Sochi – The Costs

The rumor is afloat that the Sochi Olympics will cost $51 billion (US). Does that make these the most expensive Olympic Games ever? In a word, yes, but please remember that determining the cost of an Olympics is fraught with complex issues, and it is really difficult to say how much each Olympic Games cost. Further, the world has changed over the years, with inflation eroding the value of a dollar, or a Euro, or a ruble. Obviously, the Olympic Games have also changed, with more athletes at each Olympics, and more events.

There are two costs to an Olympic Games, or Olympic Winter Games. The costs of hosting the Olympics – building venues, building the Olympic Village, hiring the administration for seven years, bidding for the Games (which now costs 10s of millions), hiring security, now a major cost, and many other costs of hosting. Infrastructure is more a civic line item – what the city does to gussy itself up for the world’s visitors, and for the future use of the city’s population (or village for Lake Placid, or neighborhood for Squaw Valley).

As an example, in 1996, Atlanta greatly upgraded Hartsfield International Airport, readying it for the influx of Olympic visitors. Is that an Olympic cost? Some would say yes, but Atlanta’s airport needed a major upgrade – it was due, and using the Olympic host responsibilities as a pretext allowed the city to justify that upgrade and offload the cost, somewhat, to the Olympic costs.

In 2004, Athens built a major circumferential highway around the city, and a new major train line from Athens city centre to Piraeus, the Athenian port city. Both were civic improvements that Athens sorely wanted and needed and the Olympics allowed them to justify building those. In both Atlanta’s and Athens’ cases, those new building projects improved the cities for years to come. Are those Olympic costs – or simply civic improvements?

There is no way to know for certain, and no way to be certain of the accounting. So we have to go on the usually published numbers, and in Sochi’s case that number is 51 billion US dollars.

But we should definitely correct for inflation, adjusting costs for previous Games to current dollars. And there are other ways to compare costs. The more athletes at an Olympics, the more it costs to run the Olympic Games themselves. The Olympic Village has to be larger. You have to protect each athlete with more security, you have to transport the athletes, you have to feed the athletes. So a better way to look at Olympic costs is to compare fixed costs against inflation per number of athletes at the Games.

Further I would say that it is important to also compare against the number of events at the Games. The more events, the more sports. The more sports, the more venues. For each additional venue, there are usually building costs. For each additional event, you have to provide more security for that event. Currently, the two biggest costs to an OCOG (Organizing Committee of the Olympic Games) are the cost of building venues (has always been #1 cost) and the cost of providing security. So perhaps an ever finer way to drill down is to look at Olympic costs against inflation per number of athletes, per number of events at the Games.

So here are the numbers for Sochi, the last four Winter Olympics, the last two Summer Olympics, and also looking at Tokyo in 1964, using usually quoted cost figures. Why Tokyo? Because prior to Beijing in 2008, Tokyo was the most expensive Summer Olympics ever, per number of athletes, and per number of athletes and events.

Olympic Costs     Constant $                                   Constant $   Constant $

Year  Host City  (mill 2012$)  Events  Athletes  Per Athlete  Per Ath/Evt

1964  Tokyo             $14,162        163       5,137  $2,755,415         $16,904

2008  Beijing           $31,987        302     10,901  $2,934,629           $9,705

2012  London          $14,460        302     10,520  $1,374,394          $4,551

1998  Nagano         $14,078          68       2,180  $6,457,985         $94,970

…………………………….$1,267                                          $581,193            $8,547

2002  Salt Lake C    $2,551          78       2,399  $1,062,068         $13,616

2006  Torino               $4,665          84       2,494  $1,870,408         $22,267

2010  Vancouver      $7,376          86       2,536  $2,908,401         $33,819

2014  Sochi               $51,000          98  2,700e $18,888,889      $192,744

Several things are evident in the above. First, prior to Sochi the most expensive Olympics, inflation adjusted cost per athlete (IACPA), and in inflation adjusted cost per athlete per event (IACPAPE), was Nagano in 1998. But Nagano is tricky. There are two figures usually quoted for its costs – either $10 billion (US), or $900 million (US) (adjusted to 2012 figures above), which are nowhere near close to each other, and obviously reflect the costs of hosting versus the cost of hosting plus infrastructure. Nagano had to almost create a winter resort from scratch and build train lines from Tokyo and other major cities to get people there, so their infrastructure costs were huge.

But even using the bigger number for Nagano, and using the $51 billion # for Sochi, Sochi will be three times as expensive in IACPA, and twice as expensive in IACPAPE. Comparing to Beijing, the previously acknowledged champion for Olympic costs at $30 billion in 2008, Sochi is way more expensive per athlete and per athlete/per event. In fact that’s not even close when looking at IACPAPE. And check out the $ figure per athlete at about $19 million – that makes every Winter Olympian in 2014 about the value of Peyton Manning, per the Sochi OCOG. And you thought the Yankees overspent?

Secondly, when you compare Beijing to Tokyo, adjusted for inflation and number of athletes, Beijing and Tokyo cost almost the same amount of money. And if you compare per athlete/per event, Tokyo was still more expensive than Beijing.

Finally, from the above it is obvious that Olympic Winter Games are actually more expensive than Summer Games when comparing against # of athletes and # of events. There are fewer athletes (about ¼th as many as the Summer Games) and fewer events (now about ⅓rd as many), but you still gotta build Olympic Villages, build venues, and provide security. In fact, at Winter Games you usually need to build two Olympic Villages now – one in the mountains and one near the city centre for indoor events.

So anyway you figure it, Sochi will be a very expensive Olympic Games, and definitely the most expensive Olympic Games ever conducted. And are these numbers conservative with security costs likely to skyrocket after the terrorist attacks in Volgograd? Will it be worth it for Sochi and the region of Krasnodar Kray? Will the new facilities bring tourists in the winter, and in Sochi’s case, even in the summer by the Black Sea? Or will those facilities lay fallow, as Olympic white elephants, similar to so many of the facilities in Sarajevo, Athens, or Beijing, and many other Olympic host cities? Only time will let us know.

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