Olympic-style mega-events reach new frontiers, at a cost

This ‘skating palace’ was a snip at $98m. Atos International

There is a tendency – almost a law of nature – that governs the way the costs of large-scale international events such as the football World Cup and Olympic Games far outstrip the initial forecasts of planners.

The spiralling cost of the upcoming Sochi Winter Olympics is no different, rising from the inflation-adjusted original bid of US$12 billion to US$51 billion according to some estimates.

This runs counter to the growing awareness among organisers of the many risks associated with putting on these grand spectacles. Today, mega-event managers are typically in the business of compiling extensive lists of prospective hazards and threats, to inform their strategies and operations.

However, despite pressure from authorities such as FIFA and the IOC, the costs of these events continue to grow and the array of risks that organisers face continues to proliferate. Why?

Mega-event boom

While there have been cost overruns ever since the first modern Olympics in 1896, the recent explosion of the mega-event industry has exposed planners to new pressures and temptations. Commercialisation has brought money flooding into sport and made such events desirable once again to ambitious politicians and governments in search of personal credit or an economic boost. It has also increased the financial liabilities at stake should things go wrong.

Significantly, the recent trend of mega-events moving into emerging markets – such as the football World Cups due to be held in Brazil in 2014 and Qatar in 2022, or the upcoming Winter Olympics in Sochi – has given rise to a new set of risks. Indeed, the changing industry suggests that the governance of mega-events may become increasingly problematic in future, for a number of reasons.

Bidding wars and showcasing

Putin gets involved. Presidential Press and Information Office

They might not be cheap, but mega-events remain a sought-after prize for local and national governments looking to showcase their economic and political power on a global stage. Bidding competitions fuel the optimism bias in planning, pushing expectations skywards.

Once preparations are underway, the pressure to impress a potential global audience of billions can encourage a mindset among political overlords that “no expense be spared” in designing and delivering the event. Such mega-projects often end up serving as expressions of political ambition and power.

Lack of infrastructure

Staging mega-events in emerging economies with poor facilities and infrastructure has implications both in terms of cost and event delivery. The high price tag for the Beijing 2008 Olympics, put by some at around US$40 billion, was linked to the huge sums that were invested in the infrastructure (even the security bill for the event was highly inflated by installation of a vast CCTV surveillance system that remained in place after the event).

The high cost of the Sochi games has similarly been put down to having to build everything from scratch. As mega-events are increasingly awarded to places where infrastructure development is needed and comes as part of the deal, total costs will rise. So too will the propensity for cost overruns, as the associated portfolio of mega-projects also grows.

This local context is crucial, since the two Olympics typically presented as being textbook cases of financial restraint are US-based games which necessitated minimal infrastructure or venue construction: Los Angeles 1984 and Atlanta 1996.

Corruption and construction standards

Compared to advanced democracies, emerging economies tend to suffer from higher levels of corruption. This makes it harder to keep a check on construction costs, procure supplies properly or keep venues safe (consider the allegations relating to Euro 2012 in Ukraine or Sochi 2014 which has been associated with organised crime and stolen funds ). Corruption isn’t just a financial problem either, as organisations like the IOC rely upon the “value-based” brand that events are built upon.

Less tightly regulated markets also lead to poor construction standards and worker safety, especially when organisers are running behind schedule with a deadline that cannot be missed. In the run-up to the Delhi 2010 Commonwealth Games, the collapse of a footbridge close to the main stadium highlighted the chaotic state of preparations and unfinished venues and infrastructure. Construction standards in Brazil have also caused concern ahead of the 2014 World Cup and 2016 Olympics.

Worse still, shocking reports on the treatment of migrant workers in Qatar highlight poor safety standards and worker exploitation commonly linked with weakly regulated labour markets in emerging economies.

Democracy and weak states

With mega-events increasingly being awarded to authoritarian regimes such as Qatar and China, or weak states that cannot fully control their borders and populations, there is increased risk of disruption both from democracy campaigners on the one hand and terrorists on the other. For example, the 2011 Bahrain F1 Grand Prix was postponed and later cancelled due to civil unrest and pro-democracy protests.

Militarised zones can be used to secure mega-events, but often they simply lead to the dispersal of unrest and terrorist activities to other regions. Consider the terrorist attacks in China’s far-western Xinjiang province in the lead up to the Beijing Olympics, or the Volgograd bombings in Russia ahead of Sochi.

When the more authoritarian governments respond with crackdowns, either on terrorists or protesters, it represents a major headache for bodies such as the IOC and FIFA who are often left defending the indefensible.

Growth in the mega-event industry and its movement into emerging markets has left it facing an array of new and often poorly understood dangers. Over the next ten years, the world’s largest events – the Olympics and the World Cup – will be held in a number of emerging economies against a backdrop of fast-changing global risks.

The shift towards emerging markets offers exciting opportunities for major sports events to reach new audiences. This shift sees the traditional Western dominance of international sport eroded, to make way for a new era that is more global and diverse. Sport fit for the 21st century.

It also, however, presents serious governance problems and spiralling financial and human costs. But if governing bodies keep selecting host cities and countries with limited physical and state infrastructure, weakly regulated markets and poor records in human rights, then maybe that is the price we will pay.


Related: Olympic costs always overrun, but nobody really cares