Japan to lose around US$6bn amidst financial crisis impacting Asian sports market, says GlobalData’s Sportcal

A sum of around US$30bn has already reportedly been spent on preparing to host the Olympics. Current estimates place the potential losses for Japan as a whole somewhere around US$6bn, following its postponement in the wake of coronavirus (covid-19) outbreak, says Sportcal, a company of GlobalData, a leading data and analytics company.

Contributing to this are year-long maintenance costs for the venues hosting events during the Games, which could amount to around US$210m. The cost of re-preparing the venues to host events could also amount to a massive US$3.6bn.

Conrad Wiacek, Head of Analysis and Consultancy at GlobalData’s Sportcal, comments: “These losses come in the wake of Japanese hopes of trying to strengthen their economy. An increase in the country’s sales tax has decreased consumer spending, and there were strong hopes that the Olympics would help strengthen Japan’s economy through tourist spending and the increased visitors to the country. With the postponement however, Japan’s economy could be in even further trouble.”

Another issue for the organisers is ensuring that they are able to use the venues during the rearrangement next year, as many of these are used for other events and tournaments. Due to the high demand, many of these are booked well in advance, so it looks likely that many events already booked for next year will have to be moved or cancelled.

Wiacek explains: “This will have a ripple effect on other industries, and could cause them significant losses, as the Olympics will likely take precedence, due to the amount of money already invested. Tourism will also have an effect, as over 600,000 people from around the world were expected to fly to Tokyo. The city is already one of the most popular in the world, and many people who had been planning to travel there have subsequently cancelled their trips.”

The financial impact is also being felt in other countries around Asia. China, where the outbreak began, has a sports market believed to be worth around US$400bn. Due to the timing of the outbreak, there are likely to be huge losses for the first half of 2020, and repercussions going forward as organisers frantically try to reschedule events to make back some of their losses.

The Chinese Super League, the country’s top football league and the Chinese Basketball Association had plans of restarting play later in April, but the government passed an order at the start of April decreeing that group sporting events were prohibited from resuming.

Wiacek continues: “This highlights the uncertainty facing sporting organisations globally, as there are so many unknowns with the virus. Companies can do their best to attempt to reschedule as best they can, but nobody knows how the situation will continue to develop. This makes rearranging events risky, as there’s a distinct possibility that the event still may not be able to run later in the year, due to either the large volume of events being held or the potential for further outbreaks.”

India is regarded as the home for much of the world’s cricket, with the Indian Premier League among the most lucrative cricket tournaments in the world. Playing the league with a shortened schedule will still see the BCCI lose between US$200-US$350m, while outright cancellation will see losses of over US$500m, putting the organisation in a difficult situation. In 2015, the league contributed around US$182m to India’s GDP, which currently stands around US$2.7 trillion.

Wiacek concludes: “While this is a tiny percentage, India’s GDP will likely see a significant hit due to the number of sectors affected by the pandemic. This will be a trend repeated across the world, as we likely plunge into a global recession.” 

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