Why Sochi is now the most expensive Olympics ever

The winter games are generally cheaper than the summer event. But Russia's cost runups are blowing away all records.

By MSN Money Partner Jan 21, 2014 2:21PM
A picture taken on December 18, 2013 shows the Krasnaya Polyana resort near the Black Sea city of Sochi
© LESYA POLYAKOVA/AFP/Getty ImagesBy Adam Taylor, Business Insider

The Winter Olympic Games that begin next month in Sochi, Russia, are very expensive. 


At a projected cost of around $50 billion, it's not just, by any measure, insanely expensive, it's also the most expensive Olympic Games ever.


Let's put that in perspective. Last year, using available data compiled by the Times of London, we charted what appeared to be the most expensive Olympic games of all time. That concept -- available data -- is important here. The finances of Olympic hosts are notoriously vague and opaque.


As you can see from the chart, Sochi is pretty far ahead of Beijing, previously the most expensive games. That's impressive in itself, but what's more impressive is that Sochi is a Winter Olympics, generally the cheaper variety of games. 


Sochi is almost three times the cost of the next most expensive winter games, which were held in 1998 in Nagano, Japan. 

Sochi Winter Olympics Russia Chart

Adam Taylor/Business Insider


One particular road and rail link between the city of Sochi and the nearby site of the skiing events is estimated to have cost more than the entire budget for the 2010 Vancouver winter Olympics.


Sochi has wildly overrun its original budget, which was set at $12 billion when Russia won its bid in 2007. While it's not that unusual to overrun an Olympic budget -- last year one academic paper described the proposed budgets for Olympic bids as "more like a fictitious minimum that is consistently overspent" -- the level of overspend is still remarkable.


So why is Sochi so expensive? Well, there are a number of factors:


Sochi perhaps isn't the most logical place for a Winter Olympic Games. It's one of Russia's best-known beach resorts, known for its sub-tropical climate in summer. While it does get cold in winter, there have been some concerns it might not be cold enough, and there have been some drastic measures taken to ensure that there is enough snow on the ground for the events.

Partly because of this, it required a large amount of construction. Case in point, the 31-mile road between Sochi and Polyana, a mountain resort hosting the ski and snowboard events for the games, had to be built because Sochi had no areas suitable for snow-based events.

It's in Russia's troubled south, hence it has big security concerns. Russia is probably spending a huge amount of money on making sure terrorists' plans for Sochi fail. This is probably money well spent -- terrorists appear to be targeting nearby areas because they can't reach Sochi itself, hence the Volgograd bombings -- but still, it's a lot of money, and not an expense Vancouver or Nagano really had to worry about.

Corruption. In last year's Transparency International Corruption Perceptions Index, Russia came in at No. 127 out of 175 countries, with a score of 28 out of a possible 100 (100 would mean that people perceive it as not being corrupt at all, so 28 is pretty bad). Whether, as opposition figures have claimed, it is a "monstrous scam" with up to $30 billion in funds stolen, or not, corruption has probably accounted for some of the budget inflation.

Why would a country even want to have an event like the Olympics if it's going to cost some $50 billion? Mark Wilson, a professor of urban and regional planning at Michigan State University, and Eva Kassens-Noor, an assistant professor of urban and transport planning at Michigan State University, have spent some time studying "mega events" such as the Olympics, the World Cup, and the World's Fair, and found they have a variety of effects both in the short term and the long term.


Kassens-Noor explains most host countries expect "certain benefits" from hosting a mega event, including improved infrastructure, prestige, and putting themselves on the map globally. A big issue, however, is whether you can actually receive these benefits -- and whether they are worth it.


"There is a high cost associated with these mega events, but you also have to ask what you get for your money," Wilson says. "If this is money that improves the city, provides a legacy in the long term, then it might be a good investment by the city even though the cost is high. But the key question is, how will it make our city a better place to live in the future? And you could also ask yourself, what other uses could there be for that money?"


Barcelona's 1992 Summer Olympic Games are often held up as the games with the biggest positive effect on the country, not only using the creation of two miles of beachfront and a modern marina to change the city from an industrial backwater to a hot Mediterranean tourist destination, but also helping spearhead a sporting revival in Spain. 


While the exact cost of these Olympics is still unclear, one report found that the event would cost $11.4 billion in 2009 dollars (400 percent over budget). That's a lot of money, but changing a city forever like that is arguably worth it.


Similarly, Russia was particularly keen to establish a world-class ski resort in the country, Kassens-Noor explains, and a large part of whether the games are viewed as a success or not will rest upon whether the games truly establish it as that. Will the infrastructure created for the Olympics actually be used in a decade's time? Or will the country be hit by the so-called "Olympic Curse" that saw venues in Beijing and Athens end up decrepit and unused just years after the events?


These are long-term risks, but in the short term, there are potential problems too. Vladimir Putin has clearly staked a lot on the event with the intention of projecting a new Russia -- one that's economically stable and capable of organizing huge, complicated events -- a Russia that's a million miles away from the country's gray Soviet past or the violent, chaotic "Wild East" of the 1990s.


By releasing dissidents such as the members of Pussy Riot and jailed oligarch Mikhail Khodorkovsky before the games start, the Russian president has been attempting to control the narrative about the Sochi Olympics. But outside events could well strip his control away -- the controversy over gay rights in Russia may end up overshadowing the Russian government's boasts, and the threat of terrorism is a serious problem.


More from Business Insider

8Comments
Jan 21, 2014 7:24PM
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This is what political corruption and sporting events costs these days! Glad the U.S. didn't get them we have enough fat cat politicians that have over flowing pockets and empty coffers. Putin is making a killing off of this.
Jan 24, 2014 1:12PM
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Absolutely the worst place in Russia for snow.    What was wrong with somewhere in the Urals?    Better infrastructure and better snow conditions.   The cost would not be 25% of what this is costing including all the bribes.
Jan 21, 2014 7:12PM
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well, it's not like anything gets cheaper over time. olympic costs, corruption and politics are a given. nothing new here to see, just move alone ...
Jan 21, 2014 6:54PM
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I'd be more worried about the human lives that are going to be lost as the terror attacks begin.  You can't put a price on that.
Jan 24, 2014 4:25PM
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Comrades......enjoy the ride!

 

Maybe Odumbo can help get your economy back on track when your attendance is so sparse you will be in debt for the next ten years.

Maybe Odumbo can help you get an Affordable Olympics Act going.  If you like your Olympic games you can keep them.

 

 

Jan 21, 2014 6:57PM
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Don't care how much anyone spends, it will never be as great as Beijing opening, that one was i will never forget
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