When Tokyo was awarded the 2020 Summer Olympics, organizers were jubilant. The event would serve as a public relations bonanza, showing the world Japan had overcome its long period of economic stagnation and the embarrassment caused by the Fukushima nuclear disaster.
But things didn’t go exactly as planned -- and not only because of the coronavirus pandemic, which forced the games to be delayed by a year.
There was the expensive proposal for Tokyo’s main Olympic stadium, which was ditched after being widely mocked for resembling an oversized bicycle helmet, an intergalactic spaceship, and a "turtle waiting for Japan to sink so that it can swim away."
There was the original Tokyo Olympics logo, which had to be scrapped after accusations it plagiarized the emblem of a theater in Belgium.
There was the president of the Tokyo Olympics organizing committee, who this week acknowledged he may have to resign following outrage over his recent comments that women talk too much in board meetings.
And of course, there was the coronavirus postponement, which organizers say will cost nearly $3 billion.
According to some estimates, Japan will have spent as much as $35 billion to host the games, smashing through the original $7.5 billion budget. Organizers contest the larger figure, saying many of those expenses are for projects not directly related to the games.
But that's of little comfort to some in Japan. According to several opinion polls, most Japanese citizens now want the games canceled or postponed, with many fearing a COVID-19 super spreader event.
“This was a disaster in the making in the first place, even before COVID,” says Victor Matheson, a sports economist who focuses on the Olympics.
The situation has added more urgency to calls for radical changes in how cities host the Olympics. Many now see the games as a debt trap for host cities, resulting in sports venues and other facilities that often lie vacant or are under-used when the games wrap up.
“[Tokyo] is certainly one more nail in the coffin” for the way the games have been traditionally hosted, says Matheson, a professor at the College of the Holy Cross in Massachusetts. “But the coffin was pretty well-constructed here over the last five years."
Always over budget
According to a recent study from Britain’s Oxford University, the Tokyo Olympics are the most expensive summer games ever.
But even when host countries aren’t tasked with figuring out how to host the games during a global pandemic, expenses consistently run out of control.
The Oxford study found that every Olympics since 1960 has run over budget, at an average of 172%.
A few infamous examples:
- In 1976, Montreal overspent its original budget by 720% and spent the next three decades paying it off, according to the Oxford study.
- The Athens 2004 Summer Games went double the initial budget and was frequently cited as contributing, at least in some part, to Greece’s wider financial crisis.
- The 2016 Rio de Janeiro games took place during the middle of an economic crisis so severe that Rio’s governor declared a state of emergency to secure funding for the event.
Fewer countries bidding
Stories like that help explain the steady decline in the number of countries bidding to host the Olympics.
The numbers are staggering: whereas the 2004 Olympics attracted 11 bids, that number dwindled to five for the 2020 event. For the 2026 games, there were just two candidates after a wave of countries pulled their bids.
The bidding shortage was so severe that the International Olympic Committee (IOC) announced the winner of the 2024 and 2028 games at the same time.
“They were legitimately worried that no one was going to bid for the 2028 Olympics,” says Matheson.
COVID debt crisis
The bidding crisis may not get better anytime soon, especially as governments deal with unprecedented pandemic-related debt.
Global debt exploded over the past year, as governments aggressively stepped up stimulus spending to curtail the economic impact of the pandemic. According to an estimate by the Institute of International Finance, worldwide debt increased by over $17 trillion to an all-time high of $275 trillion last year.
Once the coronavirus stimulus splurge slows, governments may become more frugal, the Oxford paper noted.
“Post-COVID-19, the appetite and ability for governments to go into further debt or pay a subsidy to finance the Olympic Games will likely be low and the pressure to keep costs down will likely be high,” it concluded.
Possible changes
So what can be done to fix things?
One person with some suggestions is Andrew Zimbalist, author of Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup.
Zimbalist, an economics professor, proposes naming permanent host cities for the summer and winter games -- or if that wouldn’t work, designating several rotating sites.
“That way you don’t have to rebuild the Olympic Shangri-La every four years to some other place in the world, which is financially and environmentally very costly,” he says.
Zimbalist also says the IOC should contribute more money to cities hosting the games.
For Tokyo, most of the bill will fall to Japanese taxpayers. (About $5.6 billion of the Tokyo budget is private money, including $1.3 billion from the IOC. The organization has also pledged another $650 million to support the postponement.)
Another area of possible reforms, according to analysts, is TV revenues for the games, which overwhelmingly go to the IOC.
“It used to be that the IOC shared the bulk of television revenue with the host city, some 70-80% of it," Zimbalist says. "These days, they’re sharing close to 20%."
While the IOC sells the TV rights, Japanese organizers sell the tickets. That won’t help Japan much, especially if, as expected, few or no fans will be allowed at the games.
IOC response
In an email, the IOC defended its approach, pointing to recent reforms meant among other things to discourage host cities from building unnecessary Olympic venues.
“Instead, competitions should be held in the most suitable existing facility, even if that means hosting events in different cities, regions, or countries,” the IOC email read.
For the 2024, 2026, and 2028 games, more than 90% of the venues will be existing or temporary, the statement said.
“Because the IOC is a non-profit organization, 90 percent of the revenues from the Games go straight back into sport and athlete development,” it added.
For Tokyo, that may be too late, says Zimbalist.
“They were hoping for a public relations boost from hosting the games. Maybe they can rescue some of that,” he says, but adds: “It’s pretty clear that the $30 (billion), $35 billion investment is going to waste, one way or another. There’s not much they can do about it.”