have to bring home the gold... if it's already home. For decades, hosting the Olympics has been a source of national pride. But while the Olympics are touted as an engine of economic growth and urban revitalization, the economic benefits of hosting aren't clear. Evidence points to no real change in economic activity for host countries — but very real costs.

  • The Rio Olympics cost $13B, paid for with tax dollars and corporate cash. After the Games, Rio had little to show for its investment (and an abandoned pool that turned orange).
  • The LA Olympics in 1984 marked the first and last time the Olympics were profitable, mostly because planners avoided building new stadiums.
  • Looking forward: The International Olympics Committee (IOC) is struggling to attract bidders for future Games. Poor economics for host countries and cities have caused many potential bids to be shot down by voters.
THE TAKEAWAY

The Olympic economy is an unequal ecosystem... While Japan would've taken an even bigger financial hit by cancelling, it still stands to lose the most. The Japanese hospitality and transportation sector is expected to lose up to $1.4B. Meanwhile, the IOC is poised to make $4B in television rights income, despite zero attendees. Companies with broadcast rights will be fine, too: NBCUniversal has already beat the $1.2B it earned for Rio ads. But sponsors like Asahi will get less bang for their buck without the ability to get stadiums of spectators chugging the “Tokyo 2020 Official Beer.”

Subscribe to Snacks