Japan sets the record for most expensive Summer Olympics: at least 13 billion euros

Erasmus School of Economics

After a battle between countries, Japan came out victorious: the International Olympic Committee (IOC) endorsed Japan to organize the 2020 Summer Olympics. By now, estimated costs have reached the astronomic amount of 1,644 billion yen, or 13 billion euros. Can this event ever be profitable and was this foreseeable? Sports economist at Erasmus School of Economics Thomas Peeters elaborates in an article from De Tijd.

Due to the COVID-19 pandemic, the Summer Olympics 2020 unfortunately had to be postponed. Even though this will lead to higher costs, this is not the only explanatory factor for the exorbitant price tag. The Japanese organizing committee have had insane aspirations since the start: the initial budget almost tripled the current cost forecast with 30 billion euros. Despite the seemingly fantastical costs, Peeters isn’t surprised at all: ‘Tokyo are with certainty to be the most expensive Games ever. The postponement is just one reason. The event just gets more expensive each year. The statistics confirm the trend’.

Infrastructure

According to Peeters. the biggest component of the costs is the infrastructure that has to be built. The IOC demands infrastructure to be constructed that is wholly unnecessary to cities. Peeters phrases it in a compelling way: ‘when will you ever again need a swimming pool with seats for 5,000 spectators?’. Before the pandemic, estimates indicated that Tokyo’s visitors would amount to 40 million people, generating a revenue of 100 billion euros. Part of this estimate can be explained due to the cost of living in Tokyo: five days of Tokyo will cost on average between 2,500 and 3,000 euros. However, these estimates have become a mere dream: it is almost certain that these numbers will not be reached. Many western nations will have made lots of progression regarding vaccinations, but the distribution of vaccinations is unequal: ‘What about all of the Brazilians, Indians or South-Africans that want to attend the event? Or the Arabic tourists?’. According to Peeters, the return on investment of Olympic Games always is negative. The only version that has ever been lucrative, is the 1984 Summer Olympics in Los Angeles. However, this has been the only year where there were no competing countries: this meant that Los Angeles didn’t need to beat offers of other cities with even more insane projects.

Possibilities to cut costs

There are only two ways to reduce costs. The most sensible and sustainable plan is to appoint one city for the duration of the Games. However, this is politically infeasible. Another way to resolve the problem, is to reach a higher level of organization between competing cities. If all cities would reach an agreement on a budget cap, cities wouldn’t have to dig as deep into their own pockets to secure the Games. In this way, it is possible to make a stand against the IOC.

One thing is clear: even though the Japanese people aren’t enthusiastic anymore, Tokyo will become the most expensive. To quote the governor of Tokyo: ‘The Games will continue, in any possible way and against all costs’.

Associate professor
More information

You can read the article from De Tijd, 23 December 2020, here.

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