Hosting the Olympics – Asset or Liability?

Joseph Smith

Account Manager

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For most Britons, the Olympics evoke memories of London 2012 and the heroic performances of Chris Hoy, Mo Farah and Jessica Ennis. The combination of Danny Boyle’s storytelling, unusually good weather and Team GB’s success made for one of the most memorable summers this country has seen.

Fast forward to Tokyo 2020, and it’s difficult to imagine the same sense of unity and excitement befalling the host nation. This week’s sacking of opening ceremony director Kentaro Kobayashi over alleged anti-Semitic jokes is the latest episode in a series of setbacks featuring corruption, scandals, the scrapping of stadium plans and concerns that extreme summer heat could imperil the lives of athletes. To make matters worse, the games are happening behind closed doors, whilst over half of Tokyo’s population are opposed to them taking place altogether.

The fiasco has once again raised questions around the desirability of hosting the Olympics, an event that was once seen as the biggest prize in sport. Over the years, Governments have seen the games as an opportunity to create economic growth, galvanise political support, and promote their country on the world stage. But is it worth the hassle?

From an economic standpoint, the advantages of hosting the Olympics are increasingly difficult to justify. Recent games serve to highlight this point, with Rio 2016 costing over $14bn, a budget overrun of 350%. A lot of this outlay was spent on specialised infrastructure, and generated no return, like the derelict 300-acre Barra Olympic Park which a judge was forced to close last January. Athens faced a similar problem in 2004, and now the events’ overriding legacy is its contribution to the Greek debt crisis. In the case of Tokyo, Prime Minister Yoshihide Suga has already been forced to concede that the games will leave Japan worse off. The pandemic delay alone is believed to cost in the region of ¥2.8bn, whilst the recent ban on spectators will result in ¥80bn in lost ticket revenues.

If the games inevitably lead to financial losses, what about the reputational benefits? For the host, the opening ceremony undoubtedly provides an unmatched PR opportunity. With billions tuning in, the curtain raiser is a chance to project a positive image to the world and showcase the host nation’s culture.

The breathtaking nature of Beijing’s opening ceremony was China’s way of saying it had arrived on the world stage. Described by Steven Spielberg as “the grandest spectacle of the new millennium”, the four-hour show was seen by officials as crucial to positioning the country as an economic superpower. The reputational effect on visitors shouldn’t be underestimated either. For many in attendance, the Beijing Olympics would have been their first experience of China, and given the success of the games, it’s hard to believe the impact on people’s perceptions was anything but positive.

In spite of warnings against the mixing of sport and politics, you can rest assured that the popularity of hosting isn’t lost on Governments. Despite their being a risk of not being in office when they take place, it stands to reason that successfully winning and hosting a successful international event like the Olympics will lead to a boost in the polls. The high profile afforded to the then Mayor Boris Johnson during the London Olympics saw his popularity hit new heights, and triggered a fresh wave of speculation about his future political ambitions. The recent reaction to the IOC’s decision to award Beijing the Winter Olympics is also telling. Last Thursday, MPs in the House of Commons joined a growing chorus of activists by calling on the Government to boycott the event. Former Leader of the Opposition Iain Duncan Smith called the announcement a “priceless propaganda coup” that will lend credence to the intolerant and brutal regime of the Chinse Communist Party.”

Given the shortage of studies in this area, it’s hard to say whether there really is an ‘Olympics bounce’ after hosting the games. What is clear is the event’s power to attract an audience of billions, and as China demonstrated, if you’re an authoritarian regime looking for legitimacy, the cost is certainly a price worth paying. For democratic governments, the question is more difficult answer.

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