Counting the cost of delayed Olympics

• From media to tourism, the financial hit straddled many sectors — and will be even bigger if the event is cancelled

Despite growing local opposition amid the coronavirus pandemic, the Tokyo Olympic Games, which were postponed in 2020, will get under way in less than two months — barring “Armageddon”, as one International Olympic Committee member said. But the delay so far has been expensive across many sectors.

Despite growing local opposition amid the coronavirus pandemic, the Tokyo Olympic Games that were postponed in 2020 will get under way in less than two months — barring “Armageddon”, as one International Olympic Committee member said.

But the delay so far has been expensive in various ways. Here are some areas where costs have grown, and where income that had been expected will not materialise.

OLYMPIC COSTS

Organisers said in December 2020 that the entire cost of holding the Games would come to about $15.4bn, including $2.8bn in costs for the unprecedented postponement from 2020. Since then, the projected bill for postponement has risen to $3bn.

Figures released in December estimated that ticket sales would contribute $800m for the Tokyo organising committee. But much of this could be lost given that foreign spectators are banned, and domestic fans may be sharply limited in number at best, or even absent — a decision on whether to admit Japanese fans is expected later in June.

Local ticket sales have typically accounted for 70%-80% of the total at past Olympic Games. Organisers said in March, when foreign fans were banned, that they planned to refund about 600,000 tickets but did not say how much this would cost.

SPONSORS

More than 60 Japanese companies together paid a record of more than $3bn to sponsor the Games. Sponsors paid another $200m to extend contracts after the Olympics were postponed.

That does not include partnerships with Japanese companies Toyota, Bridgestone and Panasonic, and others such as South Korea’s Samsung, who through a separate programme for top-tier sponsors have separate deals with the International Olympic Committee (IOC) worth hundreds of millions of dollars.

INSURANCE

Though the cancellation scenario is looking unlikely, insurers would face a hefty bill should that happen, with estimates running to a loss of $2bn-$3bn.

The IOC takes out about $800m of protection for each Summer Games, which covers most of the roughly $1bn investment it makes in each host city.

Local organisers in Tokyo will have taken out a further policy, estimated at about $650m.

INSURED COST

Analysts with the financial services firm Jefferies estimate the insured cost of the 2020 Olympics at $2bn, including TV rights and sponsorship, plus $600m for hospitality.

Broadcaster NBCUniversal had reaped a record $1.25bn in US national advertising spending for the Games before they were postponed in 2020 and has spent the past year trying to get sponsors to support them this year, entertainment business magazine Variety reported.

NBCUniversal’s parent company, Comcast, agreed to pay $4.38bn for US media rights to four Olympics from 2014 to 2020, it added.

Discovery Communications, the parent of television channel Eurosport, has agreed to pay €1.3bn to screen the Olympics from 2018 to 2024 across Europe.

HIT TO THE ECONOMY

The Olympics were originally expected to be a huge tourist draw, but banning foreign spectators put paid to hopes of an early recovery in inbound tourism, frozen since 2020.

In 2019, Japan hosted 31.9-million foreign visitors, who spent nearly ¥4.81-trillion. Numbers plunged 87% in 2020 to just 4.1-million, a 22-year low.

Though highly unlikely at this point, a full cancellation would mean lost stimulus of ¥1.8trillion, or 0.33% of GDP, the Nomura Research Institute said in a recent report.

But Nomura Research Institute executive economist Takahide Kiuchi said that loss would pale in comparison to the economic hit from emergency curbs if the Games turned into a super-spreader event.

“If the [Olympic Games] trigger the spread of infections and necessitates another emergency declaration, then the economic loss would be much greater,” Kiuchi said.