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The Most Expensive Olympic Games Ever
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After a one-year delay due to COVID-19, the Tokyo Olympics are off to a hot start. There have been more than 100 medals handed out already, with some incredible & inspiring storylines playing out:
Hidilyn Diaz dominated the women’s 55kg weightlifting event, bringing a gold medal home to the Philippines for the first time in Olympic history.
Yuto Horigome, the son of a Tokyo taxi driver, won the first-ever Olympic gold medal in skateboarding just 8 miles from where he grew up.
Flora Duffy, a 33-year-old triathlete from Bermuda without a coach, bike mechanic, etc., won a gold medal in the women’s triathlon, bringing Bermuda home its first-ever gold medal.
Here’s where the medal count currently stands.
Olympic Medal Count (gold, silver, bronze)
United States: 22 medals (9g, 5s, 8b)
China: 21 medals (9g, 5s, 7b)
Japan: 17 medals (9g, 3s, 5b)
The part you didn’t know: This Olympic games is not only on track to become the most expensive Olympic competition in history but more importantly, Tokyo is now expected to lose billions of dollars due to COVID-19.
In 2013, when the International Olympic Committee (IOC) first awarded Tokyo the 2020 Olympic games, there was a celebration. Sure, organizers expected the event to cost about $7.5 billion in total, but the general thought process is that an influx of economic activity from tourism — before, during, and after the games — would create significantly more value, potentially $20 billion or more.
But with the COVID-19 pandemic essentially shutting down the entire world for more than a year, the 2020 Olympic Games suddenly became the 2021 Olympic games, flipping all economic estimates upside down.
The result? According to the Wall Street Journal, Japanese officials now expect the Tokyo Olympics to cost more than $25 billion in total, almost three times the original forecast of around $7.4 billion when Tokyo put together its Olympic bid.
That would make Tokyo 2021 the most expensive Olympic games in history.
Furthermore, here’s another interesting chart from the Wall Street Journal showing how costs for the Tokyo Olympics compare on a per-event basis.
Tripling your starting budget is obviously not great, especially when it causes you to become the most expensive Olympic games in history. Still, government officials should have somewhat expected this. The Montreal Olympics ended up costing 7x estimates in 1976, Barcelona ran 2.5x over budget in 1992, and costs associated with Rio 2016 ended up at 3.5x estimates.
Average Cost Overrun
Summer Games: 213% over budget
Winter Games: 142% over budget
However, the real problem comes when you spend 3x more than your initial budget and fans can’t attend the events due to a once-in-a-generation pandemic. For example, 50,000 athletes, officials, and reporters will still travel to Tokyo for the games, but that’s only 1/3 of expectations and will cost Tokyo more than $800 million in lost ticket revenue alone.
As a result, estimates suggest that Tokyo avoided more than $40 billion in losses by not canceling the games, but without fans, they are expected to lose nearly $22 billion in total. That’s almost as much as the 2012 London & 2016 Rio Olympic games cost to put on….combined.
You’ll see reports claiming that local government officials still expect an influx of tourism-related expenditures following the Olympics — people who watched the games & decide to travel to Tokyo next year — but let’s be honest, Tokyo is still going to lose tens of billions of dollars.
This isn’t necessarily an indictment on Tokyo’s ability to run the Olympics. COVID put them in a no-win situation, and even the worst estimates still represent less than a percentage point of Japan’s total economy. Still, you have to imagine they’d like a re-run at this.
Have a great day, and I’ll talk to everyone tomorrow.
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