Olympic bid: financial fairytale or nightmare?

Raising the flag at the 1948 winter olympics in St Moritz RDB

Early estimates of how much it would cost to stage the Winter Olympics in Switzerland, and the potential economic benefits they would bring, are being carefully scrutinised - but not everyone is convinced that the figures will prove accurate.

Opinion has become polarised in the build-up to a March 3 vote on whether canton Graubünden should bid for the 2022 edition. Optimists believe the Games would inject much needed economic impetus while pessimists dwell on who foots the bill if things go wrong.

History shows that initial budgets have a habit of  spiraling out of control while the success of such an event hinges on a number of unpredictable factors, such as the weather.

The number crunchers have been out in force attempting to make sense of it all. But the calculations are fiendishly difficult at such an early stage and require a fair amount of guess work.

On the (official) cost side, the bid (CHF60 million), transport and sporting infrastructure (CHF1.5 billion), security (CHF250 million) and running the event (CHF2.46 billion) adds up to just short of CHF4.3 billion ($4.7 billion).

Just over CHF1.3 billion would be provided by the taxpayer. The rest would be made up by the International Olympics Committee (IOC), commercial investments, ticket revenues, sponsorship and the future sale of temporary structures.

The maximum added value (mostly jobs, revenues, taxes) to the Swiss economy between the potential award of the Games in 2015 and their completion in 2022 has been calculated at CHF4 billion by a recent report commissioned by the Graubünden 2022 bid committee.

The Euro 2008 football championship, co-hosted by Switzerland and Austria, generated SFr1 billion of added value to the Swiss economy, according to the Lucerne University of Applied Sciences and Arts.

The Winter Olympics would be a larger scale event than Euro 2008, with more infrastructure spending. Switzerland also lost out on staging one semi-final and the final of Euro 2008 to Austria.

Pay off

All going well, every franc invested by the Swiss taxpayer in the Winter Olympics would generate another 3.3 francs for the national economy – a kind of fiscal stimulus package, particularly for the canton of Graubünden which has suffered a crippling fall in tourism in the last few years.

Added to that, the positive legacy of Switzerland’s image, particularly among tourists, advances in technology and innovation, and improved infrastructure could then add an unquantifiable economic bonus in the future.

This was brought up by Sports Minister Ueli Maurer during a debate at the World Economic Forum in Davos in January.

“Big events as a rule generate less immediate money than businesses had expected,” he said. “But in the long run, such events always pay off if you take care to plan them well and not invest too much money.”

So far, so good – but the official estimates have generated suspicion among some inhabitants, who smell a rat.

Only the most ardent opponent of Switzerland’s Winter Olympic bid would bring up the examples of the 1976 Montreal Summer Olympics that took 30 years to pay off debts, or of the 2004 Athens edition that added another hole to the sinking Greek economy.

Bringing up the spectre of preparations in Russia for the 2014 Winter Olympics, where costs have escalated five-fold from original estimates, would also be harsh because the Sochi venue is being built from scratch.

But research from the University of Oxford last year  revealed that every winter and summer Olympic Games since 1960 had exceeded the bidding budget by an average of 179 per cent.

Admittedly, initial budgets have become much more aligned to the final cost since 2000 and the winter versions over-run by only half as much as summer Games. But the Oxford study still offers a warning for future bidders.

“The data thus shows that for a city and nation to decide to host the Olympic Games is to take on one of the most financially risky type of megaproject that exists,” it states.

Who pay what?

Swiss government: CHF30 million for the bid, CHF250 million security and SFr1 billion other costs

Canton Graubünden and host communities: CHF300 million (subject to a vote on March 3)

IOC: CHF560 million

Private investments in infrastructure: CHF500 million

The remainder is to be made up from event revenues (sponsorship, ticket sales, sale of temporary infrastructure after the Games).

(Source: Graubünden 2022 candidature committee)

“Small risks”

Jürg Stettler, an economist at Lucerne University – and a contributor to the Graubünden 2022 report – admits that the calculations were derived from a “close to best case scenario”.

“It was sometimes difficult to differentiate which infrastructure investments had already been planned and were brought forward as opposed to those that were completely initiated by the Games,” he told swissinfo.ch.

The report lists a number of risks that could throw its calculations into disarray. These include adverse weather conditions, rising accommodation and land prices, loss of trust from the Swiss public, disappointing sponsorship revenues and costs overshooting.

But Swiss former Nordic combined Olympic champion Hippolyt Kempf, now an economist with the Federal Sports Office, believes that there would be few alarms.

“The investments that Switzerland needs to make are small and are not that risky compared with other countries that have held the Games,” he told swissinfo.ch. “I am sure that we would come close to achieving the projected figures.”

Estimated economic benefits (2015-2022)

Added value (Switzerland): CHF3.84 billion – CHF4.11 billion

Added value (Graubünden): CHF1.47 billion – CHF1.8 billion

New jobs (Switzerland): 30,500 – 33,400

New jobs (Graubünden): 11,900 – 15,100

Tax revenues (Switzerland): CHF400 million – CHF440 million

Tax revenues (Graubünden): CHF76 million – CHF95 million

Additional overnight hotel stays (Switzerland): 1,030,000 – 1,750,000

Additional overnight hotel stays (Graubünden): 520,000 – 975,000

(Source: January 2013 report compiled by Rütter & Partner, Federal Sports School Magglingen, Lucerne University of Applied Sciences and Arts)