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Making the Olympics profitable

The Olympics are among the biggest sporting events worldwide. However, size alone does not guarantee economic success. In the past many countries have lost money from hosting the Olympics. Here is a look at what it takes to make the Olympics profitable and the very few who have managed to do so.

Impact on hosts

Many countries make large scale preparations to host the Olympics. Mark Speigel, an economist at Haas School of Business at the University of California has conducted extensive research into the indirect benefits of hosting Olympics. He says that host cities benefit from increased investment in infrastructure. They often get improved transit systems, new sports facilities, and additional housing units. The host country benefits too. Olympic events generate permanent employment across sectors and boost international tourism.

A report by Manning & Napier states that a country hosting an Olympic event enjoys an increase in international trade. Commerce can jump by 30% during the years leading up to the event. Direct foreign investment also increases by up to 15%. Research by the Grand Valley State University in 2017 found that the Atlanta Olympics in 1996 generated 77,000 new jobs. The London Olympics in 2012 attracted an unprecedented 31.5 million foreign tourists to the city.

Olympics and profitability

Hosting an Olympic event can be really expensive. Emerging countries host such events in the hope that their economies would benefit. They pump billions of dollars to setup new infrastructure. Unfortunately they seldom break even. Forbes reports that the Rio de Janeiro Summer Olympics of 2016 cost Brazil $13.1 billion. Eventually Rio ended up with a net loss of $2 billion. The previous 2 winter Olympics were not stellar either. At the Sochi Olympics of 2014 Russia earned a meager profit of $53.1 million on an expenditure of $51 billion. The PyeongChang Winter Olympics of 2018 amounted to a small profit of $55 million on investments worth $12.9 billion for South Korea.

There have been instances when hosting the Olympics turned out to be profitable. Los Angeles became the first city to profit from hosting an Olympic event. The International Olympic Committee’s (IOC) reported that the Los Angeles Summer Olympics of 1984 booked profits worth $230 million against costs of $413 million. Vast communities of migrant workers live in Los Angeles and other Californian cities. They regularly send money online as remittances to their home countries. Expat professionals bolster the workforce and contribute to the local economy. Cities which already have the necessary infrastructure require less additional investment to hold mega events. Such cities are better accustomed to hosting large volumes of foreign tourists.

The next big one

The Tokyo Olympics were previously scheduled for 2020. The event was delayed by 1 year and will now start in July 2021. SMBC Nikko Securities estimates that Japan lost $6 billion due to the postponement. It will recover the loss when the event eventually takes place. An IOC official considers the postponement of the event a positive outcome. It can be an opportunity for the Japanese economy to kick start after the crisis.

Estimated economic impact

The Olympics never come cheap. According to estimates by the Tokyo Metropolitan Government, the Tokyo Prefecture alone will spend $19 billion. Nationwide expenses can potentially exceed $30 billion. The 1-year delay added $12 billion to the expenses. These will be shared among the Japanese government, the organizers, and the Tokyo Metropolitan Government. The event is expected to have a positive impact on employment generation. The Japanese government estimates that Tokyo Olympics of 2021 will create 1.3 million new jobs in the Tokyo Prefecture and 1.9 million new jobs nationwide by 2030.

Profitability of Tokyo Olympics

The Tokyo 2021 Olympics are already generating revenue. Record-breaking domestic sponsorship revenues worth $3 billion and broadcast rights worth $8 billion are close to realization. Miniachi, a major Japanese news platform expressed guarded optimism. Many are expecting the event to lift Japan’s economy out of the gloom. However this will greatly depend on Japan’s willingness to open its border to foreign tourists. Nomura Securities, a global investment bank in Japan forecasts the event to generate $2.3 billion from foreign spectators.

Solving the waste problem

Mega sporting events such as the Olympics and Commonwealth Games are infamous for large scale waste generation. The UN Environment Programme estimates that a major sporting event generates 750,000 bottles in plastic waste. The IOC has plans to address the waste problem during Tokyo Olympics 2021. Reducing packaging materials, recycling 99% of procured items, and reusing 65% of the waste generated during the games are some measures being considered. IOC has launched the ‘carbon-offset initiative’ and the ‘recycled plastic victory podium project’ to make the Tokyo Olympics 2020 ‘green’. Top athletes will receive medals made of materials harvested from 80,000 tons of discarded smartphones and consumer electronics in the country.

About the author:

Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.



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