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Sochi Olympics By The Numbers

by John S Kiernan on February 6, 2014

The 2014 Winter Olympic Games in Sochi, Russia are record-setting in an astounding number of ways, from the seaside town’s traditionally warm February temps to fact that the Olympic torch visited space for the first time. But it’s when you start talking money that things truly get interesting.

The record $51 billion that Russia has invested in the Games is more than the previous 21 Winter Olympics combined. That figure also includes some $25 billion lost to corruption and theft as well as $8.7 billion spent on a transportation system to the mountains that could have been paved with a nice layer of Louis Vuitton bags for the same price. You can’t ignore the $775 million that NBC spent on the rights or the $1.05 billion in advertising revenue they’re expected to rake in either.

With that in mind, WalletHub decided to audit the Sochi Olympics in much the same manner as we did Super Bowl XLVIII. You can check out the resulting infographic below, along with some additional tidbits and commentary from sport management professors from universities across the country.


Sochi Olympics Numbers WalletHub Infographic

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More Interesting Tidbits

Sochi In Depth

  • $1,288: Cost of average ticket to the opening ceremony
  • 12th: Sochi 2014 will be the 12th Games to outlaw smoking
  • 2018: Sochi will also play host to the 2018 FIFA World Cup
  • 33: Moscow subway riders who complete 33 sit-ups in 2 minutes score a free train ticket
  • 5X: More expensive than the 2008 Beijing Games
  • 3: Deadly bombings in neighboring Volgograd (400 mi north of Sochi) in Q4 2013

Media

  • 1539+ hrs: Of coverage will be provided by NBC (includes streaming online) – more than Vancouver and Torino combined
  • 30 min: NBC is offering a free 30-minute trial for smart phone and tablet users to check out streaming Olympic coverage
  • 24%: More network coverage for Sochi (539 hours) than Vancouver
  • $334.6 million: Amount spent by 10 largest Vancouver Games advertisers (41% of total)
  • $50.3 million: AT&T – a sponsor of the U.S. Olympic Committee – was the biggest spender four years ago
  • $45.9 million: General Electric – then a 49% NBC stakeholder and IOC global sponsor – came in second
  • $130.8 million: Amount spent on automotive ads – Vancouver’s biggest ad category

Olympic History

  • 1924: The first Winter Olympics were held in Chamonix, France
  • 1994: Olympics were held every 4 years (rather than alternating Summer/Winter every 2) until 1994
  • 4: Winter Olympics sports are held indoors: curling, figuring skating, speed skating, ice hockey
  • 263: Winter medals won by Norway – most of any country
  • 4: People have won medals at both the Winter and Summer Olympics: Eddie Eagan (United States), Jacob Tullin Thams (Norway), Christa Luding-Rothenburger (East Germany), and Clara Hughes (Canada)
  • 12: Record medal count of Norwegian cross-country skier Bjorn Dählie
  • 8: U.S.-record for Winter medals, held by speed skater Apolo Ohno (2 gold, 2 silver, 4 bronze)
  • 15 yrs: Age of the youngest Winter Olympics medal winner, figure skater Tara Lipinski (1998)

Ask The Experts: Olympics By The Numbers

    1. How has the process of hosting major sporting events changed?
    2. What is the ROI for hosting such an event?
    3. Does mega-event advertising pay off?
    4. How do the Olympics impact tourism and retail spending?
    5. Which companies will be the biggest winners in Sochi?
    6. Does participation impact earning potential?
    7. Do controversial social issues affect such events?
    8. How will the Sochi Games be remembered?

     

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    Robert Lambert

    Professor of Marketing, College of Business Administration, Belmont University

    Does mega-event advertising pay off?

    I will address the advertising question that you pose. As a marketing professor, I firmly believe that good advertising—advertising that is developed with a clear understanding of the target audience (the customers’ needs and wants, their demographic and psychographic profiles, etc.), advertising that provides useful information and resonates with the viewer, can provide positive returns for the advertiser.

    Two key events are coming up which you mentioned, the Super Bowl and the Winter Olympic games. A 30-second spot in the Super Bowl is going for almost $4 million while NBC is charging almost $750,000 for the same air time for the Sochi games. Because of the high cost of the Super Bowl ads this year, many advertisers have decided not to advertise during the event. Instead, many advertisers who would have considered the Super Bowl are switching to the Olympics. No matter how you evaluate this outlay of cash, it will be difficult to get returns that would even recapture the investment.

    I have travelled to Russia many times over the years, and when it comes to many of the competitive Olympic sports (alpine skiing, etc.), Russia has not been a place where top skiers from around the world went to ski. In other words, their ski resorts were almost nonexistent until Sochi.

    I think many viewers from around the world will be curious about these Winter Olympic Games to see what the Russians have done in creating a world-class venue in the Black Sea area . All that to say that viewership should be high for this event and the price of a 30-second spot for the Olympic Games is much more attractive than the Super Bowl.

    In advertising, not only is the price of an advertisement important, so is viewership, as advertisers evaluate the cpm (cost per thousand) for the different media they use. With an expected TV viewing audience of 3 billion during the games, the potential to reach large numbers of customers is there. So, if advertisers are able to effectively identify their target audiences and present messages that connect with them, this could be advertising dollars well invested.
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    Wayne McDonnell

    Clinical Associate Professor, Tisch Center for Hospitality, Tourism, and Sports Management, New York University

    How will the Sochi Games be remembered?

    The one thing that we’ve seen with Sochi is there has been a high level of underdevelopment in terms of the hospitality industry there. That's going to be a huge challenge. I think the IOC has looked at Sochi as an opportunity to put them on the map. Everyone on the Olympic Committee will always revert back to Barcelona, and the Barcelona effect, on how the Olympics actually made Barcelona a destination city.

