The Olympic Games: Biding for the Future.

This article is based on the video “Why hosting the Olympics isn’t worth it anymore” by Business Insider.

The Olympic Games are the most important international event for summer and winter sports. The question this video is trying to answer (or bring up for debate) is: could we be watching the end of the Olympics as we know them? Seems to be impossible, but we might be at the beginning of a transformation. Hopefully those changes will be positive for the continuity of this great event. My objective now is to disclose some possibilities to help us understand where are the Games going and what are the options for the future.

The government body that leads the Olympic movement is the International Olympic Committee (IOC). They describe themselves on their official web site as “a not-for-profit independent international organization made up of volunteers”. Now, the two words here that we need to keep in mind are “non-profit” and “volunteers" considering that they still found their ways to take 70% of the profit Rio made on the last Olympics. Lets make a deeper analysis on how the IOC works. Besides the benevolent definition they gave to themselves, the IOC is a private organization permanently based in Switzerland where they manage other members, such as national committees. The summer and winter Olympic Games are basically a franchise, according to RT News, “the world's biggest franchise”. When a city bids for the Games, they are telling the IOC that they are willing to bear all associate costs to make it happen. So whats the contribution of the IOC? television broadcasting and marketing. In fact, The IOC retains and controls almost all the marketing rights from the Games. Due to these rights, event tickets and official merchandise sold has to be shared between the Host organization and the IOC. (RT 2018) It is important to highlight that with each new edition of the Games, the International Olympic Committee keeps more money. Broadcasting is the biggest source of income, with the IOC being in charge of making the deals with various networks.

So what is going on? Why every year fewer cities are willing to host an event that ideally would bring a great amount of money?visitors coming from all over the world will be consuming goods and food along with hotels and tickets for the Games, isn't supposed to be a good deal? When did the Olympics lost their positive profitability (and good reputation)? In order to get possible answers lets make a brief analysis of the last games: Rio 2016. With the initial happiness of winning the bid, it is hard to think on the induced multipliers to capture the ripple effect of the expenditures. The issues for this Brazilian city began years before the Olympics. According to The Global Inquirer, Rio 2016 was “the most controversial Olympic Games ever, a perfect storm of poverty, economic recession, and poor planning” (2016). The decision on bidding for The Olympics is often only based on the measurable economic output, but Rio failed on converting the nominal investment into a future benefit that would worth the cost of hosting The Games. When Rio joined the Bid in 2006 (ten years before the Games) Brazil was experiencing an urban boom and huge economic growth that motivated them to announce to the world they had everything needed to be the first host ever in South America. However, the Brazilian nosedive began after they got the Games, due to political scandals and corruption. Rio 2016 brought to surface the challenge over finding the equilibrium between costs and benefits of hosting an event of this magnitude. Sadly their legacy was a city that is still struggling nowadays with debt incurred and unable to maintain the cost of the facilities built, some of them now abandoned. The outcome, Olympic Games with a price of $13 billion paid for with a mix of public and private money with a 51%: Cost Overrun from the original budget (Reuters, 2017). Professor Ricardo Cabral, expert on Sport Education from the State University of Rio de Janeiro (UERJ), was the manager of the Brazilian water polo team during the Olympics. He believes the games left little gains compared to the the losses, and states:

"As a sports legacy, very little remains. I think that if we were not a sports nation (before games), we missed the opportunity of becoming one. the Government investment in sports has been reduced by at least 50%. (After the games) the private companies that invested in the preparation of teams in the Games have practically retired. Some modalities that already had results, still remain with less resources. The Brazilian Olympic Committee has lost its sponsors, but has managed to maintain government funding".

I wanted to hear the opinion of Professor Cabral for two different reasons: 1) as a manager he was a direct participant of the Games, 2) he has been a citizen of Rio before, during and after the Games, so he testifies the transformation leaded by The Olympics. when asking him about any positive outcomes from Rio, he affirmed that although the economy suffered a big lost, there is a good urban legacy with some road works and public spaces created that are still functional.

