The Financial Burden of the Olympics

The Sochi Olympics is the most expensive Olympic Games ever with a cost of around $50 billion. Despite the enormous cost, only $6 billion was used solely for the Olympic sporting venues (3). The original budget of the Sochi Games in 2007 was $12 billion (4). Naturally the cost would increase in seven years with inflation, however the fact that it increased exponentially is the result of poor planning!

Major Reasons for the Cost:

1. Infrastructure and accommodations: Prior to the Olympic construction, the Sochi area consisted of a series of small villages of only a couple thousand people. So it required a tremendous amount of construction by around 20,000 migrant workers to build the facilities and infrastructure to support an event of this size (2). Large scale infrastructure, including railways, highways, airports, hotels, etc., were established to accommodate and connect such a large mass of people. In fact, 1 million people were expected to attend (including 13,000 journalists), as a result a large amount of money was used to construct hotel accommodations (1).

2. Sports Facilities: If you expect to transform a beach holiday destination into a winter sports hub, it’s going to cost a fortune. With only one ski-lift and none-existent ski runs and sports complexes (i.e. arenas), the organizers built almost every venue from scratch (1).

3. Weather: A large amount of money was invested in a backup system to increase the supply of snow in case there was an insufficient amount of snow due to the high temperatures (I will elaborate more upon this in another post).

4. Security: Another reason for the excessive budget is the investment in security measures to address the terrorist threats (4). There were 100,000 police officers and soldiers employed to ensure a safe environment during the Games (5). 

In comparison, the 2010 Vancouver Olympics cost ~$8 billion. One railway and highway alone (between Sochi and the skiing site) was of equivalent cost (or more) to the entire Vancouver Games. Also, the 2008 Summer Olympics in Beijing was previously the most expensive Olympics prior to this year’s Games, with a budget of ~$43 billion. So Sochi even surpassed the Beijing Olympics by around $7 billion which is insane! Also, the Winter Olympics are traditionally cheaper than the Summer Olympics (4).

The reason for changing the location of the Olympics each year is to give every country a chance to showcase their facilities and their country. However, the organizers have started selecting underdeveloped areas. These countries have not traditionally hosted the Olympics because they don’t have the infrastructure and resources to support such a large mass of people. Therefore developed cities like Vancouver who already have some of the facilities, hotels, highways and other transportation systems, did not require as high a cost. I agree that every country should have an opportunity to hold the Olympics, but I also think that the price tag of the event should be taken into consideration.

If Sochi is able to use the ski resort and sports venues frequently following the Olympics, than I think it would partially compensate for the outrageous cost. However, if Russia is unable to put the new hotels, sports complexes and infrastructure to use, than Sochi will be left with angry and displaced residents (those that had to move to make room for the facilities), as well as extremely expensive, but underutilized facilities. Also considering the security uncertainties in Russia with the unstable political situation (especially in the last few weeks), I don’t think many people are going to want to visit Sochi in the near future. Consequently, I think Russia will be left with a crazy debt that will take years to pay off.

(1) http://www.dw.de/sochi-the-most-extravagant-winter-olympics-ever/a-17411857

(2) http://ngm.nationalgeographic.com/2014/01/sochi-russia/forrest-text

(3) http://www.businessweek.com/articles/2014-01-02/the-2014-winter-olympics-in-sochi-cost-51-billion

(4) http://www.businessinsider.com/why-sochi-is-by-far-the-most-expensive-olympics-ever-2014-1

(5) http://www.cbc.ca/news/world/sochi-security-venues-safe-but-suicide-bombers-feared-1.2518208

Choosing the Host City

Looking at the political, environmental and social state of Sochi mere days before the start of the Games, I was very skeptical of the choice of the location selected for the 2014 Winter Olympics. There was a substantial amount of construction that was yet to be completed, the accommodations were not ready for all the visitors, there were terrorist threats and many other problems that I will elaborate upon in the following posts. In other words, the hosts didn't seem to be ready!