    I think Sochi, before and even after we have arrived there, has a little bit of a black eye, because of the alleged corruption that’s involved with Putin’s Government, and a lot of the contracts that have gone out, and the exorbitant costs of the Olympics so far, and the anti-gay stance there, and the question of how the facilities have been built and how spread out they are, and the hospitality.

    I really haven't heard in previous Olympics, whether if it be Summer or Winter, the conversations about concerns about hospitality for Olympics as much as I have for Sochi. You read the literature, and up until maybe a year ago, Sochi only had two hotels. So, I think it's a significant concern. Everyone is looking on with trepidation. Everyone is expecting the worst, but hoping for the best because there's been a lot of negativity emanating from Sochi on so many different topics. It's not about cost overruns or will they be ready to go in terms of the construction of the facilities, it's really a more serious issue in terms of the hospitality.

    Can they host thousands upon thousands of people coming into their community? It's about transportation. It's about how the Olympics are spread out all over the place. It's about the political tensions. It's about the alleged Government corruption in terms of awarding contracts to some questionable people or the rebuilding of things that really didn't need to be rebuilt, and all of that stuff. Those are the things that really were scaring a lot of people, and probably putting a little bit of an ominous cloud over Sochi before anyone got there.
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    Steven Carvell

    Associate Professor, Associate Dean for Academic Affairs, and Academic Director of The Pillsbury Institute for Hospitality Entrepreneurship, Cornell University

    What is the ROI for hosting such an event?

    They’re big things. They’re highly sought after, and in order to get them, to convince the Olympic Committee that you are going to make a huge investment in the splash of the Olympics, because that's what the Olympic Committee have to sell. It then means a huge amount of investment, not just hospitality investment, but infrastructure investment. In China, that big stadium is now a bird haven, unoccupied by humans.

    Unfortunately for the host countries, these things are mostly also marketing events. They are not financial paybacks.

    How do the Olympics impact tourism and retail spending?

    I think the presumption is that the global magnifying glass that's on the city and the host country creates some hope of a permanent increase in tourism interest. To what extent that happens is so difficult to be able to measure because of the advent of so many events that occur. How do you measure the Greek government's meltdown and the negatives of having people rioting in the streets, which of course demotivates tourism, against their Olympic?

    I don't think there's any real evidence that there is such a bounce, but I think particularly for developing countries like Brazil, it's their chance to show that they aren't just a developing country, that they have the capacity to be coordinated, methodical.

    But what happens, unfortunately more often than not, is that these governments are spending money that they don't have. Which means that's either going to be made up in taxation of some sort, or debts. And that has to be paid off by the population. And that's really where the unfortunate side effects of some of these things come in – the offset of the nationalistic pride is financial woes.
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    Neil A. Morgan

    Chair, PetSmart Distinguished Professor of Marketing, Kelley School of Business, Indiana University

    Does mega-event advertising pay off?

    Advertising in these events is really about (a) building brand name awareness, or (b) adding/cementing specific associations with brand names. If you assume that firms are (long-term anyway) rational, then continuing to advertise must be believed to be net positive from an economic perspective. The fact that prices to do so keep going up is further evidence of the value firms place on advertising around such events.

    Does participation impact earning potential?

    From an earning potential perspective, most athletes/coaches are essentially brands - that is their earning potential is determined (to a large degree), by (a) how well known they are, and (b) what it is perceived that they can do better/differently than others. Major sporting events that receive significant media attention can build both these aspects of an athletes brand, and thereby increase their value.
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    John Vrooman

    Senior Lecturer in Economics, Vanderbilt University

    How has the process of hosting major sporting events changed?

    In terms of the Super Bowl the major change is probably the exclusive nature of the new venues which were built with the promise of actually landing the mega-event. The problem is that the economic architecture of the new luxury venues is designed to internalize almost all economic activity derived from the game. As a result the promise of direct and indirect spending in the local market is exaggerated.

    In terms of the Olympics the big negative is the cost side of the ledger. The revenues are usually over-exaggerated and the costs or often overlooked or completely ignored. This presents a big problem particularly in light of the inflation in hosting costs. Athens was a disaster with a cost of $12 billion in 2004, Beijing came in at a whopping $42 billion in 2008 and London spent $15 billion. The winter games are not much cheaper: Vancouver dropped a cool $12 billion.

    Does mega-event advertising pay off?

    The rates for these events are so high that any tangible payoff is negligible. Most gains are show up in the intangible establishment or embellishment of the brand for the product or service. There are of course 110 million hits for the Super Bowl 30 second ads that are going for $4 million, but the tangible gains are just not there. That’s why the .com ads have come and gone and most of the ads are produced by the usual established suspects (now including godaddy).

    Does participation impact earning potential?

    Players and coaches receive modest bonuses in comparison to their salaries. Super Bowl winning players will get $150,000 ($88,000 for the SB and the remainder for the previous 2 playoff games) and losers will receive a total playoff bonus of $106,000 (these would have been $20,000 higher but both Denver and Seattle had first round byes).

    As a result the Super Bowl is usually a losing proposition for the participating clubs. Even after the League covers $3.5 million expenses for the winner and $2.6 million expenses for the loser the teams still lose money. The media and gate are shared evenly with the other 30 clubs and the players usually have bonus clauses in their contracts. Consider that last year’s winning SB qb Joe Flacco was given a 6 year extension for $120 million which crowded out enough other players to reduce the Ravens to 8-8 mediocrity under the $123 million salary cap. The financially optimal NFL post-season is to make it to the conference championship games and lose…the winners may go on to the SB but they lose money in the present and talent in the future.
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    Keith W. Lambrecht

    Chair, Director of Sport Management/Business, Quinlan School of Business, Loyola University – Chicago

    How has the process of hosting major sporting events changed?

