The official cost of the Tokyo Olympics is USD 15.4 billion, making it the most costly Olympics ever, according to a University of Oxford analysis.
What else could a billion dollars buy? In Japan, the cost of constructing a 300-bed hospital is estimated to be over USD 55 million. So you’d be able to put up nearly 300 of these.
In Japan, the average primary school costs over USD 13 million. You get 1,200 schools for that price.
A Boeing 747 costs around USD 400 million, according to a fast search. For the price of the Tokyo Olympics, you get 38 jumbo planes.
The point is that Olympic Games are expensive and may take precedence over other objectives. In fact, according to various Japanese government audits, the true cost of the Tokyo Olympics is substantially higher than the official number, possibly twice as much.
Except for USD 6.7 billion, all of the money comes from Japanese taxpayers. The IOC’s contribution is USD 1.3 billion, according to the most recent budget. Following the pandemic, it contributed many hundred million more.
In a research conducted by the University of Oxford, it was discovered that all Olympic Games since 1960 had had cost overruns averaging 172 percent. Depending on the cost figure you use, Tokyo’s cost overrun is 111 percent or 244 percent.
In an email, Oxford author Bent Flyvberg said, “The IOC and host cities have no interest in tracking expenses because tracking tends to expose cost overruns, which have increasingly become an embarrassment to the IOC and host towns.”
Flyvberg also mentioned that costs may be cut if the IOC took on more of the bills instead than the organisers’ wallets.
Following costs is a time-consuming task fraught with debates about what constitutes an Olympic expense and what does not. Numbers from separate games can be “opaque and non-comparable,” according to Flyvberg, necessitating sorting and tracking.
“The issue is separating what is Olympic spending from what is simply ordinary infrastructure spending that would have occurred anyway but was accelerated for the Olympics.”
Victor Matheson, a student at College of the Holy Cross studying sports economics, wrote in an email.
For example, he claims that the 1964 Tokyo Olympics were “either one of the cheapest or one of the most expensive Games,” depending on how much of the preparation costs are counted as Olympic costs.
The 2008 Beijing Olympics, which were estimated to cost more than USD 40 billion, and the 2014 Sochi Winter Olympics, which were estimated to cost USD 51 billion, are frequently cited as the most expensive.
“The costs of greater infrastructure in Beijing and Sochi are likely to be included in the figures: roads, rail, airports, hotels, and so on. In an email, Flyvberg stated, “Our figures do not.”
The IOC can market the Olympics as a global party that brings the globe together and promotes world peace because of the ambiguity surrounding costs and who pays.
Everyone appears to benefit, as the not-for-profit IOC’s financial interests are hidden beneath national flags, pomp and ceremony, and heartfelt stories of athletes winning gold and overcoming the epidemic.
Costs in Tokyo, of course, have risen as a result of the postponement. The delay, according to officials, added USD 2.8 billion to the ultimate figure. The postponement, as well as a later ban on fans, wiped off almost all of the ticket revenue, which had been projected at USD 800 million.
The Tokyo Metropolitan Government, most likely, will have to cover the shortfall.
Tokyo organisers raised a record USD 3.3 billion from domestic sponsors, led by Dentsu, Inc., the world’s largest advertising corporation. However, many sponsors openly complained in the run-up to the Games that their money was squandered because there were no spectators.
Because of widespread dissatisfaction with the Olympics being held in the midst of a pandemic, Toyota, one of the IOC’s top 15 sponsors, has suspended its Games-related advertising from Japanese television.
The International Olympic Committee, located in Switzerland, appears to be the great winner, having guaranteed broadcast rights income of USD 3 billion to USD 4 billion by staging the Olympics even without supporters.
The IOC is basically a sports and entertainment company, with broadcast rights accounting for about 75% of revenue and sponsors accounting for the remaining 18%.
The IOC was able to push the Games forward in part due to the conditions of the so-called Host City Agreement, which favoured the IOC over the Japanese hosts.
President Thomas Bach said in an interview last week that financial considerations were not a factor in the IOC’s decision to postpone rather than cancel the Games.
Bach stated, “We could have cancelled the Games 15 months ago.”
“From a financial standpoint, that would have been the most straightforward solution for the IOC. But we opted not to cancel the Games at the moment, and we didn’t use the insurance we had.”
The IOC has never stated how much insurance coverage it has or what is covered in such a situation.
So, what was Tokyo’s motivation for hosting the Olympics? Why does any city do this? The Olympics, according to German sports economist Wolfgang Maennig, provide minimal economic benefit. As a result, any value must be found elsewhere. He’s compared the Olympics to hosting a large party for your friends and overspending in the hopes that they leave delighted and remember you fondly.
“Economists concur that the Olympics have no major positive influence on national (or even regional) income, employment, tax revenue, tourism, or other factors,” Maennig, a 1988 Olympic gold winner in rowing, stated in an email.
Any gains, he claimed, would come from elsewhere, such as home-field advantage and more medals for domestic athletes, new sporting facilities, increased worldwide recognition, and accelerated urban renewal decision-making.
Japan’s Olympic performance has reflected this, with the country winning more gold medals and overall medals than it has in the past.
Construction companies and contractors receive a large portion of the Olympic income. Eight new venues were established in Tokyo. The National Stadium, which cost USD 1.43 billion, and the new aquatic complex, which cost USD 520 million, were the two most expensive projects. The next two Olympic organisers, Paris in 2024 and Los Angeles in 2028, have stated that new building will be significantly reduced.
Though the epidemic and lack of fans are likely to have caused short-term economic losses in Tokyo, such losses are minor in the context of a country with a GDP of USD 5 trillion.
In their research “Going for Gold: The Economics of the Olympics,” Robert Baade and Victor Matheson point out that Olympic investment is risky, with only a few reaping the advantages.
It is often far easier for the athletes to win gold than it is for the hosts under the existing system.