The Tokyo Summer Olympics were successfully conducted and concluded on the 8th of August 2021, and will go down in history as one of the most challenging Olympics to have ever been conducted, owing to the complications arising from COVID-19. It is interesting to note however, that even with the current crisis that Japan is facing either in terms of the cases or the economic recovery problems they are facing, the games still went on, albeit in the absence of spectators completely, and with multiple protective regulations in place.
In the scope of this article, we hope to understand how much the pandemic actually costed Tokyo, and the Olympics.
To gather some context, it is important to note that most cities that host the summer Olympics historically have always faced a loss economically, and have not seen a huge profitable turnover (with exceptions). Thus, going into the Olympics, Tokyo knew that there was a large probability that the city would not see a net profit or even a very minimum profit, but a more likely scenario would be seeing short term economic losses. The reason that we say short term economic loss, is because most cities have been able to churn out social and economic benefits in the long run (with exceptions).
Let us take the the example of the very same city, with Tokyo also hosting the Olympics of 1964, which had seen great success.
This was due to the fact that the olympics paved way for Japan to invest in infrastructure, such as the Shinkansen Bullet train and an expressway linking the airport to the city center, which were important developments that benefitted the public at large.
It was imminent that the games were to be conducted, as decided by the International olympic Committee(IOC) and the city. However, there were two potential problems that were to be noted
The games causing a rise in the number of cases, further hurting the recovery of the country
The impact of hosting the games with no spectators, to minimise the potential of the 1st problem
To look into the first problem, a little bit of background of Tokyo as a city, and how COVID affected them. Japan did see a massive number of COVID cases, and there economy having large scale effects. With three pandemic related shutdowns, the country has seen losses of almost $145 billion USD. The last they could afford, was another complete shutdown if there were to be a spike in cases again. This was also made difficult by the fact that as of Jun 2021, only 6% of the country had been fully inoculated, and an additional 10% had been partially vaccinated, which were relatively low numbers, although Tokyo did see a slightly greater percentage of vaccinated people in and around the city.
Due to all of these, the last thing that the city could see was another complete shutdown with no economic output. Even if the games were to be conducted, they could see very mean to almost no profits, depending on whether spectators would be allowed or not.
When weighed against the potential losses, the best case scenario of having profits would still probably be very problematic for the economy as a whole if there were to be a spike in the cases. The postponement did not help Japan’s case economically, as there were additional expenses as a direct result of the postponement of the games. Japan could also not break the contract with the IOC, as the costs of breaking the contract would also be enourmous, which would not be a desirable situation.
However, the government were quick to realise this problem that could arise, which is when they instituted a state of emergency within certain major parts of the country. This largely restricted movement of people, which meant that the propensity for the spread of the virus would be minimum, while not affecting the Economic activities to a great degree, especially primary activities. It also gave time for the government to plan a vaccination drive in order to boost the vaccinations, which would speed up the recovery. However, conducting the games also meant that various safety measures needed to be in place, which also resulted in additional expenditure to prevent COVID-19 infection at the games and at the Olympic Village.
Now, coming to the 2nd major problem, which turned out to be the reality in order to curb the massive effects of the first problem. The entirety of the games were conducted without any spectators, and were also successful to a large degree as the cases had not significantly risen across the country, apart from specific cases at the Olympic Village. However, not having visitors affected the income that was to be derived either directly in the form of ticket sales and accomodation, or indirectly in the form of tourism also increasing as a result of this. Foreign tourists were expected to spend about 151.1 billion Japanese yen during the course of the games and it’s associated activities, which disappeared due to Japan not accepting foreign visitors. When the entirety of the olympics, including the Paralympic Games when considered, the total expenditure was estimated to hit about 207.9 Billion Japanese yen, according to a report published by the Tokyo Government in April 2017.
Even in the alternate best case scenario wherein domestic tourists were allowed to attend did occur, the spending would be very minimal due to the impacts of the pandemic on the residents, and the fact that inbound consumption in the form of accommodation and other related activities would be absent. However, even this did not happen as residents were also not allowed into the stadiums. Added on to this, around 600,000 tickets were also refunded to the spectators after the decision to not allow them to spectate.
However, what did occur was the worst case scenario, wherein even domestic spectators were not allowed to spectate. According to the Nomura research institute, this would accommodate for losses of about 147 Billion Japanese Yen, which is a significantly large amount. These losses are a result of the spending on dedicated infrastructure such as stadiums and the olympic village, along with associated operating costs, that saw no return on the investment. It is very difficult to accurately mention or even predict how much the actual losses would have been, which only time can tell.
While these Olympic Games might have been the most successful in terms of organisation, logistics and the shear conduct of the events, in what may have been the most difficult period in over a century, it has certainly cost the city of Tokyo economically, and the impacts of this might spill over to general spending and economic recovery of the country. However, given the circumstances and the amount that Tokyo did stand to lose in terms of either the number of cases rising leading to another shutdown, or in terms of the multiple probable cases of having spectators, this was probably the most effective and efficient way in which it could have been conducted while minimising losses.
Comments