President Vladimir Putin

Through the Olympic Games, President Vladimir Putin (president of Russia), had the objective to make Sochi an international tourist attraction (1). He wanted to establish better infrastructure, create a world renowned ski resort, adopt a new and improved reputation for Russia and be known worldwide as an enlightened country. We’ll see if he achieves his goal in the next couple decades and if the Sochi legacy will withstand the test of time. For example, there have been Olympic sites like Beijing (China 2008) and Athens (Greece 2004) that have had minimal use since the Olympics and that have basically been abandoned (2). Hence, I question whether the money, energy and time could have been used to better ends?

Seeing as Sochi was having difficulty getting ready for the Olympics, I also began questioning how the host city is chosen. I discovered that the International Olympic Committee (IOC) decides which city hosts the Olympics seven years in advance of the Games. The process begins with the submission of proposals by prospective cities/countries and it is decided by the voting of the Olympic committee members. Once the interested cities submit their proposal, they must answer questions regarding their intentions for hosting the Olympics, and how they would provide world-class venues and accommodations for the athletes, the dignitaries, the visitors and the press. The voting process entails a series of ballots and in each ballot, the city with the least votes is eliminated from the list. They then engage in another vote, and so on, until the host city is selected (3). With such an elaborate process, I would think that the most ideal location would ultimately be chosen to host the Olympics. However, many unforeseen events could occur in the intervening years which may jeopardize the success of the Games. Therefore it would be difficult for the IOC to anticipate issues such as political constraints and climate variability when choosing the optimal location. 

The host country must also take into consideration the financial aspects involved in holding the Olympics, and the next post will focus on the costs of the Sochi Games in comparison to previous Olympic venues.

(1) http://www.theverge.com/2014/2/24/5441806/vladimir-putin-won-the-olympics-but-hes-not-smiling

(2) http://www.businessinsider.com/why-sochi-is-by-far-the-most-expensive-olympics-ever-2014-1

(3) http://www.wisegeek.com/what-is-the-process-for-determining-the-location-of-the-olympic-games.htm

The Return of the Olympics!

My dream (despite how unrealistic it is) has always been to make it to the Olympics because I think that being an Olympian is one of the highest achievements an athlete can make in sports. Olympians compete on the world stage and represent their country in doing so. The Olympics include many athletic events that occur every two years (Summer Games alternate with Winter Games), that unite countries and unite the world through the passion of sport. This two week event features the greatest athletes from participating countries who have spent years preparing to compete in sports such as ice hockey, snowboarding, skiing, figure skating, curling, bobsledding, etc. (Winter Games), as well as soccer, swimming, gymnastics, athletics, etc. (Summer Games).

The host city and country takes on a huge commitment by hosting the Olympic Games because a lot of planning and money is required. Historically, host cities have either thrived from holding the games, or were saddled with a multi-year debt because the billion dollar venues were virtually abandoned after the medals were awarded. So it is a crazy risk to invest into something that could either make or break the economy of a city. Russia took on the task of hosting the Winter Olympics this year, through which they showcased their country, their history and their culture. In fact, the Winter Games in Sochi, Russia attracted around 2,850 athletes from 88 countries. Roughly 3 billion people watched the Olympics (1). Needless to say that the world was watching and participating!

However, maybe a little too much of Russian politics was portrayed during the Olympics because the host city seemed to run into difficulties that were often tied to the politically unstable state of their country. Death threats were sent by extremist groups, risks were taken, and the seemingly unprepared Russia held this worldwide competition from February 7 to 23, 2014. These Winter Games also sparked a lot of controversy that sometimes took away from the positive spirits of the Olympics. I think that the Olympics promote team spirit, equality, inspiration and national pride, but the 2014 Olympics also seemed to be affected by human rights and morality issues. Aren't the Olympics about the love of sports and not politics?

Despite the threats and the unfortunate distractions, there were no major incidents during the games, and the competition itself was both successful and exciting. In the next series of blogs, I will share some thoughts about the choice of location, the cost of hosting the games, the impacts, as well as other aspects associated with the Olympic Games in Sochi.  

(1) http://edition.cnn.com/2014/02/04/sport/sochi-winter-olympics-by-the-numbers/