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Gauging Olympic Games ROI

Posted by Chad O'Connor  February 24, 2014 11:00 AM

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With the closing of the 2014 Sochi Winter Olympics, residents in the region of Sochi in Krasnodar Krai of the Russian Federation are asking what is next for their economic future. This topic is also of great interest for future hosting cities of the Olympic Games.

To answer some of these questions I sat down with Paul Varadian to discuss this topic. Paul was a USA bobsled and skeleton athlete. He is the CEO of AlumniBridge, and has served in the International Olympic Movement both for the USA and Armenia for more than 20 years.

JS: Thank you for sharing your expertise. Commentators worldwide have been debating the return on investment for a host city to organize the Olympic Games. To start with, the Winter Olympics cost approximately $2BN in Salt Lake City (2002), $6BN in Vancouver (2010), while the estimated cost for the Sochi Olympics this year will surpass $50BN. What accounts for this dramatic increase in cost of the Olympic Games?

PV: This primarily is due to infrastructure costs. Salt Lake City, Vancouver, Beijing, and London already had many of the required facilities in place. Sochi had no such infrastructure and a great deal of the investment was to build up the essentials such as new roads, rail lines, hotels, technology, and all of the venues, including stadiums.

JS: What accounts for the Olympic Committee awarding the hosting rights to cities with less or more infrastructure?

PV: The Olympic movement strives to be a universal institution. It wants the involvement of as many countries as possible in competition and hosting. That being said, it’s very expensive to host the games. So it is not an easy task for the Olympic stakeholders to make such decisions. The bidding process is very open with clear guidelines, but also requires guarantees of the bid city.

JS: Based upon your years of leadership in the Olympic Movement, are the Olympics beneficial for the economic development of the host city?

PV: This is a complex question and there is no one clear answer. It has to do with the economic health of the host city prior to hosting the Olympics, its long term ambitions, and the ability of the government to manage the preparations for the Olympics appropriately. These factors will ultimately dictate the economic benefits.

JS: What are some of the most successful and unsuccessful Olympic Games in history in terms of economic development for the region, and what are some of the factors for this success?

PV: Successes are measured by the lasting legacy the Games create. Standouts would be Lillehammer and Nagano in the winter and Barcelona and Sydney in the summer. In addition to revitalization, they put themselves on the world map as a destination. For disappointments, none really in the winter, but Atlanta and especially Athens have failed to create an economic return. The legacy of the spectacular Games of Beijing, London, and Sochi will be determined in the future.

JS: Hosting the Olympic Games is an investment that continues to grow and a risky proposition for governments when public investment is scrutinized ever closer. Do you believe there will be less competition for cities bidding on hosting the Olympics?

PV: There will always be bidders for the Olympics, given the prestige and economic development potential of the Games. It fulfills the Olympic ideal of inclusion when emerging economies such as Brazil, South Africa and Kazakhstan bid, among other countries. I do believe however, the costs will give pause to many developed nations considering bidding.

JS: Will Boston host the Olympics in the foreseeable future?

PV: It’s very unlikely given the vast venue infrastructure required, most of which does not exist. Boston is a renowned city for education, medicine, and sports, so I am not sure an Olympic legacy is needed to bolster the City. I also question the political will to invest tens of billions of tax payers’ dollars.

JS: How can business and policy leaders take a more active role to further the Olympic movement and stir economic development?

PV: Sochi showed the world the pride of Russia and its people. The Olympic Games are a showcase for everything that is good about humanity, and despite all the troubles and inequalities in the world we really do want peace, prosperity, and above all sportsmanship in our lives. Business and policy leaders need to use the ideals and camaraderie that the Games provide to promote unity of purpose to accelerate all forms of development, not only economic, and to do it everywhere.

JS: Thank you again for your commentary and for your service to the Olympic Games.

John Henry Silva is a partner at Cambridge Bookstore and co-founder of the Analogue Room in Cambridge.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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