Financial Impact Of 2020 Olympics Delay

The early 2020 onset of the coronavirus (COVID-19) pandemic posed a collection of unique financial and societal challenges. Extreme pricing volatility struck nearly every asset class including currencies, commodities and equities. Travel restrictions and prolonged quarantines made conducting business-as-usual impossible. For a majority of the world's citizens, everyday life was altered in ways unimaginable only a few months earlier.

This included one of the world's time-honoured traditions, the 2020 Summer Olympic Games. Scheduled to begin on 24 July in Tokyo, Japan, the Games of the XXXII Olympiad were delayed by a full year (July 2021) due to the COVID-19 contagion. Given the massive up-front capital investment, the financial ramifications of the delay posed great concern to all associated with staging the games.

The Cost Of Hosting The Olympic Games

Dating back to the first Olympics of the modern era in 1896[1], the economic impact of the games has grown exponentially. Cities and countries interested in hosting the games commit large sums of money, including administrative fees, construction costs and infrastructure development. While the investments are expected to yield positive returns, assumed debt and preliminary capital allocations are extensive.

The actual cost of hosting the Olympic Games can be enormous. For comparative purposes, expenses are characterised in three primary ways:[2]

  • Operational costs: These expenses are incurred by the Organising Committee for securing host nation status and staging the games. Administration, technology, ceremonies and medical services are a few examples.
  • Direct costs: These are incurred by the host city, nation or investors involved in building essential facilities. Construction of competition venues and accommodations for participants are illustrations of direct costs.
  • Indirect costs: These costs refer to any money spent in upgrading existing infrastructure. Primary indirect costs are local to transportation and include expenditures for building road, rail and air facilities.

In the modern era, initial budgets and final price tags for hosting the Olympics are massive. According to studies from the 2012 London Summer Olympics, the U.K. incurred a final cost of US$14.8 billion, representing a budgetary overrun of 133%.[2] High-end estimates for the 2020 Tokyo Olympics came in as exceedingly more expensive, with a reported US$25.2 billion spent in preparation for the games.[3]

Is Hosting The Olympics A Good Deal?

Although the host cities for the Olympics gain popularity and fanfare, the return on investment (ROI) isn't always a financial windfall. The absorbinate costs associated with winning the bid, upgrading facilities and physically hosting the event frequently result in budget overruns.

While substantial profits may be realised from presenting the games, gains are far from guaranteed. In fact, since 2004, Olympic venues have experienced inconsistent ROI. Below are a few of the more notable figures:

  • Rio De Janeiro, Brazil 2016: In 2016, the Rio De Janeiro Summer Olympics rendered a final price tag of US$13 billion, well over projections of around US$3 billion. The added cost is credited with prolonging an existing recessionary cycle in Brazil.[4]
  • Sochi, Russia 2014: The 2014 Winter Olympics in Sochi cost in the neighborhood of US$50 billion. This expense shattered the initial budget of US$12 billion and generated a modest US$53 million in profit.
  • Beijing, China 2008: In 2008, China spent more than US$40 billion on the Summer Games. China realised a US$146 million profit.
  • Turin, Italy 2006: As a host of the 2006 Winter Games, Turin ended up sustaining a loss of US$3.2 million. The deficit represented 2% of its US$1.58 billion operating budget.
  • Athens, Greece 2004: One of the largest financial failures of the modern Olympic era, the cost overrun of the Athens games led to a staggering debt load. With an initial budget of US$4.6 billion, the Athens Summer Olympics accrued between US$14 billion and US$15 billion in debt. The economic stress created by the 2004 games is often credited with ushering Greece into a financial crisis.

From a historical standpoint, the financial impacts of hosting the Olympics vary wildly. While revenues from tourism and television contracts are expected to outweigh enormous up-front capital expenditures, they often fall short. Subsequently, crippling debt loads, economic pressure and abandoned facilities commonly plague host cities when the Olympics finish.

Economic Impact Of The Coronavirus (COVID-19) Delay On Japan

As the world's third-largest economy, Japan was well-positioned to host the 2020 Summer Olympics. However, the COVID-19 pandemic brought about a public health emergency that postponed the games until July 2021. The delay could prove costly given the extent of capital investment made by private entities, the host city of Tokyo and the Japanese government.

At year end 2019, organisers estimated that hosting the Tokyo games was to carry a final expense in the neighborhood of US$12.6 billion. This cost is split between the city of Tokyo (US$5.57 billion), the Japanese Olympic Organising Committee (US$5.62 billion) and the central government (US$1.40 billion). Early on, the investments bore fruit with the Tokyo games securing a record US$3 billion in domestic sponsorship. Further, exclusive partnerships with corporate interests such as Toyota, Bridgestone, Panasonic and Samsung boosted financial expectations.

Despite the promising pre-Olympic business atmosphere, the COVID-19 outbreak prompted many to take an ominous view toward the Tokyo games. Whether the games were to proceed as scheduled, be cancelled, or delayed, the eventual impact was thought to be severe. For instance, a cancellation was estimated to result in a 0.2% reduction in 2020's third-quarter GDP from lost tourism spending alone.

Upon the games being officially postponed, much of the uncertainty resided. Aggregate losses due to the delay were projected to be between US$5.42 billion and US$6.32 billion. Investment bank Goldman Sachs forecasted that Japan would lose US$5.1 billion in domestic consumption for 2020. Dramatic reductions in tourism, television and advertising revenues were the key drivers of the losses.

Unfortunately for Japan, a 2013 agreement with the International Olympic Committee (IOC) assigns most of the postponement costs to the host city/nation. Contracts state that in the face of any unforeseen hardship the host city/nation may request "reasonable changes" to existing arrangements. However, the IOC is "not obligated to consider, agree to or otherwise accomodate any such changes."

Although the 1-year delay may pose many unforeseen challenges, the responsibility will fall upon the city of Tokyo, the Organisation Committee, corporate partners and the Japanese government to manage the fallout.


The COVID-19 pandemic brought unprecedented tumult to the realms of commerce, finance and sport. Among the victims was the 2020 Summer Olympic Games in Tokyo, Japan. As of this writing (12 April 2020), the Games are scheduled for July 2021, but even that date is far from concrete. According to Toshiro Muto, CEO of the Tokyo Organising Committee, COVID-19 could threaten the 2021 games:

"I don't think anyone would be able to say if it is going to be possible to get it [COVID-19] under control by next July [2021] or not. We certainly are not in a position to give you a clear answer."

Given the global humanitarian and financial costs of the coronavirus contagion, the postponement of the 2020 Tokyo Olympics is a secondary concern. Nonetheless, the delay will significantly impact the bottom line of the games. If delayed or cancelled in 2021, the economic ramifications for all involved will likely prove severe.



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