    While the decision to hold or sponsor a major sporting event is not new, the number of countries, cities and organizations desiring an affiliation with a sporting event has grown and thus so has the leverage of the sport industry.

    Overall, it has become more competitive and fit has become more important. In addition to fit between partners, it has also become more critical in regards to brand, particularly as part of the comprehensive assessment of corporate objectives.

    What is the ROI for hosting such an event?

    This is the ultimate question which has created much debate. It is difficult to obtain accurate financial data. For the most part, it is thought that major sporting events operate on the negative side of the ledger, although countries and cities often report a positive economic impact pre-event, during the event, and post event.

    Given the success of the NFL, it offers the best ROI opportunity.

    Does mega-event advertising pay off?

    Also a great question, as a key component for success is the measurement of the ROI. The Super Bowl generated $2.1B in network advertising sales from more than 130 marketers from 2004-2013. The average rate for a 30-second Super Bowl ad jumped from $2.3M in 2004 to $4.0M in 2014 (SBJ, 2014).

    Again, it is debatable whether the investment pays off. Most experts would say not, other than increasing product/service awareness. However, NASCAR data indicates that 73% of fans chose to purchase products of NASCAR sponsors over other products. Does participation impact earning potential?

    The use of individual athletes to endorse products has been a marketing practice in the sport industry for decades. Once of the first was in the 1936 Olympics when Adidas provided track star Jesse Owens with free shoes.

    Companies typically engage in bidding wars in an attempt to sign a contract with a champion athlete(s) to represent their product. Everyone is looking for the next Michael Jordan as he established the benchmark for endorsement earnings. While Olympic and World cup stars are successful endorsers, the NBA, NFL and PGA tend to be better endorsers. However, there is a continuing trend of companies seeking female athletes as product and service endorsers.
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    Stefan Szymanski

    Stephen J. Galetti Collegiate Professor of Sport Management / Co-Director, Michigan Center for Sport Management, University of Michigan, School of Kinesiology

    How has the process of hosting major sporting events changed?

    Generally the effects are small. They can be divided into effects on infrastructure/capital and tourism effects. The former looks big in in broader economic terms is small. For example, the price tag on Sochi has been put at $50 billion - extravagance on an unprecedented scale - still only works out at $7 billion a year over the 7 year preparation period, while Russian GDP is $2015 billion- so the contribution is one third of one per cent of GDP. For London 2012 the figure was about one tenth of one per cent. Of course, it is argued this money is concentrated on one location and so brings a huge regional benefit. Certainly investment in key infrastructure like roads can make a big difference, but much is spent on facilities that will be used at well below capacity after the event, while Olympic transport planning is often far from optimal in the long term. Moreover, the construction contracts are often won by multinational businesses, so the benefits are spread across the globe.

    Tourism effects are usually very small. Tourist arrivals in the UK actually fell in July/August/September 2012 compared to 2011 (by about 600,000) - not surprisingly given all the security fears. It is said that tourism has been declining in Sochi in recent years because of the construction and I doubt many foreigners will turn up, especially given all the bad press. The hope is that after the event tourism will grow because of the exposure effect- but there is no evidence to support this- even the alleged success of Barcelona did not experience faster tourism growth that non-Olympic cities.

    Government debts incurred can generate a long term burden, and it plausible that a bigger impact could have been achieved by focusing on long term needs rather than a short term temporary event. A lot is now made of the publicity/marketing effects which are hard to measure. I find it hard to believe that many businesses will set up in Sochi even if the games are considered a success.

    Which companies will be the biggest winners in Sochi?

    The long term sponsors such as Coca-Cola and McDonalds must feel they get a lot since they have a long term relationship. Local sponsors hope to boost business too- but probably fear appearing patriotic if they don't put money in even if they expect little back. Construction companies must benefit to some extent. It's less clear for the tourism industry. Typically Olympic events are overpriced and volume is disappointing. Then the industry usually suffers from long term overcapacity after the event. So it may take years for natural growth to catch up and make the business profitable.

    Do controversial social issues affect such events?

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    Joel G. Maxcy

    Associate Professor, Temple University, School of Tourism & Hospitality Management

    How has the process of hosting major sporting events changed?

    The typical economic impact (measured by the increase in national income or GDP) from a mega sport event is in reality very small perhaps even negative. Estimates beforehand, when there is competition and bidding to host events, typically predict impacts of several $billion. But when follow up studies are done on the actual effects the truth is found and exaggerations by a factor of ten are characteristic. And, some who have analyzed the follow ups find even those are exaggerated to the point where impact is actually negative—meaning the event caused GDP or national income to be less that it would have been otherwise.

    The primary economic benefit is the spending by visitors during and around the time of the event. That can be considerable, but studies find that visitor spending effects are often overestimated because: 1. while event and related spending increases other retail spending in the area declines. 2. Some Olympic spectators would visit anyway, but at a different time 3. Would be tourists avoid the area and locals get away because of the Olympics and the crowding (more likely in say London than Sochi). 4. Most importantly though is that the expended funds do not remain in the local economy and recirculate so they would be truly impactful, but instead go to the IOC and other outside corporations and interests, and find the way quickly somewhere else.

    For the Olympics, a big cost that is not included is the sport specific infrastructure that is expensive to construct, but which may have little use or need to be converted to something useful after the games, and often at considerable expense. These costs are always born by the host. This warrants particular attention in Sochi where a summer resort is being transformed to a winter wonderland. Doubtless, this will be a more expensive endeavor than typical winter games facility construction.

