Tokyo Olympics’ staggering price tag and where it stands in history
Summary
Mounting pandemic challenges pushed the cost of the Summer Games to an unprecedented highThe Tokyo Olympics are set to be the most expensive Olympics on record. According to officials, the budget is $15.4 billion, but Japanese government auditors have said total spending tops $20 billion, almost three times the original forecast of around $7.4 billion when Tokyo put together its bid for the Olympics. That puts the Games $11.04 billion over the total cost of London’s Olympics, the next most expensive ever.
The Olympic Games are one of the most expensive mega events any country can organize, according to a study on Olympics costs. The average sports-related cost of hosting the Olympics is $12 billion, with nonsports-related expenses typically several times that, the study found. In the case of the Tokyo Games, postponing the event added $2.8 billion to its final cost, according to the organizing committee.
Spending spree
The single biggest cost of the Olympics has been the construction of venues. Eight venues were built specifically for the Games at a cost of around $3 billion. That includes the 68,000-seat National Stadium, completed in 2019, and two 15,000-seat arenas for swimming and volleyball. An additional 25 venues were renovated.
On a per-event basis, the price tag is also high. The average cost per event at the Summer Games is $22.4 million; $39.2 million for Winter.
Ballooning costs
The hefty price tag of the Tokyo Olympics isn’t just the result of the event’s postponement, though. Budgeting for the Games is traditionally subject to uncertainty, which results in large cost overruns. That has been the case every time since 1960.
In a 2020 study, “Regression to the Tail: Why the Olympics Blow Up," lead author Bent Flyvbjerg and his colleagues measured cost overruns. For example, if a Games was estimated to cost $8 billion but actually cost $12 billion, then these Games incurred a cost overrun of 50%. The baseline for measuring cost overrun is the cost estimate at the time of bidding for the Games.
The financial effects of games’ cost overruns can be long-lasting, according to the study. That was the case for Montreal, which took 30 years to pay off the debt it incurred by the 720% excess expenditure on the 1976 Summer Games. Likewise, cost overruns and related debt for the 2004 Games in Athens exacerbated the 2007-17 financial and economic crises.
In addition to costs being high, revenue is expected to be lower. The ban on spectators, which followed the government’s decision to declare a Covid-19 state of emergency in Tokyo lasting through the end of the Games, is also a blow to thousands of Japanese ticket holders and the local organizers, who will forfeit around $800 million in ticket revenue.
Plus, the number of people coming from overseas for the Olympics has been reduced by around two-thirds. Still, more than 50,000 athletes, officials, reporters and others are converging on Tokyo for the Games, making it the largest international gathering since the pandemic began.
Japan’s largest auto maker, Toyota Motor Corp., said it wouldn’t run advertisements in Japan connected to the Olympics during the Tokyo Games amid concerns in the country about the spread of Covid-19.
To be sure, even the worst estimates of losses from the Games are less than a percentage point of the size of Japan’s economy. Takahide Kiuchi, an economist at Nomura Research Institute, said there was still a potential payoff from people overseas who will watch the Tokyo Games and decide to visit Japan after the pandemic.
This story has been published from a wire agency feed without modifications to the text.
