The Hidden Costs of Hosting Tokyo 2020

Tokyo Big Site in Odaiba
Tokyo Big Site in Odaiba

There were fears at one stage that costs of the Tokyo2020 Olympics would balloon to some USD30 billion, which would approach the USD40 billion that was spent on the 2008 Beijing Olympics.

While it is unlikely that cost estimates will drop to the initial budget of USD7.5 billion, the amount presented to the selection commission of the IOC at the bid presentation, the IOC and the organizers of Tokyo2020 are hoping to get the costs below USD 15 billion.

Currently, costs estimates for Tokyo2020 are JPY1.8 trillion or nearly USD16 billion. But there are always hidden costs, or at least costs not spoken about openly, like cost overruns. In this March 2017 article, The Japan Times cites Asahi Shimbun, which reported that “the original bid estimate for constructing new Olympic venues was ¥499 billion and that is now ¥680 billion. Transportation costs have increased from ¥23.3 billion to ¥140 billion, security from ¥20.5 billion to ¥160 billion and ‘software’ expenses from ¥257 billion to ¥520 billion.”

Currently, organizers intend to host the media and broadcasting center for the 2020 Tokyo Olympics at Tokyo Big Sight, which is a large convention center in the Odaiba waterfront district. To accommodate the Olympics, plans include closing off the convention center to all trade shows from April 2019 to November 2020. In a January, 2017 article, The Japan Times cites The Japan Exhibition Association, which claims that the shut down could translate to more than ¥1 trillion in lost sales and affect 1,000 companies associated with the exhibition industry, including booth decorators and logistics firms, if exhibitions are canceled or downsized.

It’s a “matter of life and death,” said Masato Suzuki, deputy general manager of Tokyo-based manufacturer Sanko Tsusho Co. Ltd.’s inspection equipment department. “We small and midsize firms don’t want the Olympics if it means canceling or scaling down exhibitions. It’s by far our most important business opportunity,” he said, adding that about 70 percent of his company’s sales are generated by clients established at the exhibitions.

In a May, 2017 article in Japan Today, it was reported that the city government may be losing a fight to get the national and regional governments to pick up part of the costs of refurbishing sports venues or building temporary sports venues in locales outside Tokyo. As an example of possible costs unanticipated by the organizers in Tokyo, the governor of Kanagawa is looking to add to the bill. Enoshima, the intended venue for sailing events, is a part of Kanagawa prefecture. Governor Yuji Kuroiwa believes his prefecture will have to compensate fishermen who will be prevented from fishing during the Olympic Games, and thus will lose revenue.

Very often, organizers cite the increase in tourism revenues for a city and country hosting the Olympics. But that argument is countered by economist, Andrew Zimbalist, in his book, Circus Maximus – The Economic Gamble Behind Hosting the Olympics and the World Cup. He explained in his book that at big tent events like the Olympics or the World Cup, tourism actually falls.

Still another problem is that when a foreign soccer fan spends $100 at a Brazilian restaurant during the World Cup competition, it might not be a net gain for the Brazilian economy. This is because between June 12 and July 13, 2014, there may have been tens or hundreds of thousands of people (tourists or businesspeople) who would otherwise have traveled to Brazil but instead chose to avoid the congestion, tight security, and high prices during the World Cup and either went elsewhere or stayed home.

This plays out in real life: tourism in Beijing fell during the 2008 Summer Games, as it did in London during the 2012 Olympics. That is, even counting the athletes, the media, the administrators, and the Olympic tourists, the total number of visitors to these cities fell during the month of the Olympic Games. Further, some local residents may have the same impulse that foreigners have: they believe their city or country will be excessively crowded and expensive during the mega-event and that the period of the competition would be a good time to take a vacation outside the country. The amount of outbound tourism from China grew by 12 percent in 2008, the year China hosted the Summer Olympics.

Will the pride that comes with hosting a successful Olympics, and the legacy infrastructure of the 2020 Tokyo Olympics outweigh the hidden costs of running the biggest show on earth? That’s the debate that’s taking place as we head towards September 13 and the IOC meeting in Lima, Peru, when IOC members gather to decide on the fates of Paris and Los Angeles.