Thursday, May 29, 2014

Are the Olympics Profitable?

I mentioned yesterday that I'd found a chart of Olympics profits for the past forty years.  The chart is here.  (The usual caveats about Wikipedia apply but it seems to be in good order.  Also, data from some countries is almost certainly more reliable than from others.)  First, the breakdown and then I'll have some comments.

Montreal, '76 - $990 million loss
Lake Placid, '80 - $8.5 loss
Moscow, '80 - unknown
Sarajevo, '84 - $10 million profit
Los Angeles, '84 - $250 million profit
Calgary, '88 - $32 million profit
Seoul, '88 - $300 million profit
Barcelona, '88 - $10 million profit
Albertville, '92 - $67 million loss
Lillehammer, '94 - unknown
Atlanta, '96 - $10 million profit
Nagano, '98 - unknown but a loss
Sydney, '00 - $2.1 billion loss
Salt Lake City, '02 - $101 million profit
Athens, '04 - $14-15 billion loss
Torino, '06 - $3.2 million loss
Beijing, '08 - $146 million profit
Vancouver, '10 - unknown but a loss
London, '12 - approx $70 million profit
Sochi, '14 - too early to tell

It looks like almost half (9 out of 20) were profitable.  If you read through this slideshow, you'll find that it really was a mixed bag.  For instance, Barcelona made a small profit but they spent heavily on infrastructural improvements which have proved to be a long term value.  Other comments:
  • The biggest loser was certainly Athens.  Not only did they lose the most money, the cost of the Olympic games is thought to have contributed to their general financial meltdown.  Their sites have been neglected and are falling apart.  
  • Turin (Torino) posted a small loss but they're also happy with the improvements that the games brought.  Frankly I'm skeptical of any of the numbers that show either a small profit or loss.  For Turin, that meant a budget of $700 million and a loss of less than $4 million.  I'd be shocked if there wasn't some cooking in there.
  • Speaking of cooking, the numbers for Nagano are unknown because the vice secretary general of the Olympic bid committee, a Japanese national, ordered all of the documents to be burned!  Clearly, it was a financial disaster.  Not just then, but ongoing.  It costs about $22 million per year to keep the buildings from falling apart.   
  • The '84 games, both Sarajevo and Los Angeles, were the first ones to turn a profit since 1932.  The '88 games also turned profits.  The reason is simple, this was when the Olympics embraced corporate sponsors.  Yes, that meant increased commercialization.  I'll leave it to the reader to decide if that trade off is worth it.
  • If you read through the slideshow, you'll see that one of the big reasons that the games ultimately succeed or fail is if the host city can plan well enough for continuing use of the stadiums and infrastructure.  If they can figure it out, the games are a boon.  If not, they're an anchor.  I'm guessing that there is a split between summer and winter, but that will have to wait!

Wednesday, May 28, 2014

Why the Montreal Olympics were so Durned Expensive

Yesterday I ran across an article about the remaining bids for the 2022 Olympics.  The short version is that it seems to be coming down to Kazakhstan or China as hosts.  In other words, here comes Beijing 2022!  One of the common themes for cities withdrawing bids is that the Olympics are always big money losers.  I know from my other reading that this isn't true.  For some time I've thought of tracking down past Olympic games and creating some kind of chart but a little research (thanks Google!) and I found one.  I'll try to break that one down soon. 
In the meantime, I wanted to talk about the poster child for the 'Olympics are money losers' argument: host of the '76 games, Montreal.  The games were wildly over budget and only paid off in 2006.  It took an additional 30 years after the games ended to finally pay them off.  That's a long time. 
What happened?  The biggest culprit is probably the Montreal mayor, Jean Drapeau.  When they were bidding, he promised austerity and that the games would be 'very humble, with simplicity and humility'.  This didn't happen.  The estimated cost was for $125 million but the final bill came in at nearly $2 billion.  This means that they budgeted for about 1/16 of the true cost. 
From the book 'The Olympics' by Allen Guttman:
Drapeau's chosen Parisian architect, Roger Tallibert, designed a magnificent $350-million stadium whose spectacular retractable roof was not completed until years after the games, Drapeau rewarded Taillibert with a bonus that Nick Auf der Maur estimated at nearly $50,000,000. In the face of considerable adverse criticism, Tallibert, was by no means abashed: "The West will one day have to acknowledge that sports installations, however costly they may be to build and maintain, must be included in the State's budget in the same way as the manufacture of arms."
Drapwau, whose support of Tallibert never wavered, appointed his cronies to the organizing committee, which proved unable to cope with the extortionate demands of the construction firms and labor unions working on the facilities. Workers struck, workers lollygagged, workers demanded and received overtime pay to make up for time lost in labor disputes. The judgement voiced by Reet and Max Howell seems just: "In addition to the astronomical architect's fees and structural design problems, contributory factors were inflation, strikes, fraud, corruption and inept coordination.
Drapeau had said 'The Olympics can no more lose money than a man can have a baby'.  He somehow thought it would be impossible to lose money.  That didn't turn out to be true.  The official after report said that the losses were just under a billion ($990 million).  This would be the most costly Olympic debt . . . until 2000. 

Wednesday, May 14, 2014

Monday, May 12, 2014

Have a Nice Monday

A misty morning farm in Holland.

New York Olympics?

Rio is set to host the 2016 Olympics and there are numerous reports that they aren't on schedule to be ready.  The city will host the World Cup this summer and there is talk that the IOC will use that event to gauge whether or not the Olympics are in jeopardy.  The latest report includes a rumor that Moscow could be a back up site.  The IOC dismissed this as fantasy and frankly, it's hard to see.  There is no way that Putin could be awarded another Olympic games when he's invading other countries.  A move to Moscow would quickly be followed by massive boycotts.
The Moscow rumor has almost certainly released in response to a report that London has been secretly been scouted as a back up in case Rio can't go.  The idea is that most of London's venues would still be open for business so the prep work would be easy.  There is even an historical precedent.  London got the 1948 games because they were most able to put the games together on a rush basis after WWII.
I wonder, though, how quickly a city like New York could organize things.  If, say, next week, Rio was hit by a meteor, how quickly could the Big Apple get things going?  Let's look at what venues were required for the London games in 2012.  Roughly, they had:
  • An Olympic stadium that was used for athletics and the opening and closing ceremonies.  New York has two major league baseball stadiums and the new Giants stadium.  Any of them could be used.
  • Four (I think) smaller arenas.  These were used for activities like basketball and gymnastics and the like.  A venue like Madison Square Garden would be comparable.  New York City probably has enough of these spots on their own, but if you extend to Boston and Philadelphia, you can get this to work with existing basketball arenas alone.
  • Football (soccer) fields.  London used six of these scattered throughout England, Scotland and Wales.  Again, you could easily find six NFL venues that are close to NYC.  And if that's too far out for you, there are probably 50 college sites that would also work.
  • Some place for the swimming and diving would be needed.  I couldn't find one quickly with Google but I'd be surprised if a venue didn't already exist somewhere on the North-Eastern seaboard.  Same with a velodrome.
  • Then there are a bunch of miscellaneous things like sailing and marathon and beach volleyball.  None of this would be difficult to find and build up. 
Which leaves us with things like a) ability to handle host the influx of crowds and b) handle traffic from venue to venue.  New York City just hosted the Super Bowl without any hotel problems.  For a summer event it would be easy to bring in half a dozen cruise ships to accommodate more guests.  And there is no place in the US that has a better, denser network of transportation options.  Between subways and trains, there wouldn't be crazy traffic problems.
I'm not saying it would be easy, but if Rio can't go in 2016, I bet that New York City could step in on a fairly short notice.