Official price tag for Tokyo Olympics is $15.4 billion. This figure, according to a University of Oxford study, is the highest ever recorded. What else can those billions be used for?
A $300,000 hospital with 300 beds in Japan would cost $55 million. These could be built in a total of almost 300.
Japan’s average elementary school costs around $13 million. You can get 1,200 schools for that amount.
A quick search reveals that a Boeing 747 costs around $400 million. There are 38 jumbo jets available for the Tokyo Olympics.
It is important to remember that Olympic Games can be costly and can cause other priorities to fall by the wayside. Several audits by the Japanese government have shown that the true cost of the Tokyo Games exceeds the official estimate, possibly twice so. Only $6.7 billion of the total cost comes from Japanese taxpayers. The latest budget shows that the IOC contributed $1.3 billion. After the pandemic, it contributed several hundred million more.
Olympic costs have been dissected in a study by the University of Oxford, which found that all Games since 1960 have had cost overruns averaging 172%. Depending on the cost figure, Tokyo’s overrun cost is either 111% or 244%.
In an email, Bent Flyvberg, an Oxford author, stated that the IOC, host cities, and IOC have no interest tracking costs. Tracking tends to reveal overruns which can be an embarrassment for IOC and host countries. Flyvberg pointed out that organizers would have their wallets opened by the IOC, which would reduce costs.
It can be tedious to track costs, and there are arguments about which expenses are Olympic. Flyvberg explained that different numbers can be “opaque” and not comparable and need to be sorted and tracked.
“The problem is detangling what Olympics cost and general infrastructure spending that would be happening anyways but was sped-up for the Olympics.” Victor Matheson wrote in an email.
He cites the 1964 Tokyo Games as an example. “Depending on the amount of preparation costs, they were either the cheapest or the most expensive Games.”
The 2008 Beijing Olympics, which are usually listed at more than $40billion, and the 2014 Sochi Winter Olympics (which cost $51billion) are often mistakenly cited as the most expensive.
“The costs for Beijing and Sochi will likely include larger infrastructure costs such as roads, rails, airports, hotels, and other infrastructure costs. Flyvberg stated in an email that our numbers don’t reflect this.
The IOC can present the Olympics as a global party that unites the world and promotes peace and cooperation by blurring the lines between costs and who pays. Everyone is seen as benefitting, and the financial interests for the non-profit IOC are concealed behind pomp and ceremony, national flags, heart-tugging stories of athletes winning gold or beating the pandemic.
The delay caused significant costs to Tokyo. Officials claim that the delay cost $2.8 billion more. Officials claim that the delay and subsequent ban on fans wiped out nearly all ticket sales income which was originally budgeted at $800 millions. The Tokyo Metropolitan Government will likely be responsible for this shortfall.
Tokyo organizers raised a record $3.3 billion from domestic sponsors, driven by giant Japanese advertising company Dentsu, Inc. In the lead up to the Games, many sponsors expressed their dissatisfaction that their money was not being used. Toyota, one of the IOC’s top 15 sponsors, pulled its Games-related advertising off television in Japan because of public discontent about holding the Olympics in the middle of a pandemic.
The International Olympic Committee in Switzerland, which holds the Olympics without fans, is the big winner. Its broadcast rights income ranges from $3 billion to $4Billion. The IOC is primarily a sports and entertainment company. It earns almost 75% from broadcast rights sales, with 18% from sponsors.
The IOC was able to drive the Games forward, partly because the terms in the so-called Host City Agreement favor the IOC and not the Japanese hosts.
Last week, President Thomas Bach stated that financial interests were not the main reason the IOC decided to postpone rather than cancel.
Bach stated that “we could have cancelled the Games 15 months before.” It would have been financially the best solution for the IOC. We decided not to cancel the Games and not to use the insurance that we had at the moment.
The IOC has not stated how much insurance it has in place for such eventualities nor what coverage is available.
Why did Tokyo decide to host the Olympics? Why would any city want the Olympics? Wolfgang Maennig, a German economist and sportsman, said that the Olympics provide little economic benefit. Any value must be found elsewhere. He often compared the Olympics to throwing a huge party for your friends and spending a lot of money, in hopes that they will remember you fondly.
Maennig, 1988 Olympic gold medalist in rowing wrote in an email, “After three decades’ of empirical research economists agree that Olympics do not generate any significant negative effect on national (or even regional) income, employment tax income etc.”
He stated that any benefits could be found elsewhere, and included home-field advantage, more medals for home athletes and new sporting facilities, international awareness, and quick-track decision-making around urban regeneration. Japan’s Olympic performance is in line with this; it has won more overall and gold medals than ever before.
Construction companies and contractors receive a large portion of the Olympic benefits. Tokyo built eight new venues. The National Stadium cost $1.43 Billion and the new $520 M aquatic center were the most expensive. Los Angeles in 2028 and Paris in 2024 are the next Olympic organizers. They have announced that they are cutting back on new construction.
Although Tokyo may have suffered some short-term economic losses due to the pandemic, absence of fans and other factors, these losses are small for a country with a GDP of $5 trillion.
Robert Baade, Victor Matheson and Victor Matheson have done another study on Olympic costs, “Going For Gold: The Economics and the Olympics.” They point out that Olympic investments are risky and only few people reap the benefits.
They stated that their goal was to have the hosting costs matched by the benefits shared so that ordinary citizens can contribute through their tax dollars. “In the current arrangement it is often much easier for athletes to win gold than for the hosts.”