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Bubble Bursts on Olympic Utopia: IOC Bows to Reality

This article appeared this week in my Sports, Business & the Law column in the Chicago Daily Law Bulletin. Here is the link to the article on the CDLB website. A subscription is required, but a free trial subscription is available.

In 2014, the International Olympic Committee (IOC) took an unusual step by calling an “extraordinary Session” for all IOC members. The goal was to address a major problem regarding the future of the Olympics. In the current selection process for the 2022 Games, five of the seven cities being considered as host cities for the Games have withdrawn from the process. Each of these cities cited unreasonable financial costs as a main reason for backing out. As a result, the only cities now remaining are Almaty, Kazakhstan and Beijing, China.

Olympic Agenda 2020

IOC Sessions, which effectively are the governing body of the IOC, typically are held once a year. The 96 IOC members in attendance at this December, 2014 extraordinary Session held in Monaco unanimously approved what is called the Olympic Agenda 2020. The Olympic Agenda 2020 includes a list of forty recommendations that will serve as guidelines to address rising cost problems that have significantly damaged the Olympic brand. IOC President Thomas Bach called the recommendations “a picture of progress.” The adoption of the Olympic Agenda 2020 represents a major milestone for the IOC, which historically has adopted change at a glacial pace.

Five Cities Cite Cost as Major Issue

Called a strategic roadmap for the future of the Olympics, Olympic Agenda 2020 could not have come at a better time. The five cities that withdrew from consideration for the 2022 Games had abundant examples from recent Games to justify their concerns about the potential costs. The estimated $51 billion cost of the 2014 Winter Games in Sochi, Russia made those Games more expensive than all previous Winter Games combined, and China’s 2008 Summer Games cost approximately $44 billion. If these high costs could be justified by long-term economic growth or significant long-term improvement to a host city’s infrastructure, the five cities that withdrew from the 2022 Games selection process might have stayed in the competition.

No Long Term Benefit

The reality, however, includes poorly-spent construction costs and limited economic impact for host cities. The historically short-sighted expectations of the IOC with respect to a host city's venue and infrastructure construction has been cited as a major reason for soaring costs of recent Games. Many of the competition venues in Athens, host of the 2004 Games, were built just for the Games and now are abandoned and are decaying. The same situation exists in Sochi and Beijing. Some have cited the cost of the Athens Games as a contributing factor to Greece’s financial turmoil, and several authorities have found no long-term benefit to the Games in Russia or China.

Watershed Moment for IOC

The city selection process for the upcoming 2022 Winter Games is proving to be the IOC’s watershed moment. The IOC typically selects a host city for the Games seven years in advance of the actual Games. For the 2022 Games, the five cities of the original seven that withdrew all are located in democratically governed countries. They withdrew in large part because the high financial costs could not be justified to their skeptical public. When the Norwegian government pressured Oslo, Norway to drop its bid, a key government official cited the “insane demands that [IOC] should be treated like the king of Saudi Arabia...".

Olympic Agenda 2020 Recommendations

The problems surrounding the 2022 selection process is forcing the IOC to look within. Among other things, the Olympic Agenda 2020 recommends the following:

  • The IOC is to offer more assistance to cities during their bidding process.This assistance will help cities develop a cost-effective bid package built upon the best practices of prior host cities.

  • The IOC will actively encourage host cities to maximize the use of existing facilities, infrastructure, and temporary venues, particularly when there is no long-term need or justification for them. This will help to keep the costs of planning and construction lower for the host city.

  • The IOC will permit host cities to hold race competitions outside the host city.The IOC also, in certain instances, will allow the host cities to hold race events outside of the host country.The purpose is to help the host cities avoid unnecessary construction costs for facilities and venues that have no long-term purpose.This new focus on sustainability will help make the cost of hosting the Olympics be more reasonable for interested cities.

It remains to be seen the true impact of the Olympic Agenda 2020. In a large bureaucratic institution such as the IOC, the actual implementation of the Olympic Agenda 2020 may be very different than the lofty goals that were espoused in Monaco. However, one thing is for sure: the fact that the IOC is acknowledging these problems with the Games is an important step forward.

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