Editor: Preya Pandya. Read time: 9 mins.
India finished 48th on the medal tally in Tokyo, its highest in over 4 decades. 1 gold, 2 silver, 4 bronze- a very proud moment for India. Here are the men and women of steel and thunder who made India proud and gave Indians something to cheer for in these dark times of a deadly pandemic. Neeraj Chopra won gold in Athletics in Men’s Javelin throw. Silver won by Mirabai Channu in the 49kgs weightlifting category, and another won by Ravi Kumar Dahiya in wrestling. The men’s Hockey Team won a bronze. The other bronze medals were won by PV Sindhu in Badminton, Lovlina Borgohain in boxing, and Bajrang Punia in wrestling again. Let’s look at this historic event- The Tokyo Olympics 2020.
The Tokyo Olympics 2020, which was postponed to 2021 due to the Coronavirus Pandemic, has been catching our attention in the news for the last two weeks. The 2020 Summer Olympics, officially the Games of the XXXII Olympiad and branded as Tokyo 2020, was an international multi-sport event held from 23 July to 8 August 2021 in Tokyo, Japan, with some preliminary events that began on 21 July. The 2020 Games are the fourth Olympic Games to be held in Japan. Tokyo is the only city in Asia so far to hold the summer Olympics twice. The Olympic Games are the largest, the highest-profile, and the most expensive event to exist. The cost involved in hosting the event is even more gigantic than we could ever imagine. There are always unpredictable expenses that exceed the decided budget. This cost is called Cost Overrun. Usually, 172% is the average cost overrun of all Olympic Games. Let’s look at the economics behind hosting an Olympics.
A growing number of economists argue that both the short and long-term benefits of hosting the games are at best exaggerated and at worst nonexistent, leaving many host countries with large debts and maintenance liabilities. Cities must first invest millions of dollars in evaluating, preparing, and submitting a bid to the IOC. The cost of planning, hiring consultants, organizing events, and the necessary travel consistently falls between $50 million and $100 million. Tokyo spent as much as $150 million on its failed 2016 bid, and about half that much for its successful 2020 bid, while Toronto decided it could not afford the $60 million it would have needed for a 2024 bid.
Once a city is chosen to host, it has nearly a decade to prepare for the influx of athletes and tourists. The Summer Games are far larger, attracting hundreds of thousands of foreign tourists to watch over ten thousand athletes compete in about three hundred events, compared with under three thousand athletes competing in about one hundred events during the Winter Games. The most immediate need is the creation or upgrading of highly specialized sports facilities such as cycling tracks and ski-jumping arenas, the Olympic Village, and a venue large enough to host the opening and closing ceremonies. There is also usually the need for more general infrastructure, especially housing and transportation. The IOC requires cities hosting the summer games to have a minimum of forty thousand available hotel rooms, which in Rio’s case necessitated the construction of fifteen thousand new hotel rooms. Roads, train lines, and airports need to be upgraded or constructed.
Altogether, these infrastructure costs range from $5 billion to over $50 billion. Many countries justify such expenditures in the hopes that the spending will outlive the Olympic Games. For instance, some 85 percent of the Sochi 2014 Games’ more than $50 billion budget went to building non-sports infrastructure from scratch. More than half of the Beijing 2008 budget of $45 billion went to rail, roads, and airports, while nearly a fourth went to environmental clean-up efforts. Operational costs make up a smaller but still significant chunk of hosts’ Olympics budget. Security costs have escalated quickly since the 9/11 attacks—Sydney spent $250 million in 2000 while Athens spent over $1.5 billion in 2004, and costs have remained between $1 billion and $2 billion since.
Also problematic are so-called white elephants or expensive facilities that, because of their size or specialized nature, have limited post-Olympics use. These often impose costs for years to come. Sydney’s Olympic stadium costs the city $30 million a year to maintain. Beijing’s famous “Bird’s Nest” stadium costs $460 million to build and requires $10 million a year to maintain and sits mostly unused. Almost all of the facilities built for the 2004 Athens Olympics, whose costs contributed to the Greek debt crisis, are now derelict. Gangwon, the South Korean regional government responsible for most of the 2018 games’ infrastructure, is expected to incur an $8.5 million annual deficit due to the upkeep of unused facilities.
This time, for the Tokyo Olympics, there were many other factors as well that contributed to the huge cost. The postponement cost them an additional $2.8 billion to the total outlay. With a summer surge of COVID-19 in many parts of the world, including in Japan, the decision was made to bar spectators. Without fans, international tourism will not provide the spending needed to make up for the costs incurred by the Japanese government. While the economic cost will be substantial, the health cost could be even higher. As of July 20, 2021, days before the opening ceremonies, 71 athletes had tested positive for COVID-19. That same week, Japan reported an increase in cases of more than 1,700 cases, a 26% increase over the previous week.
Beyond that, Tokyo was expecting tourists to come in and buy merchandise, stay in hotels, and consume japanese goods and services in general. None of that happened and that cost estimated to be at least $2 billion.
Also, the pandemic crippled Japan’s ability to get the costs back. Due to the lack of spectators, the loss in ticket sales was roughly around $800 million.
One might ask, if there are so many disadvantages and expenses why might a city choose to host the Olympics? Let’s look at some of the benefits of hosting the Olympics-
Cities hosting the Olympics gain temporary jobs due to infrastructure improvements that continue benefiting the cities into the future. For example, Rio constructed 15,000 new hotel rooms to accommodate tourists. Sochi invested approximately $42.5 billion in constructing non-sports infrastructure for the 2014 Olympics. Additionally, thousands of sponsors, media, athletes and spectators typically visit a host city for six months before and six months after the Olympics, which brings in additional revenue. It is also a matter of national pride and putting the city on the map. During the Olympics, the eyes of the entire world are on the city and the country hosting it. Some countries have hugely benefited from hosting the Olympics in the past with a surge in tourism.
To conclude, hosting the Olympics tends to result in severe economic deficiencies for cities. Unless a city already has the existing infrastructure to support the excess crowds pouring in, not hosting the Olympics may be the best option and of course, with COVID cases rising again in Tokyo it might make the pandemic worse. Let’s see how the Tokyo 2020 Olympics pan out for Japan’s economy. Do you think it is advisable for a country to host the Olympics after looking at these facts?
