Looking past the Olympic hype

Olympics are expensive investments, but worthwhile if you achieve what you’ve planned.

It’s 2019 and we’re almost to the world’s next largest sporting event, the 2020 Tokyo Summer Olympics, where Japan will showcase its technological prowess with robot security guards1 , driverless taxis2, and 3D laser AI technology for gymnastic scoring3.

The Olympics have always been prestigious. Athletes from around the globe pit themselves against each other to take home the most medals for their country. Tourists flock to watch the Games live, putting the country and its city on to the map. Their names go down in history forever… it’s no wonder cities compete to be the next Olympics host.

But is hosting the Olympics really as rewarding as it sounds?

The Olympics are expensive: every host city since 1960 has bust its budget4 on newly constructed stadiums and facilities. Poorer countries like Greece and Brazil are still recovering.

Pyeongchang hosted the 2018 Winter Olympics but didn’t end up in as much debt as previous host cities. Infact, the Pyeongchang Organising Committee has announced a surplus of at least US$55 million5. What was different?

Pyeongchang saw through the hype of being an Olympics host. For starters, it avoided building another white elephant. It immediately demolished the US$100 million stadium built for the opening and closing events after it served its purpose, saving on the costs of maintaining a permanent structure.

Next, it converted its two Olympic villages into condominiums and sold them successfully to domestic buyers. This was helped by the buildings’ strategic location near the newly constructed bullet train that puts Pyeongchang just 1.5-hours away from Seoul.

The snow sports and ice venues are not left to waste. Some are open to the public to encourage winter sport participation, and others are being used as training grounds for high performance athletes.

Investments should be made in a similar fashion. Don’t be influenced by hype and don’t follow the crowd when investing. Sometimes making the right investment decision can be very uncomfortable. At Eastspring Investments, our investment professionals look for opportunities based on fundamentals, not hype.

1 https://english.kyodonews.net/news/2018/10/2d643dba2a01-robot-station-security-guard-unveiled-to-press-ahead-of-tokyo-olympics.html
4Olympic Proportions: Cost and Cost Overrun at the Olympics 1960 – 2012. Said Business School. University of Oxford.

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