Once a city becomes the host, how far are they willing to go in order to prove the world they can afford it? In Mexico, my home country, car owners have to pay a special annual tax called "Tenencia" (that can be translated as "having" since the verb "Tener" in English is "to have"). The justification for this tax is to "contribute to public expenses, to the expansion of highways, roads and other public implementations." (El Financiero, 2019) Growing up I always heard the urban legend that the REAL reason why this tax was created were the Olympic Games Mexico City hosted in 1968 in order to pay for the debt the construction of facilities left. This popular belief is actually false; however, it sowed in the people a feeling of hatred and rancor towards those Games and now the population is almost completely against a future bid to avoid another tax like that. Although the decree came into force two years before Mexico City won the bid for The Games, the people is convinced that it was supposed to be a temporary tax that became infinite to pay for the games, so whether is real or not, you can ask any Mexican what are their thoughts about the "Tenencia", and you will get a somehow angry answer that will involve the 1968 Olympic Games (even if the person you're talking with does not own a car. Trust me, I interviewed people for this paper).

But the actual price Mexico paid for those games was fatally high, and not in financial terms. I grew up aware that Mexico 1968 is one of the darkest episodes in our history, not exactly for The Games itself but for the actions the government inflicted in order to give the world a perfect image. 10 days before the beginning of The Games, a group of approximately 10 000 university and high school students congregated in the area of Tlatelolco, 25 km (15.6 Miles) away from the Olympic village to make a pacific protest against police brutality towards students. The President Gustavo Díaz Ordaz did not want the world to see these protesters and got worried about how the international press, present for The Games, would report the issue. The Olimpia Battalion, a special army created by the government to watch for the security of the games, received the order to kill any person located in the area where the protest was held, including passers by and innocent neighbors (Proceso, 1994). Some students who survived the initial round of shots were taken by the army and disappeared after. The next day the government ordered the news to announce that the students were armed and shoot against each other, so the Battalion had to be called to repress them. We still do not know the exact amount of people killed that day, and by 2019, there is no one in jail paying as a responsible of the killings. But it was until 2002 when the Mexican government recognized the event as a brutal crime against the Mexican people, and not a security measure to protect the safeness of the Olympics as they originally claimed (Aristegui, 2019).

Host cities with happy endings (yes, it is possible)

Olympic Sport Management requires a deep analysis to calculate an optimal macroeconomic output and manage it for posteriority. When public money is used for this cause the cost-benefit has to be focused on the citizens, unfortunately history tells us that the majority of the hosting organizers cares more about the visitors attending the Games. When this happens it is expected to face the disconformity of the people who might prefer to see this money invested in other public causes such as health or education. In order to deliver the adequate infrastructure for the Games, the host city must undergo an accelerated transformation, along with implementing a greater supply of services based on the improvement of urbanization already available. This might be consider a short-term indirect benefit for construction workers and other local companies who might find in The Olympics a good opportunity to invest. Considering the world wide attention that The Games will bring to the city, it is important to think on how to create a permanent legacy with sustainable investments that will improve the profitability of the businesses and will stimulate economic activity that is not directly related to The Games.

Lets take a look at Barcelona, a city that successfully hosted the Olympics in 1992. Spain was living on the Post- Francisco Franco era, a dictator who was against the autonomy of Catalonia. In order to be ready for the Games, Barcelona focused on increasing the utility of the city services, along with a radical makeover that improved the image of the city raising the number of tourists willing to visit the city after the games. For Barcelona, the games became a positive externality that catapulted them into one of the most attractive cities in the world for almost any type of industry. But most importantly, this games had long-lasting positive effects on the citizens moral, as I previously mention, surviving the repression of Franco. According to Barcelona Life, the biggest effect was the “feel good” factor on the population. The feel good effect is an important topic for both psychologist and economists. Considerer an intangible good, it is hard to be measured, it can only be surveyed with the positive opinions from the citizens and their levels of happiness and satisfaction connected to the Games.