    Super Bowls generate less revenue—they are basically a single event, but are less expensive because they use an existing stadium. World Cups fall in between; they are multiple events but often do require the construction of some new football stadiums, but those are put to use afterwards.

    What is the ROI for hosting such an event?

    Short term there is a blast of publicity. For the often small town winter games host it puts the locale “on the map”. This is clearly valuable, but I don’t think we have good estimates about the real worth of this. Economists have spent much time on the economic impact situation above- where there are much data, but little on the value of this “advertising” effect. Of course much of the publicity benefit is intangible and otherwise hard to measure. That is even more the case for long-term. We know Grenoble, Innsbruck, Lake Placid, and so on hosted winter games back in the day. Does that continue to pay off relative to other alpine resorts today- not much research on this as of now.

    I doubt there is much long-term effect of this nature for the large and famous cities hosting summer games – LA, Sydney, Athens, Atlanta, etc. are known for much beyond once being an Olympic host city. However some of these recent host cities made considerable upgrades to non-sport infrastructure, and that should have long-term benefits. Athens in particular, where they built roads, a new subway system, and an international airport, all for the 2000 Olympics. (That said, I don’t think anyone wants to look at Greece right now as a model of economic success.)

    How do the Olympics impact tourism and retail spending?

    Spending on hotels, restaurants, car rentals, and of course sports events increase, with the influx of visitors. Other retail spending like grocery, furniture, hardware, etc. decreases as visitors don’t consume much of these, and locals also shift some of their spending toward event related consumption.

    I don’t think that it is possible or even worthy to separate the event from the general economic climate. The issue really is here’s the economy and good, bad, or in-between, and does the event affect in some way. Almost always the effect is net zero but some folks benefit much while others lose. In a good economy everyone is most likely happy either way, and in a bad economy that needs help- there are better ways to fix that than investing in and hosting sports events.

    How will the Sochi Games be remembered?

    The IOC is the huge winner as they collect almost everything and pay for nothing: TV broadcast rights sales revenue, the big sponsorship dollars, gate revenue licensing and on and on.

    The host country/city gets publicity and that hopefully will increase tourism, but it comes at a substantial price. They cover the bid and construct the entire needed infrastructure to put on the games.

    Doubtless public leaders see benefits because there is great competition to host every time. However it’s most likely that much of the benefits are not widespread among the citizenry, but mostly accrues to the few and well connected. The Beijing and now Sochi objectives appear to be beyond just increasing tourism and hospitality revenue though. The leaders want to gain some recognition of national legitimacy and political respect that only hosting a major event on a World stage and pulling it off with no hitches can bring.
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    Jeremy S. Jordan

    Associate Professor, Director, Sport Industry Research Center; Temple University, School of Tourism & Hospitality Management

    How has the process of hosting major sporting events changed?

    The Olympic Games is one of the largest, if not the largest sporting event in the world (World Cup would be the other). So, the total economic impact is substantial given the length of the event and high percentage of tourists who come to the host city to be part of the games.

    However, there is substantial cost to the host city, primarily in the areas of infrastructure, stadiums and security. These costs often negate the economic gain of hosting (to some degree) and often result in years of debt for the host community (Athens, Montreal, etc.).

    What is the ROI for hosting such an event?

    Again, the debt related to hosting the games can last for years, with some cities never fully recovering the money that was invested. However, the improvements, specifically to city infrastructure can be substantial and greatly enhance quality of life for residents and tourists.

    Also, the short term implications are that the Games places the city on an international stage and increases global awareness about the city, especially in the form of potential tourism activity. There have been situations where normal tourist activities are disrupted during the games (London) however there is normally a flow on effect after the games where tourists visit the destination to tour stadiums or simply because they became interested in the destination during the games.

    How do the Olympics impact tourism and retail spending?

    My understanding that if the retail is directly related to the Games than impact can be positive as there is normally increased visitation and total number of spectators during the Games. However, businesses that are not as closely related to the Games can see interruptions in normal business as customers may not be able to access the services/products of these businesses during he Games. Again, businesses in London that were not related directly to the Games discussed this business interruption in 2012.

    Do controversial social issues affect such events?


    How will the Sochi Games be remembered?

    The IOC has a fairly structured sponsorship program call the The Olympic Partners. Companies that are part of this program invest heavily for the right to be aligned with the Olympic Games and most pay a premium so that they have product category exclusivity. Organizing Committees for the Olympic Games (OCOGs) are allowed to broker local sponsorship deals as long as there are no product conflicts with TOP companies. Media rights holders also stand to profit from the Games given the viewership associated with broadcasting the event.
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    J. Darren Smith

    Sport Management Program Coordinator, Department of Kinesiology, Recreation, & Sport, College of Health and Human Services, Western Kentucky University

    How has the process of hosting major sporting events changed?

    Most countries expect to experience a boom in economic income as a result of hosting the Olympic Games, and, in fact, they do. However, they typically do not experience enough economic gain to off-set the cost of the construction and infrastructure needs required in order to host such events. A good, recent, example of this would be the Olympics in Beijing. There are photos and descriptions available of the facilities that were highlighted on International Television as the greatest ever, now being void of activity of any sort that may be beneficial to the country.

    The difficulty with the Olympic Games, unlike the Super Bowl and World Cup events, is that facilities must be constructed in order to host the Olympics. Countries or cities chosen to host the Super Bowl or World Cup typically have adequate facilities to host these events and the amount of infrastructure and construction cost is relatively small compared to the Olympics. Host countries/cities for these events are more likely to realize a positive economic impact as a result of hosting the events.

