Russia's experience in hosting the Sochi 2014 Winter Olympics provides a number of lessons for future Olympic hosts, especially as future Olympic bids are won by the BRICS nations and the developing world.
A member of the Russian delegation waves the country's flag after Sochi was chosen the host city of the 2014 Winter Olympics. Photo: AP
Across Japan this weekend, people celebrated the nation winning the right to host the 2020 Summer Olympics. And, rightly so, given the nation’s proud Olympic heritage, having hosted the Summer Olympics in 1964 (Tokyo) and the Winter Olympics in both 1972 (Sapporo) and 1998 (Nagano). But now the hard work begins.
As the example of Russia and the Sochi 2014 Winter Olympics shows, winning the right to host the Olympics comes with increased scrutiny and questions from a global audience.
For Japan, the first and most obvious concern is ensuring that the Olympics don’t turn into a massive money pit with uncertain economic consequences. Japan is already facing internal criticism that it earlier squandered $200 million on a failed bid to host the 2016 Olympics, and the suggestion that, in order to win over the International Olympic Committee this time around, rolled out a number of impressive new designs and venues, like a beautiful new Zaha Hadid stadium for a staggering $1 billion.
Even with infrastructure already in place from the 1964 Tokyo Olympics, Japan still plans to spend $8 billion on the 2020 Summer Olympics. There’s now a growing realization that spending lavishly on the Olympics can wreak its own types of macroeconomic havoc – including the necessity of having to raise state taxes to pay for it all.
Similarly, Russian organizers of the Sochi 2014 Winter Olympics have had to face these questions about the economic impact of the Games. The fact that the Olympics will cost Russia north of $50 billion - notwithstanding President Putin’s statement in a recent interview with Moscow's Channel One that the real costs should be evaluated as closer to a more fiscally prudent $6 billion – has already been a topic of much speculation in the West. It’s almost impossible to read any article these days about the Sochi 2014 Winter Olympics without seeing the phrase “the most expensive Olympics in history” tucked in there somewhere.
While it’s certainly a stretch to say that paying $50 billion for anything is reasonable, Russia hopes that its massive spending will pay off in terms of regional economic development. To make that possible, Russia is now building high-speed rail lines between Moscow and Sochi and upgrading the Black Sea region's air, rail and highway infrastructure. Unlike previous Olympics, which largely left host nations with a lot of empty, rusting stadiums, these 2014 Olympics plan to leave Sochi and the Black Sea region with multi-use facilities that can be converted into other uses beyond just athletics (or moved to other regions of Russia).
There are plans to convert today’s Olympic venues into tomorrow’s convention centers, malls, condos and hotels – thereby further sprawling Russian economic development along the Black Sea ever closer to the Abkhazia border.
Which bring us to Point #2. Tokyo’s 2020 organizers must ensure that they make the public case that this is about more than just one city – Tokyo – becoming a one-time beneficiary of government largesse in order to advance government objectives, such as bringing in more tourism dollars or boosting global prestige. In Japan, there’s real concern that all of the $8 billion in government spending could be better utilized elsewhere in the nation to revitalize the economy.
Unlike Sochi, which is essentially opening itself up to the West for the first-time ever as a viable tourism destination, Tokyo is already one of the most popular tourism destinations in the world. Unlike Beijing, which used the 2008 Summer Olympics to announce its place on the world stage, Tokyo is already established as a major city. So what exactly will Tokyo get for all this spending?
In the case of Russia, there are concerns that Sochi 2014 is just being used as a massive PR play by the national government, while the rest of the vast nation looks on with envy or dismay. These concerns have been aggravated by a growing number of examples of insider dealings that have vastly inflated the cost of the project.
The International Olympic Committee announces Tokyo as the city to host the 2020 Summer Olympic Game. Photo: Reuters
Rubles earmarked for political insiders in cities like Moscow, it seems, are suddenly being diverted to Sochi. One of the oddest scenes of the year in Sochi was the example of Akhmed Bilalov, who headed up the RusSki Ski Jump facility, essentially being sacked on national TV by Putin for substantial time and cost overruns. And, there are continuing rumors that some Kremlin insiders have won preferential contracts to develop Sochi.
The only way Russia can change perceptions that a select few insiders have been profiting from the Olympic Games is by truly delivering a world-class tourism hub after all the Olympic (and Paralympic) athletes have packed up and gone.
In the mountains of Krasnaya Polyana, there are now the makings of three world-class snow resorts (on the days when it actually snows), massive condo complexes and a huge mixed-use Alpine-like village, all of it created from scratch. There's now a ski train that takes visitors up to the mountains in just under 30 minutes. Instead of flying to the Alps for a ski holiday, Russia's oligarchs - and, hopefully, members of Russia's middle class - now have a comparable alternative.
Can Sochi become another stop on the world ski tour? Only time will tell. In the short-term, the focus will be down by the Black Sea, where Sochi recently completed a gleaming new Olympic Park connected by rail line to the airport, the ski resorts in the mountains and central Sochi. In terms of tourism, the lasting impact will be Formula 1 (coming in 2014 right after the Olympics) and the FIFA World Cup (coming in 2018).
And, just last week, NHL hockey legend Pavel Bure announced that he would be bringing a KHL hockey franchise to Sochi – the equivalent of a U.S. city hosting the Super Bowl and then finding out that it was getting a new NFL franchise as a nice little reward.
Aside from these economic and political issues, the Tokyo 2020 organizers will need to address head-on fears that an external event could somehow disrupt the Games. For Tokyo, the fear is Fukushima. Already, people have noted how radioactive fallout from Fukushima might impact Tokyo athletes.
In the days leading up to the announcement of Tokyo as the winner, the "radioactive fallout scenario" seemed to gain momentum -- including rumors that Tokyo's water supplies might be contaminated -- but these rumors have been rejected out of hand by Japan's Olympic organizers.
Sochi, thankfully, doesn’t have to worry about nuclear reactors. But it does have to worry about something potentially just as dangerous – Islamic terrorists attempting to disrupt the games with a terrorist attack. In the wake of the Boston Marathon bombing, those concerns were only accelerated.Given Sochi's proximity to some of the most dangerous regions of the North Caucasus, it's been a significant task for Sochi's Olympic organizers to downplay the terrorist threat scenario for the city's influx of global guests.
Going forward, there’s going to be even more debate about what hosting the Olympic Games really means. Now that BRICS nations like Brazil, China and Russia are hosting the Games, we’re entering a brave new world in which the Olympics extend beyond just the old standbys – the major cities of Europe and North America – hosting the Games.
As the Olympics increasingly are hosted in Asia, Oceania and Latin America, hosting the Games is increasingly going to entail massive spending to build something that has never existed before. And, it will entail a subtle understanding of cultural nuances. What happens, for example, when a Muslim nation hosts the Olympics for the first time? Mix together all these factors, and it’s easy to see why the Olympic Committee selected Tokyo over Madrid and (especially) Istanbul – there's a lot less to worry about, at least for now.