Lessons From Sochi: How South Korea Managed Keep Its Olympics Costs So Low
The 2014 Sochi Winter Olympics were the most expensive in history, costing an estimated $50 billion
This time around, South Korea has managed to keep the price down to $12.9 billion, which still overshot the budget proposed in their bid. Even so, how did South Korea's Olympic games cost so much less than those staged four years ago in Russia?
From the outset, the local Olympic organizing committees from Sochi and Pyeongchang took opposite approaches. Sochi's grand plans for the "most extravagant Olympics ever" resulted in ballooning costs from day one. The conversation leading up to Pyeongchang 2018, on the other hand, was modest, and that may have been key to keeping down the cost.
Recent Olympics have been consistently outspending their proposed budgets. For decades costs have spiraled out of control, and the upcoming summer games in Tokyo look set to follow suit.
Given the scale of each games, the real cost is hard to calculate. Even the $50 billion figure eternally tacked to Sochi 2014 isn't a hard number. Leading up to the games, a Russian Olympic official said the country was willing to spend $51.08 billion, but it's not like he published an expense report. No one does. Taxpayers quietly cover over-expenditures for decades after the games have left.
After hosting the 1968 Winter Olympics, taxpayers in Grenoble, France, were still paying the bill into the early 1990s. The 1976 Montreal Games were finally paid off in 2006. With little transparency in the country's economy, it is unclear how long the Russian people will continue to pay for Sochi. With increasing awareness of the pitfalls of hosting an Olympics, however, South Korea was subject to more scrutiny.
All Olympics overshoot their budgets
One research study, from Sorbonne economist Wladimir Andreff, asked why sporting mega-events so often overshoot their bid budgets and found the culprit is the bidding process itself. Andreff ultimately recommended that the bidding process be scrapped altogether, and that we establish a single fixed Olympic site once and for all.
Most bids fail because they are overzealous. Organizers bid with the assumption that previous games were expensive because of mistakes that won't be repeated. In the bidding war, where skepticism might cost you your bid, foolishly short predictions win the day.
Sochi's original 2007 bid of $8.5 billion had more than quadrupled to $33 billion in three years.
During the bidding process, Pyeongchang estimated its budget within a range: between $3.5 billion and $9.5 billion. Once Sochi failed to meet its $8.5 billion budget a new budget was established -- which eventually turned into several new budgets. When the Pyeongchang committee failed to meet their $3.5 billion goal, they at least failed towards a consistent target
Investments in the Sochi Games were subject to a substantial amount of corruption and fraud, pushing the price tag higher. One report claimed that between $25 billion and $30 billion of the Olympic investment fund had been embezzled.
South Korea is no stranger to corruption scandals. But scrutiny towards the country's executive may have minimized damage to the Pyeongchang Games. Ex-president Park Geun-hye was removed from office and arrested last year, and the current administration is still in the midst of corruption investigations that are still bringing new charges.
After Park's arrest, the South Korean peoples' confidence in the Pyeongchang Games skyrocketed, Professor of Sports Science at Dong-A University Dr. Chung Hee-joon said over the phone.
The center must hold
Boston stepped out of the bidding process for the 2022 Winter Olympics after Bostonites voiced their concerns about footing the bill in 2015. Stockholm, Sweden; Oslo, Norway; and Krakow, Poland, stepped out for similar reasons. Only Beijing, China, and Almaty, Kazakhstan, remained. Boston's mayor referred to hosting the Olympics as "mortgaging the future of the city away."Much of the cost is incurred through infrastructure development, with the dubious promise that the games will win the local region increased tourism for years to come.
In South Korea, local governments were having none of it. In late 2014, Gangwon Province Councilman Lee Ki-Chan threatened to give up the rights to host the 2018 Winter Olympics in an effort to push the national government to contribute 75% or more of the total cost of the games. Hosting the Asian Games in 2014, Incheon, South Korea's third largest city, made a similar threat. After the city's success at hosting a remarkably low-cost games with a budget of just $2 billion, Incheon declared itself a model for future mega-games in Asia.
Indeed, Pyeongchang has largely emulated Incheon's tactics, cutting costs by saying no to unnecessary infrastructure investment. Pyeongchang's committee constructed low-cost temporary stadiums, for example, instead of permanent behemoths that would sit unused, and quickly decay. The Pyeongchang stadium cost $109 million and will be used four times before being torn down. Sochi's Winter Olympics infrastructure development, by contrast, included a Formula One racetrack.
While handing out blankets at the opening ceremony may lead to bad press in the short term, such measures all help towards not overspending in the long run.
August Rick, Contributor
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