Rome Business School study on Tokyo 2020
With an estimated 23.7 billion of euros, the final cost exceeds the budgeted expenditure
However, the television rights have guaranteed the International Olympic Committee revenues of approximately 4.4 billion dollars; Many sponsors, who accounted for about 18% of total revenue, also abandoned the event or downsized their presence; The analysis illustrates how, historically, the actual costs of the Olympic Games have always exceeded forecasts: emblematic in this sense are Montreal 1976, Barcelona 1992, London 2012 and Rio 2016; The Firm also takes stock of Milan-Cortina 2026, estimating the economic impact on Lombardy and Veneto at over 4 and a half billion euros.
Rome, 3 August 2021. Rome Business School has published the study: “Olympic Business: Opportunity or Failure?” (by Valerio Mancini, Director of the Research Center of the Rome Business School) which collects data on the economic consequences of Covid-19 on the Olympics in Tokyo. The study then carries out a forecast analysis on the Milan-Cortina 2026 Winter Olympic Games which will be held from 6 to 22 February.
The numbers of the Tokyo flop
Research reports that the one-year postponement of the Tokyo Olympics has already cost about $ 3 billion. The data collected indicate that the Tokyo 2020 Games will remain in the annals as the worst deal ever for the host country: the final bill for the Olympics will be at least 23.7 billion euros, exceeding the approximately 14 billion euros estimated that the Government hoped to amortize with the flow of tourists; well beyond the Rio 2016 Olympics (€ 16 billion), London 2012 (€ 17 billion) and Sydney 2000 (under € 6 billion). If 6.7 billion of private contributions are excluded, the coverage of the Games must be guaranteed by public funds. The sponsors cover about 18% of the total revenue, while 75% comes from the sale of the broadcasting rights of the races on TV and via streaming. Therefore, both the Japanese government and the local institutions of the capital will have to make up the deficit.
The limited public access and the turnaround of national sponsors (the resounding renunciation in this sense by the giant Toyota which, like others, has cancelled or reduced the promotional events initially planned) are the main causes of the flop: the budget of the Games estimated to raise $ 800 million in revenue from the sale of approximately 7.8 million tickets, but less than half have been sold and will now need to be reimbursed.
“However it ends it will be, therefore, the Olympics of records from an economic point of view,” says Valerio Mancini. Now, however, there will be the primacy of losses which, however, despite the solid economy and the renowned Japanese resilience, will be distributed unevenly. The Japanese taxpayers will undoubtedly pay the bill.” Especially since there will be no indirect benefits destined to raise GDP: the six hundred thousand foreigners who had already bought the tickets quoted have never arrived in Tokyo. Therefore, all the extra income that comes from the so-called collateral sectors and the expected boom in consumption will be missing. “It had been calculated that during the year there would have been at least 40 million visitors. Instead, the accommodation facilities remained empty throughout 2020 and 2021. It is no coincidence that the polls, a few days before the inaugural ceremony, show strong hostility from the population towards the Games. An absolutely unprecedented fact given the traditional discipline of the Japanese towards the authorities”.
However, the study reports, the International Olympic Committee will be able to reduce the damage thanks to the television rights that have guaranteed revenues of about 4.4 billion dollars, making all the national federations and minor sports that survive only thanks to a sigh of relief. the solidarity contributions of the Lausanne organization. In fact, 91% of the organization’s revenue is guaranteed by the sale of TV rights and by international sponsors who want to link their name to the five circles.
The turnover generated by an Olympics
With the aim of answering doubts about the positive effect generated by the organization of the Olympic Games, the research collects a series of data. “Very often, in the past, the calculations were wrong and the Games caused serious deficits for the host country”; The most striking case is that of Greece (2004): the expected costs were 4.5 billion dollars, the actual costs have turned into 8.9 billion. Considering the most recent editions, the most significant positive economic impact was had in Sydney 2000 (8 billion euro of related activities), with 90,000 new jobs generated in the period 1994 (year of application) – 2006. While for the Olympics in Rio de Janeiro in 2016, the largest Olympic Village in history was built, with 700 million dollars spent, but never converted.
“It is therefore obvious that a debate will rekindle, following the renunciation by the Municipality of Rome of the candidacy for the 2024 Games and the assignment of the 2026 Winter Olympics to Milan-Cortina: the economic potential and the real opportunities for a sporting event of this magnitude are not at all obvious.” The study mentions some forecast data relating to the Winter Games:
The economic repercussions that the 2026 Olympics will produce on the territories of Lombardy and Veneto would amount to four and a half billion euros;
The investment package would amount to 11 billion and over 60 works;
The budget drawn up by the Italian technicians provides for the allocation of over one billion and three hundred thousand euros for management, of which nine hundred million will be allocated by the same Committee while the remainder by the regions of Lombardy and Veneto and the autonomous provinces of Trento and Bolzano;
It is expected that 234 million euros will be earned from ticket sales alone;
The Olympic Village, an area of over 18 hectares, will cost almost one hundred million euros and, at the close of the Games, the 1,100 beds available will be converted into residences for university students.
“Historically, the actual costs of the Olympic Games have always exceeded expectations; moreover, if particular attention is not paid to the reconversion of infrastructures, then, as has already happened too often in the past, they risk turning into a real failure. The economic aspect, however, is not the only one to evaluate. In fact, the great economic and political powers go beyond the mere sporting result, seeing international sports competitions as an integral part of global geopolitical challenges and, therefore, the perfect opportunity to show themselves to the world. The Beijing 2008 and Sochi 2014 Games are an emblematic example of this, as they represented for China and Russia the perfect transformation of the Olympics into an instrument of political soft power”, concludes Mancini.
Read here the entire Report.