Seven hurdles facing Olympic host cities

It isn’t just the athletes who will be competing in the London 2012 Olympic Games. London has the opportunity to become a benchmark for the staging of all future summer Olympics. Stuart Crainer looks at the hurdles London faces.

The past three summer Olympics have left their host cities with major financial problems and unfulfilled dreams. The following is by no means a thorough review, but a few details will symbolise the sad risk/reward history of recent Olympic events when viewed through a pair of business and management glasses:

• Sydney 2000 According to news reports, it cost New South Wales (whose capital is Sydney) some £720 million to stage the Olympics. Sydney’s Olympic Park became a white elephant; in fact, plans to develop the site for residential and commercial use did not even emerge until 2005. The Olympic legacy appeared an after thought rather than part of an overall Olympic strategy. It was hoped that the Olympics would generate new and higher levels of tourism in Sydney and beyond, but this didn’t happen. 
• Athens 2004 While everyone knows that Greece today is facing huge economic problems, the financial picture wasn’t much better for those organising the Olympics more than seven years ago. According to reports, the event cost nearly $11 billion — twice what was planned. And the cost of all those infrastructure projects that required round-the-clock labour going right up to the start of the games isn’t included in that number. It is estimated that more than half of Athens’ Olympic sites are hardly used or empty.  It turned out that Athenians had little real desire to conquer kayaking, baseball or table tennis.  The facilities for these sports are among those decaying and forgotten.
• Beijing 2008 Originally, ‘The Bird’s Nest’ Stadium created a worldwide enthusiastic stir; but a year later, the only use for it was to hold a commemorative opera.  There are plans to make it into a shopping centre as its size is too big for just about anything else.  China’s great capitalist coming-out party was accompanied with a hefty price tag.  Architectural eye candy comes with a premium price.  The Beijing Games cost an estimated $43 billion — thought to be three times more than any other Olympics.

Hurdles to jump

There were many more issues that these three cities have faced; but earlier summer Olympics sometimes brought sterling results, such as the increase in tourism in Barcelona after the 1992 summer games and a great deal of urban regeneration in Atlanta after the 1996 games.

What does all this portend for London? Less than a year away from the opening of London 2012, one might conclude that ‘what’s been done has been done’ and leave it at that. Although those in charge of the London Olympics remain positive, and there seem to have been a steady stream of positive developments, announcements and unveilings in recent months, there are issues that need examination. There are still many management hurdles to jump — both to find solutions to immediate problems that may emerge for London in the post-Olympic period and to provide lessons that may help those preparing for the 2016 Summer games in Rio de Janeiro as well as those bidding for future games.

Seven of the hurdles that need to be examined, in a management sense, are:

1. Cost overruns How much will they actually be and who will pay for them? Past experience says there will be cost overruns; moreover, many of those extra costs are often hidden from the public by being shifted to other budgets. Infrastructure costs are but one example of this. It is important that a tight rein on costs be initiated from the outset and that oversight be put in place. Scrutiny of estimates and the awarding of contracts by outsiders are essential. Another aspect of the issues in this area is determining how to ensure transparency.
2. The future use of sporting venues Using these venues once the games end can pose many problems; for example, some are so large that they will have to be reduced in size if they are to be profitable. Others are specific to sports that may attract little attention. There is a history of Olympic ‘white elephants’ that stand empty for years. Can someone find a way to move these elephants toward social benefit or commercial profit?
3. Transformation of Olympic housing to public housing Questions abound. What planning needs to be done to ensure that the housing constructed for the athletes actually will be used as mixed or affordable housing after the events? Will the housing for the athletes who participate in the Paralympics be set aside as housing for the elderly and disabled? What will be done with the massive cafeterias set up to feed those involved in the Games? Can they become restaurants? Can hotels be devised from some of the housing near or attached to the cafeterias?
4. Security issues The need to secure a huge influx of people, both the participants in the games and spectators, in a world that has seen so many terrorist attacks can lead to actions that go beyond the usual powers allotted to the police and other security personnel. In Sydney, temporary legislation was passed to give these forces greater ability to search and question people anywhere in the city. How can cities ensure that this type of legislation is indeed temporary? How much surveillance equipment put in place should remain once the games are over?
5. Infrastructure improvements The transportation industry tends to benefit greatly from hosting the games. Even though Athens found itself in severe debt after the games, it gained new suburban rail and light rail systems along with a new international airport. Barcelona’s transportation improvements were, in truth, spectacular. Cities need to know what it takes to ensure such positive outcomes, including projections about such things as how much of the new systems will provide real gains if the venues linked by the new investments aren’t repurposed to beneficial uses.
6. Impacts on tourism Some cities, particularly Barcelona, have been the recipients of increased tourism because the media coverage (as well as word of mouth) improved shaky reputations about safety and beautiful sights to see. For others, the response has been different. In calculating the gains from hosting the games, cities that already are tourist attractions may find that projections based on cities without such a reputation are far from accurate. The London 2012 games will surely attract many new tourists; but, in 2013, will a higher level of tourism be sustained or will it revert to what London traditionally encounters?
7. Marketing merchandise Some may see all the Olympic-stamped merchandise that is sure to be sold for London 2012 as, well, gewgaws with little value. But whatever their intrinsic value, such memorabilia is more than just a way to help people retain or refresh fond memories. All the marketing merchandise related to the event is also being sold to offset costs. In today’s new world of marketing through social media, what steps should be taken to ensure the greatest return? What can be learned from product tie-in in the case of television shows and movies? With the first and second round of ticketing sold out, the level of attendance is assured. But how are those in charge of London 2012 handling the rest of the many marketing challenges?

Let the study of the management of London 2012 Games begin.

Stuart Crainer (scrainer@london.edu) is Editor of Business Strategy Review.

The theme of the 2012 Global Leadership Summit to be held at London Business School in May 2012 will be the business of sport.