Another great example of a city that successfully benefited from hosting the Games is London, in 2012. In 2008, Ken Livingstone, then the mayor of London, made clear that he was thinking on the Games as an opportunity: “I didn’t bid for the Olympics because I wanted three weeks of sport, I bid for the Olympics because it’s the only way to get the billions of pounds out of the government to develop the East End – to clean the soil, put in the infrastructure and build the housing.” (The Guardian, 2017). One of the strategies London used when the Games were over was selling the venues to the private sector. The London stadium, formerly named The Olympic Stadium and The Stadium at Queen Elizabeth Olympic Park is nowadays he home of West Ham United of the Premier League, after being renovated into a full-time football (Soccer) ground (WHUFC, 2019). One of the best strategies London applied that every future host must imitate? Is that they created “The London Legacy Development Corporation (LLDC)”, with the objective of managing the opportunities left by the Games (infrastructure, jobs in security and societies) to contribute to the city an preserve the benefit left by the Games by using a 5 years strategy plan (Queen Elizabeth Olympic Park, 2019).  

With the four previous editions I mentioned above, 2 had a negative legacy and two had a positive afterwards. It is almost impossible to ask for the IOC to share for free the profit with the Host city. The best way for a city to profit positively from games is to make sure any facility built for the games will be a long term investment for the citizens, whether if it becomes public or private. The second part, to make sure that the image after the games will be positive, like it happened with Barcelona. I find specially interesting the case of Barcelona because it was obvious there was animosity between the Catalonian people and the government of Spain, however, they got the recognition of the world afterwards and obtained higher status beyond other European cities, even those in Spain such as the capital, Madrid. So there was no reason for them to feel discontent with the Spaniard Government regarding of the Games, I fact, they proved that the Catalonian people could be self sufficient. Not the case with Rio and Mexico City where the population was already disconfirmed and against its government and the Olympics made it worse. 

An obvious contrast: Mexico and Brazil are developing countries in Latin America while Spain and England are European developed countries. So for the future, shall we only accept the Bid from first world cities? I believe it a point that has to be taking into consideration. A city such as Rio de Janeiro does not need a major events in order to attract tourism, since they were already one of the most visited cities on earth what they really need is a government that is willing to scarce their resources on the basic needs of the citizens. For a developing country allocating their money effectively into hosting a major event, they should focus particularity into the infrastructure sector and how to use it after the event to avoid inefficient resource management. We can still give developing countries the chance, but not leaving them alone with all the expenses. The IOC must create a fund specialized for this cause so the economy of vulnerable countries will not be affected. We must learn from London and implement on each host city a Legacy Development Corporation. Also, is important being transparent with the population about how the games are being fund to avoid the expansion of lies that will affect as it happened in Mexico City with the car tax. Future host cities must apply the concept of Conscious Capitalism, which is a philosophy that considers the interests of the whole society. It is based on the principles of finding a Higher Purpose that focuses beyond pure profits, a Stakeholder Orientation that concentrates on the whole business ecosystem to create and optimize value, Conscious Leadership and Conscious corporate culture as the sum of the values and principles that constitute the social and moral fabric of a business (Investopedia, 2018).

Permanent Host as a permanent solution

On the video published by Business Insider, Professor Zimbalist proposes a permanent host as a possible option, but he is not the only one who thought about it. John Rennie Short, Professor at the University of Maryland and experienced author on urban environmental, geography and geopolitics, has done an extensive research on the urban impacts of hosting the Olympics. For him, this is a solution regarding cities over spending on buildings that might be abandoned after, also he states that this is something the IOC has the responsibility to fund:

"The IOC, which profits off the games, should facilitate and fund this project. The initial cost of $100 billion could be offset against bonds or loans on the basis of future media revenues. As one of the biggest events on the planet, it would not be difficult to generate funds to cover the initial construction and operating costs".

