2021 Olympics: Hit or Miss?
- SupplyYourDemand
- Jun 28, 2020
- 2 min read
During the last 124 years, the modern Olympic Games have only been cancelled three times, and that too because of the World Wars. This is the second time Japan has had to cancel the games, but this time it is due to a new and different kind of war, the Coronavirus. The pandemic has caused the games that are supposed to be held in Tokyo, to be postponed to 2021. The delay will cost Japan around £5 billion according to the telegraph, and the global economic downturn will cause a fall in tourism in Japan, as well as lessen its well-needed benefits. This brings in the question of whether the costs may now outweigh the benefits.
One of the main benefits of hosting the Olympics is the potential revenue made from tourism sales, for example tourists buying the local food and fashion. However, the pandemic has caused Japan to benefit less from this. This is because the virus has forced businesses to close and unemployment to increase worldwide. This has resulted in a huge fall in economic growth and a rise of animal spirits- a term used by Keynes to describe the state of confidence of consumers and businesses when making economic decisions. Since a ticket to see the Olympics is a luxury good, meaning that the decrease in income is smaller than the decrease in quantity demanded, low incomes and uncertainty (e.g. about the virus’ duration and the following travel restrictions) will cause a drop in the number of trips booked to Japan. This is assuming that the situation does not change significantly over the next year. Furthermore, even if the number of tourists are not affected, many would be
careful about how much they are willing to spend on goods and services in Tokyo, which may lead to an estimated fall of £1.8 billion in tourism-related revenue.
Despite the fact that seeing the Olympics is a once-in-a-lifetime opportunity, there are substitutes to a ticket e.g. watching it live on television. The fall in revenue from tourism can thus be made up for through revenue made from live spectators, but only to a small extent. Though, this would mean that investment in building new hotels and other accommodation and other new infrastructure, would have gone to waste.
In addition, the grand loss of approximately $225 billion in long-term profits from investments could entirely be a loss, as Yoshiri Mori, the president of the Tokyo 2020 organising committee, has stated that in the possible event of the Olympics having to be moved again to 2022, “The Olympics would be scrapped”. This would increase the opportunity cost experienced by Japan, as the investment in infrastructure that was made in preparation for the games could have, in hindsight, been spent on health or education services.
In the face of the Olympic games being postponed or even cancelled in 2021, revenue from tourism may not be hugely affected as Tokyo has been categorised as one of the top 10 cities to visit according to websites such as ‘cntraveler’ and ‘Bestcities’. However, we are living in unprecedented times and no-one can predict what the future holds and if previous trends in the holiday market are still applicable to a post-corona future.
Authored by Joanna Theo
Reviewed by Sarita Kumari
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