On July 23, firecrackers whizzed and cracked in the air above Japan’s capital city, the spectacle just a fraction of the pageantry of the Olympic Opening Ceremony. Just minutes later, a cloud of buzzing drones took to the sky, further developing the spectacle as the world looked on from TV screens across the globe. Despite this year’s lack of a brimming audience, the organizers for the Tokyo Olympics refused to hold out on any of the glory to kick off the festivities. But was the hullabaloo justified? Or perhaps just (firework) smoke and mirrors to enrapture the public after a long wait?

While the fanatical fanfare suggests otherwise, the Olympics are not profitable. Massive costs incurred by developing stadiums, stands, and an Olympic village lead to a net financial loss for the host city. Despite the obvious drawbacks to hosting, cities still put forward bids to the International Olympic Committee and are honored when selected. This phenomenon can be attributed to a simple matter of national pride, representing a host’s desire to subtly flex their state’s resources and strength while the rest of the world is watching. These Olympic investments, however, have negative impacts that are often glossed over in the shadow of the spectacle.

The moment a city is announced as a host, shovels break ground and methodically researched plans go into effect. Oftentimes, this process begins close to a decade before the Games. Unfortunately for the host city and the developers involved, the adage “the best laid plans of mice and men often go awry” is consistently proven true in the case of Olympic infrastructure. Construction delays, natural disasters, and budget overages are just a few of the many complications that mar the balance sheets of host committees time and time again.

Over the course of the bid creation process alone, cities spend millions in consulting, organizing, and traveling fees in order to persuasively present their painstakingly constructed pitch. For some, these massive expenses become sunk costs; unapproved bids result in unrealized dreams for cities that aspired to be the next site of the Games. For others that craft multiple bids after initial rejection, exorbitant amounts are spent over every attempt at proving that their city is a worthy host. Tokyo spent approximately $150 million on its unsuccessful bid to host the 2016 Olympics, and an additional $75 million for the ultimately accepted 2020 bid. While these may sound like immense figures, they are dwarfed when the cities “lucky” enough to be chosen as hosts begin to develop facilities appropriate for the festivities.

For the proud hosts, billions go into the staggering athletic showcase; in 2016, more than 10,000 competitors from 207 different delegations playing 28 sports descended upon Brazil’s capital city of Rio de Janeiro. Those numbers fail to include the thousands of coaches, officials, members of national press teams, and millions of fans who also flood the host city during the Games. The Rio Olympics drew an incredibly large crowd, but with that came a massive price tag: Total costs were upwards of $13.1 billion, surpassing their proposed budget by more than $3 billion. 

Prior to the Games’ postponement, a December 2019 projection found that the Tokyo Olympics would cost more than $12.6 billion — a figure that was later overshadowed by an estimate from Japan’s National Audit Board, which stated that the final cost of the Olympics would be closer to $22 billion. While outside investment shouldered much of the burden, the Japanese government still owes billions. To add Olympic-sized insult to injury, each budget overage is an additional expense on taxpayers, many of whom are already dissatisfied about the Games moving forward. Even in a typical non-pandemic year, host cities pull out all the stops to cultivate an Olympic experience — and face enormous debt as a result. 

What, then, is the draw of such exorbitant spending in the eyes of host cities? This question can be answered by looking at history, particularly the first Tokyo Summer Olympics in 1964.

On a rudimentary level, the 1964 Games were a way for Tokyo, and Japan as a whole, to prove itself to the world. In the wake of the Second World War, Tokyo took the opportunity to show not only its resources as a global industrial hub, but also as a destination for commerce and tourism. In Tokyo, officials approved massive infrastructure spending to clean up and modernize the city before the Games, a decision that made things look amazing on camera, but also had harmful externalities on Japanese citizens. The rushed construction of the bullet train between Tokyo and Osaka, for example, created the perception of Japan as a modern nation with advanced public transit options, but also took up over one-third of the original Olympic budget despite its construction having no use for the transport of Olympic personnel. Additional environmental destruction was written off as a necessary side effect of preparing Tokyo to reintroduce itself to the world. While the 1964 Olympics were seen as a resounding success by both organizers and the rest of the world, the Games were motivated less by a desire for economic and cultural revival, and more by the hope that Tokyo and Japan would garner a new reputation as a strong member of the international community.
Today, the Olympic footprint is a financial loss that is difficult to recoup, particularly when stadiums lie empty after the Games, and the absence of spectators impacts the revenue meant to offset the massive costs. The drawbacks of hosting that had once been a well-kept secret have exposed the financial idiosyncrasies of the Olympics, but the allure of exerting soft power on the world’s stage is seemingly still valuable enough to carry a multibillion-dollar price tag.