While professor Zimbalist suggested that Los Angeles has the infrastructure, venues an facilities needed to be the perfect permanent host, Professor Short´s idea is to build from scratch a sustainable urbanization with green technology to minimize its impact toward global warming. He also provides a candidate country for this permanent city: Greece

"The very recent Greek crisis provides an opportunity. The Greeks are in hock to around $271 billion to all official lenders. The government in Athens has agreed to transfer state assets of $80 billion to an independent fund. How about selling a permanent site in Greece for the Summer Olympics? An uninhabited island would be ideal, not too far from the coast accessible by ferries as well as planes".

To be honest, the idea of using an uninhabited island sounds a little exaggerated to me, but hey, this guy is an expert on geopolitics and urbanization. I find more convenient the idea of Professor Zimbalist and locate this city in the United States. The world is more familiarized with the American lifestyle while English language is more popular than Greek. However, a possible threat (at least with the current administration) is that athletes, staff and visitors from banned countries such as Syria and North Korea might lose the opportunity of being part of The Games due to a denied visa. 

The permanent host facilities should be able to sustain economically itself by being active between Olympic Games, for example Hosting qualification events, world championships and other events. It can even become a permanent training facility. It should have its own staff, security and services needed. With this development no more countries would need to spend on infrastructure and organizations, so the risk of another Olympic apocalyptic city is gone. It will be necessary two different permanent host, one for Summer and one for Winter Games.

But there is an aspect that we might miss with the Permanent Host, which is the cultural impact that Olympics had so far. The Olympic Games are a great (and sometimes an once in a life time) opportunity not only for athletes, but for performers, dancers, musicians and all kinds of artists who dream on a chance to display their talent to the world. Open and closing ceremonies had give us some unforgettable moments. How can we forget when James Bond jumped with “The Queen” from a plane while Mr. Bean “played” Chariots of Fire? Or when in Rio the athletes presentation became a Carnival Samba festival? That is one of the best things the Games have and I wonder if we would lose that with a permanent Host. 

My suggestion is to invite a co-host every edition. So instead of having to host the Games on a particular country and having to build the facilities for it, the co-host will bring an organizing committee to the permanent facility. For the opening closing ceremonies, the co host will bring the dancers, singers and actors to perform. Instead of a city, the permanent co-host should be a whole country. The finances will be subsided by the co-host jointly with the IOC, both responsible of the preparation and delivery in total collaboration and partnership. The country where the Olympic city is geographically located is not responsible of the games, neither financially or in planning. Just as the current Games do, the co-host will make its profit from ticket sales, broadcasting rights and sponsorships. In orders to be the Co-host we can use the current bidding system. And obvious disadvantage of a permanent host is that the co-host will have to organize the Games from distance and expending on sending abroad the organizing committee. But this is totally better than the risk of building infrastructure. 

Portas Event Legacy Scores for Summer Olympic Games 1992-2016 (out of 100)

Source: Portas Consulting

Sport Managers have a great responsibility to make the future development of the Olympic movement transcend its rentability. It does not matter where a Sport Manager comes from nor which city (permanently or not) is hosting the games, the Olympics is always open for them to contribute professionally. Every edition has job opportunities and volunteer roles available. I believe it is the responsibility of Sport Management programs all over the world to educate students about the positive and negative legacy left by previous editions of the Games in order to create a new business management model that will overcome previous obstacles. During the Games, Sport Managers should serve as external counselors to guarantee optimal practices from both the IOC and the organizing city along with implementing a prevention plan to avoid cases of corruption, money laundering or any other illicit activity. Sport Management must teach and apply the principles of conscious capitalism as the new business philosophy that prefers social responsibility beyond egocentric profits, to guaranty in a proper economic direct, indirect and induced impact. As a Sport Manager myself, my hopes are positive. I am trying to educate myself in globalization, profitability and ethical management to collaborate into better competitiveness between cities bidding for the games. In other words, practicing in the real world the mission the IOC itself gave to the olympic movement: “to contribute to building a peaceful and better world by educating, without discrimination of any kind and in the Olympic spirit, which requires mutual understanding with a spirit of friendship, solidarity and fair play.” (IOC, 2019)

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