    What is the ROI for hosting such an event?

    Short Term, countries will see a rise in the economic impact of the Olympics.

    Long Term, the difficulty is determining actual cost of hosting the events, loss of opportunity as a result of cost to host events, and how long the economic impact will last beyond the time the events were being held.

    How do the Olympics impact tourism and retail spending?

    Again, short term a country will see an increase in tourism and as a result retail spending will increase. How long this tourism increase lasts as a result of hosting the games is difficult to determine.

    For the store owner, hotel owner, restaurant owner, etc, the economic climate is tied directly to the fact that the events are being held in their city/country. As a result, the suppliers reap benefits from the same. The trickle down increases spending in a community/city/country multiple times due to increased money in the pockets of employees.

    With each level of spending, governmental taxes will also increase as a direct result of the increased tourism and retail spending.

    It’s is difficult, sometimes impossible, to separate the economic impact that results dependently/independently of an event such as the Olympics, Super Bowl, World Cup, or even local Little League baseball tournament.

    Which companies will be the biggest winners in Sochi?

    The biggest winners of the Olympics will be sponsors who operate on a World level. By sponsoring the Olympics, they will gain years of advertisement that will result in years of additional sales due to familiarity of product name. Kodak is a company that comes to mind. Every time a photo is taken and shared across media outlets or social media with a Cannon banner in the background, they have gained more attention for their company. It may or may not result in additional sales, but it will result in brand recognition.

    Coca-Cola, Pepsi, McDonalds, VISA, etc are already in the world market, but each time an individual posts photos or a mention in social media, the company gains recognition. It isn’t often, but this recognition could backfire. If something negative occurs near the companies advertisement banner (totally unrelated to the company), the association of the company to the location of the negative action can sometimes spill over and become associated with the company.
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    Kevin Heisey

    Associate Professor, Department of Sport Management, Liberty University

    How has the process of hosting major sporting events changed?

    Independent studies generally find limited direct tangible economic effects for any of these events, though it can differ depending on unique circumstances. For example, the 2006 FIFA World Cup taking place in Germany was in a prime location for drawing visitors from other European countries into Germany.

    Even that event, which was generally considered a great success and estimated to have generated several billion Euros in direct, tangible, additional spending in the country, the amounts are in the 100ths of 1% of overall GDP.

    Intangible benefits can be enormous in terms of resident enjoyment, host city/country location factors, and long-term brand building for the hosts, but those benefits are difficult to measure.

    What is the ROI for hosting such an event?

    The Games themselves are generally at least revenue neutral or better. The overall financial impact is dependent greatly on decisions the hosts make and one looks at them and accounts for them. Generally, you can think of all expenditures as falling into one of the following 4 categories: operations, capital and infrastructure, sport capital and infrastructure, and security.

    The straight, operating budget of the Olympics is generally a net gainer for the organizers.

    Non-operating costs are often (incorrectly from my perspective) attributed to the Games and the economic implications are dependent on how one views or accounts for non-operating costs.

    Examples:

    Capital and infrastructure spending and development might take place in association with hosting the Games. Presumably host governments don’t make those expenditures for a one month event, but rather for long-term use. Thus it would be improper to attribute those costs to hosting the Olympics or attribute the benefits as being a result of the Olympics. At best the upgrades may have happened sooner than they would have without the Games, but it is often ambiguous whether that is economically beneficial or not.

    Capital spending on sport infrastructure should also not be attributed to the Games for similar reasons as those cited above unless, as is the case for some of the venues from Athens 2004 and Beijing 2008, the venues have no clear post-Games use.

    Montreal Olympic stadium is often cited as a black eye for the economics of hosting the Olympics because it took 30 years to pay off, but the stadium served as host for major sports franchises (Major League Baseball and Canadian Football League) for decades, major events throughout the years, and is still in use periodically for events that draw large crowds. It isn’t appropriate that the cost of a multi-purpose sport and entertainment facility with a useful life of over 3 decades and counting would be attributed to a two week event in the summer of 1976.

    Some observers improperly overstate and attribute spending on security to the Olympic Games. Others argue that Olympic security is little different than security for ‘normal’ events that an Olympic host city would have. Cities prominent enough to successfully land the Games have strong security systems in place as a normal course of events. I am not a security expert, but it might be reasonable to assume that in a post September 11, 2001/July 7, 2005 world that London already has significant security and protection in place 2012 Olympics or not.

    How do the Olympics impact tourism and retail spending?

    For areas like Sochi, Russia and Pyeong Chang, Republic of Korea, I expect significant short-term positive impacts and possibly modest, longer-term impacts. These cities aren’t global tourist destinations, so it is likely that hosting the Games will draw significant, additional tourists and tourist spending. If they host successful Games and leave a positive impression, they will be positioned better as tourist destinations in the long term. Winter sport participants I’ve spoken with feel that both areas are too far off the regular ‘circuit’ of international events to become long-term, international level competition sites.

    For global destination cities like London, the Olympics often result in shifts in the tourism and retail spending industries. Enthusiastic estimates of impacts often don’t account for this. I haven’t seen any solid formal research on the immediate tourism and retail impact of the London Games, but there were numerous media reports of major slowdowns in the normal London tourist and retail business.

    I do know that in 2006, Berlin and Munich saw fewer hotel visitors during the FIFA World Cup than they normally do, which is difficult to understand from a sport fan perspective- I was there and it seemed like people were everywhere singing, cheering, and following the matches- but the fact is that the event drove more visitors away than it attracted and I wouldn’t be surprised if the story wasn’t the same for London. We tend to overlook that major international cities are normally full of visitors and that when they host a high profile sport event, the sport visitors normally replace and even might drive away normal visitors.

    Which companies will be the biggest winners in Sochi?

    This is tough to answer from a western and global perspective. This is such an unusual host site, I’ve been told by a former IOC official that if site visits were still part of the host city bid process (they were done away with after the Salt Lake City bribery scandals), Sochi would never have been selected.

    Sochi is a warm weather resort close to mountains that allow for winter sports. The big potential winner is Sochi tourism if the notoriety of hosting the Olympics helps it make the jump from regional to international tourist destination. Just eyeballing the hotels, it doesn’t look like there are many western/international hoteliers. Radisson is the only one I’ve seen.

    Similarly, I don’t see any special sponsor benefits for partners outside of the Sochi region. The host city isn’t in a particularly densely populated region or economically strong area. I don’t have any evidence of this, but being so near to areas like the Chechen Republic and any threat of negativity that entails, might prove too risky for non-domestic sponsors to partner with and activate heavily around these Games.

    As Olympic Games, they still have value from the event brand and with home countries and their Olympic committees and athletes, but overall, my opinion is that Sochi is one of the least sponsor friendly mega-event sites we’ve seen in years.
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    Wayne Smith

    Associate Professor, College of Charleston, School of Business

    How has the process of hosting major sporting events changed?

    The Olympic Games represents a much larger build of infrastructure than many other high profile events such as the Super Bowl. For instance, most host Olympic cities make significant improvements to public transportation routes as well as highways. The Olympic villages often become subsidized or low cost housing. The effect of an Olympics has a much longer lasting effect as a result.

    What is the ROI for hosting such an event?

    The short and long term is if the host adds significant debt load as a result of being a host. For instance, it took Montreal 30 years to pay off its debt. Calgary Alberta on the other hand ran a debt free Olympics that even produced a surplus. That surplus is still used today to fund the existence of five purpose-built venues. The question really is however, in a post 9-11 world with the cost of security alone; could a debt free Olympics even be possible?

    On the other hand, without the Olympics as a catalyst; how many public works projects such a public transportation expansion would have been built? These infrastructure investments have a long term effect on host cities.

    How do the Olympics impact tourism and retail spending?

    In the years leading up to an Olympics, tourism is actually increased pretty dramatically. During the Olympic year there is an obvious boost even beyond that. What is surprising that is that many hosts have reported a down turn in visitation for a couple of years post Olympics (some refer to this as the Hangover effect). What is not known is how long the effect of the image boost that comes with hosting a successful Olympics lasts?

    While I cannot make the argument that the Olympics image enhances tourism long-term, I will say that improvements to airports, hotels and other what is referred to as tourism superstructure improvements does help the industry long term to remain competitive.

    Do controversial social issues affect such events?


    Now, if a few athletes were to make a significant political statement during the games, that may change but the IOC along with the various countries Olympic committees as well as the media and sponsors will work hard to keep that minimized. There is too much money at stake not to.

    How will the Sochi Games be remembered?

    Like Calgary was, Sochi is a great place to host a Winter Games because they can use it as a catalyst to become better known on the world stage. For example, London was not going to be better known for hosting an Olympics. Most already have perceptions of the city and would have made up their minds already whether it was a city that they would like to visit or not even before the games occurred.

    Sochi on the other hand, is a powerful regional destination with a strong pull in the Russian, Middle Eastern and Chinese market but is less well known in the Western markets. This will be a great chance to introduce the destination and work to form a positive image of the destination as it will be many in the Western Hemisphere’s first real introduction to the place. A coming out party for the destination – so to speak (my apologies for the terrible pun).
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    Corinne Farneti

    Assistant Professor of Sport Management, Richard J. Bolte, Sr. School of Business, Mount St. Mary’s University

    How has the process of hosting major sporting events changed?

    With an increase in terrorist activity and/or threats in various regions around the world, organizers of games need to take special care in the planning, implementation and publicity of security operations. A security breach or incident could not only harm participants and spectators, but the mere threat of an incident could keep patrons and their coveted dollars away. Public perception of the event is key.

    Another major factor in hosting these mega-events is the construction or renovation of venues, housing, and infrastructure. To effectively handle the anticipated increase in tourism, host cities and surrounding areas need to ensure that sport tourists and participants can safely enjoy their time in the area. Whether it’s walking from their hotel to the venue, traveling by car to a local shopping area, or using a train system that connects various venues, all elements of the tourist experience are important. Construction costs are immense, and are often what put cities in debt long after the event is over.

    Tied directly to the above mentioned factors is the increase in technology. As technology increases, expectations increase. Venues are expected to be equipped with state-of-the-art HD video screens, PDA-like point of sale systems, and elite sound systems. It’s a game of “keeping up with the Joneses.” If a spectator’s expectations aren’t met, they won’t be satisfied. A dissatisfied customer won’t be a return purchaser, nor will they speak highly of your event to their friends.

    Technology also affects all aspects of security. As potential threats find ways to evade security measures, organizers of these games/events need to stay one step ahead; most of this one-upmanship comes in the form of increased technology.

    What is the ROI for hosting such an event?

    Generally, hosting large international events such as the World Cup and Olympics is negative overall. While environmental, social, and economic impacts may vary location to location, there tends to be a general theme.

    In terms of environmental impact, any time you bring large masses of people together, there is going to be an increase in pollution (fuel, garbage, etc.). The host cities of these large events often include environmental sustainability plans in their bid to host the event to help offset the worry. Many of the recent plans focus on educating participants, volunteers, and tourists on how to live a ‘greener’ life. Many of the newer venues are now aiming for LEED certification as well.

    Social impact also may vary. Often times taxes increase to help support event initiatives, which doesn’t sit well with residents. They often become annoyed at not only the tax hike, but the increased number of tourists wandering their usually quiet streets. It isn’t fair to say that ALL residents are angry; in fact, many welcome outside visitors to their community.

    Another social issue with hosting games is the displacement of lower-class and/or homeless individuals. You can call it a gentrification of sorts. In the Vancouver Olympic Games of 2010, subsidized housing was removed from the city to make way for luxury hotels. Laws were put in place to keep homeless (visibly) off the streets to ensure a picture-perfect atmosphere for tourists. Ultimately, it was a general social upheaval causing many protests.

    Lastly, and sometimes the most significant contributor to the negative side of hosting an event, is the economic element. In areas where venues need to be built and infrastructure needs to be put in place, debt can escalate quickly. Montreal’s 1976 Olympics was finally paid off 30 years later. The Sochi Olympics kicking off in a few weeks is rumored to cost over $50 BILLION. Fifty billion dollars. The unfortunate part to this is that taxpayers are often the ones hurt over this the most.

    Yes, they have millions of eyes turned to their city for an extended period of time, showing off their culture and spirit. However, they are stuck with years of ungodly debt. Because debt has been such an issue in hosting these games, most cities putting in bids to host an event/games provide sustainability plans for their venues and infrastructure.

    Many of the Sochi venues are “temporary”, in that they can be taken down and moved after the event. This option is cheaper than building a permanent structure that has a good chance of sitting empty as taxpayers empty their wallets for years to come. In some cases, these venues are used heavily after the initial purpose of the event. In this instance, it could be quite possible that the investment was worth it. Others may note the increase in tourism to the city after the event as a reason to host an event. There has been evidence in both directions for this; either way, it is a hard statistic to measure.

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    Tibor R. Machan

    R. C. Hoiles Chair in Business Ethics and Free Enterprise, Argyros School of Business & Economics, Chapman University

    How has the process of hosting major sporting events changed?

    Sadly many such events are subsidized and cost the taxpayers instead of those who want them. Football arenas, for example!

    What is the ROI for hosting such an event?

    If one considers the cost of the infrastructure, once again the taxpayers, including many who have no interest in the sporting event, must foot the bill like it or not!
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    Mark Kanazawa

    Professor, Department of Economics, Carleton College

    What is the ROI for hosting such an event?

    Hosting an Olympics can be at best a break-even affair for a host country, but it depends a lot upon how it is done. Probably the most financially successful Olympics of all time was the 1984 summer Olympics in Los Angeles. Its organizer, Peter Ueberroth, was savvy, paid careful attention to costs, and ran it essentially under a business model. He ended up with a surplus of roughly a quarter of a billion dollars.

    On the other hand, some Olympics are generally recognized to have been financial disasters, such as the 1976 Olympics in Montreal and the 2004 Olympics in Athens. I think one important issue is the need for new venues, which comprises a significant portion of the costs. Some cities have plenty of existing venues for events, while others have to build new ones.

    One reason Ueberroth was able to keep costs down was that there were plenty of existing venues in LA, especially ones at UCLA and USC, plus he raised private moneys for refurbishing existing venues.

    Athens, Montreal, and Beijing had to build expensive venues from scratch and to this day, the Stade Olympique built by Montreal remains one of the most expensive stadiums ever built, in inflation-adjusted terms. These stadiums can also end up being white elephants if enough uses for them can’t be found after the Olympics are all over. The Stade Olympique appears to be grossly underutilized, especially since the Montreal Expos moved. And some of the venues in Athens and the famous “Bird’s Nest” in Beijing are mostly just sitting there, largely unused.

    I think part of the lesson here is that needs to be careful planning, including integrated assessment of the host city’s needs, both during and after the Olympics are all over.

    Does participation impact earning potential?

    All three events are opportunities for athletes to shine, and in our modern media-driven world, to capture the imagination of viewers and corporate sponsors for product endorsements. However, mere athletic success is no guarantee of a slew of endorsement opportunities.

    A number of other factors matter as well, especially the charisma, likeability, and sheer good looks of the athlete. Certain athletes have these in spades, such as Mary Lou Retton, Bruce Jenner, Nastia Liukin, Lindsey Vonn, and Shaun White, enough to make it onto the covers of Wheaties boxes.

    Others are smart, well-spoken and articulate, which can translate into jobs as color commentators, talk show hosts, or movie actors. However, for every Mary Lou Retton or Shaun White, there may be hundreds of other top athletes who are unable to translate their athletic success into financial rewards, simply because they do not have these other qualities.
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    Bruce K. Johnson

    James Graham Brown Professor of Economics, Centre College

    What is the ROI for hosting such an event?

    The answer is no. With most of these mega-events, the costs imposed upon the host by the NFL, the International Olympic Committee, and FIFA far exceed the revenues generated for the host. The cost of building the venues for the Olympics and the World Cup are enormous. The facilities are used during the few brief weeks of the events and, in many cases, never again. The construction debt incurred burdens the hosts for decades to come. The Athens and Beijing Olympics are prime examples. So is the South Africa World Cup. Meanwhile, the tourism bonanza usually does not materialize. In the case of the Olympics, many people who would have visited the host city during a normal 2 week period avoid it because the city will be overrun by sports fans. Many popular tourist areas in London were eerily quiet during the 2012 Summer Olympics.

    Of course, there are intangible benefits to hosting a mega-event. Civic and national pride may get a large boost. Economists use Contingent Valuation Method (CVM) surveys to estimate the monetary value of these intangible benefits. Two studies estimating the value of national pride by Britons from hosting the 2012 Summer Olympics indicate that Britons may value these nationalistic feel-good effects by a few billion pounds. Unfortunately, the Olympics cost the UK taxpayers several times that amount. The national and civic pride generated by hosting one of these events does not justify more than a small fraction of the government expenditures required to build the facilities.

    Of course, the Super Bowl does not require a new stadium to be built. But there are nonetheless large costs imposed upon the host cities. Economic studies conducted by impartial researchers find little in the way of tangible benefits created by the Super Bowl. Tax revenues don’t go up appreciably—or at all—nor does employment, during the weeks or months of the event.

    There is a related question you don’t ask about, that might be of interest for another Olympic story. Many countries subsidize the training of their Olympic athletes, in the hope of boosting the number of medals won. They justify these expenditures by arguing that Olympic success by its athletes boosts a nation’s international profile and raises its prestige abroad. This in turn boosts national pride.

    In a paper I have written with several colleagues, we found, using CVM survey results, that Canadians value the medal success of their winter Olympic athletes by far more than the costs of subsidizing the training programs. We are careful to say this does not mean the money spent on training would not produce an even greater return if spent on something else, say health care or education. But the return is worlds better than the return on building Olympic facilities.

    Does participation impact earning potential?

    Appearing in the Olympics may enhance an athlete’s earning potential a great deal, especially for charismatic stars in obscure sports whose profile is raised during the Olympics. Think of star swimmers, figure skaters, and skiers, for instance. Often, the increased earning potential comes in the form of product endorsement opportunities.

    Lindsey Vonn has no doubt suffered a huge loss by missing the Sochi Games. Though we don’t have to worry about her going hungry, the exposure she would have gotten during the Games would have dwarfed anything she could hope for in any other event.
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    Randy R. Grant

    Professor, Chair of the Economics Department, Linfield College

    How has the process of hosting major sporting events changed?

    There are a couple of areas that have changed in recent years. Terrorist threats have heightened the need for security, and that clearly comes at a high cost. More personnel spending more hours on surveillance, setting up and running checkpoints, additional expenses for security equipment – these all add to the cost.

    They also add to the time and other costs for spectators. Long lines through security checkpoints and greater restrictions on items brought into venues impose costs that are difficult to quantify, but no less real than those easy to measure.

    Another major change deals with the secondary market for event tickets. For many years, reselling tickets for more than their face value (‘scalping’) was illegal in many places. Now it is not only legal, it is supported by online ticket exchanges such as Stub Hub. The fact that market prices for major events (e.g. the Super Bowl) end up much higher than ticket face values (what the NFL receives in ticket revenue), means that organizers of major sporting events are sacrificing significant revenues they could receive if events were priced more in accord with market demand.

    While this forgone revenue has always been an issue, the fact that there now exists better mechanisms to capture it suggests that pricing of major events may change in the future. We already see this with dynamic pricing models used by professional sports teams for regular season events.

    What is the ROI for hosting such an event?

    Most of the literature suggests that these events are a net negative (cost) for host cities and countries. There is wide variation, however, as much depends on the investment necessary to prepare for the event. A city like New Orleans, for example, already has the infrastructure to support hosting a Super Bowl, so other than logistical support (security and traffic management), the costs are relatively low.

    For countries like Brazil and South Africa, preparations for Olympics and World Cup events are major undertakings that require massive infrastructure spending (especially relative to the nation’s GDP). Even with good planning, this often creates multiple facilities that go underutilized and generate high maintenance costs long after the event is over. On the other hand, hosting such events can promote development through well planned infrastructure spending, and the event itself can provide a lasting boost from the exposure (e.g. Sydney and the 2000 Olympics).

    Does mega-event advertising pay off?

    Results here are mixed. Marketing data show that some products receive a boost after a major event; others do worse. One has to look beyond the simple correlation of whether, say, a firm had Super Bowl ads that were followed by rising or declining revenues.

    Broader conditions in the specific market and the economy as a whole would also be relevant considerations. A company that appears to lose money from advertising during a big event may be caught in an arms race. While they lose money from advertising, they would have lost even more if they didn’t, because of the actions of competitors.

    Does participation impact earning potential?

    I’ve not seen literature that measures the average effect, but I would expect to see a large variance in outcomes. Peyton Manning’s earning potential is unlikely to be significantly affected by Super Bowl XLVIII; he’s already a well-established brand. For someone newer in the league (the NFL in this case), the national exposure can significantly increase earning potential, particularly if they are successful and their participation is clearly acknowledged (quarterbacks will do well here; offensive linemen not so much). Olympic athlete earning potential also varies widely.

    For athletes from poorer nations, Olympic success can be the difference between poverty and affluence. For U.S. Olympic athletes, who are notoriously under supported, it can be the difference between making a living at their sport or having to give it up (at least at that level of competition).

    I would expect World Cup outcomes to be similar to Super Bowl effects. Those who are already established may benefit some, but the growth in earning potential won’t be nearly as substantial as for those who are getting their first recognition on a national or global scale. World Cup boosts may be smaller than for the Super Bowl by virtue of the fact that World Cup players and coaches are already involved in other well-recognized competitions, including the Champions League in Europe (and its analogs in other parts of the world) and the various national leagues, such as the English Premier League, Serie A, Bundesliga, and La Liga. Messi and Ronaldo will be rich and famous whether or not their national teams advance far in the World Cup. On the other hand, a high finish by the U.S. men’s national team could provide significant recognition and potential earnings boost for U.S. players.

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    John Kiernan is Senior Writer & Editor at Evolution Finance. He graduated from the University of Maryland with a BA in Journalism, a minor in Sport Commerce & Culture,…
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