Hosting the Olympic Games: Will the IOC’s Agenda 2020 help cut costs and assist smaller nations?

Published 05 May 2016 | Authored by: Emma Mason, Stuart McInnes MBE

Traditionally, hosting an edition of the Olympic Games was seen as an opportunity to shine a spotlight on the triumphs of the world’s greatest amateur athletes. More recently, however, as the Olympics has evolved into an ever more commercially lucrative enterprise, hosting the Games also became an opportunity for a nation to try to derive significant financial, economic and political benefit.

As a result, it has been argued that the spiraling costs of hosting may now outweigh any tangible benefit a host nation might hope to derive.1 And if the Games can be compared to the World’s most competitive (and most expensive) party,2 is hosting it an opportunity that is only available to the World’s richest nations?

Recognizing these concerns, the International Olympic Committee (IOC) developed a raft of reforms under a broader initiative to define the Olympic Movement known as Agenda 2020. This article reviews the effects Agenda 2020 hopes to have on the bidding process, the hosting costs and the ability of smaller nations to host the Games.

The costs and risks faced by host nations

While having the potential to deliver short and long term (legacy) benefits, hosting an Olympic Games involves considerable financial risk for a host city and no guarantee that objectives will be met. The harsh reality is that every host city in the past cycle of seven Olympic games has exceeded its original estimated cost.3 Notable examples include:

  • Montreal 1976 – though the Games were deemed a sporting success they nearly bankrupted the City in the process and left the city with a debt that took decades to pay off.4
  • Beijing 2008 – though the Games overran their initial budget by a relatively small 4%,5 Beijing was, at a cost of $42 billion, the second most expensive Olympic Games on record. Further, at that time, China’s economy was able to provide sufficient capital to support a budget that was two times the size of Athens without resort to debt.6
  • London 2012 – in developing the East London site the Olympic Development agency cleared and cleaned 200 acres of contaminated land and buried power cables to create 200 acres of usable parkland. However, the increase in employment was disappointingly short term and has not been sustained. More significantly nearly 4 years after the Games the claimed promise of breaking financially even is some way from being achieved.7
  • Sochi 2014 – exemplifies both the general increase in the total cost to the host nation. Sochi 2014 Winter Olympics cost $51 billion,8 exceeding their original budget of $12billion by $39 billion.

The combination of high initial budgets, the risk of overspend, and no guarantee on delivery of legacy objectives has made governments and their citizens wary of such a commitment.  The IOC have recognized this, and sought to address the issue as part of a boarder initiative to shape and define the future of the Olympic Movement through a package of reforms that are known as Agenda 2020.

Agenda 2020

Agenda 2020 was drawn up following the election of Thomas Bach as the ninth IOC President on 10 September 2013.9 The former fencer, who won a Gold Medal for Germany at the 1976 Olympics in Montreal, set out in his candidature for the IOC Presidency that the Olympics needed to continue to progress to ensure it was relevant in a world that changes faster than ever”.10 He invited stakeholders to contribute ideas as to how the Olympic movement could change in the event that he was elected President.

Accordingly, Agenda 2020 contains a raft of reforms on a variety of issues such as the protection of clean athletes, discrimination, ethics and good governance.

As part of Agenda 2020, the IOC formally recognized the general perception that the costs associated with hosting an Olympic Games had escalated to such an extent that they were preventing cities from bidding.11

Agenda 2020 seeks to address this problem by changing the process of bidding for and hosting an Olympic Games through a package of reforms unanimously approved12 by the 127th IOC Session in December 2014. It’s aims, amongst others, includeReducing the Cost of Bidding13 and to Reduce the cost and reinforce the flexibility of Olympic Games Management for candidate cities thereby increasing the diversity of host nations.

The reforms are wide ranging (to read them in full, click here) and, accordingly this article will focus on:

  1. The changes to the bid process that have been implemented as a result of Agenda 2020.
  2. Other cost cutting reforms that have been recommended in Agenda 2020.
  3. A short analysis of whether points (1) and (2) will allow smaller nations to successfully bid to host a future edition of the Olympic Games.

Changes to The Bidding Process

The previous bidding process for the Olympic Games was criticized14 when only three cities were deemed to have submitted suitable bids to be shortlisted to host the 2020 Olympics. This, together with growing fears15 over the requirement for excessive budgets and a public spat with Norway who, on withdrawing from the 2022 race criticized16 the 7,000 pages of demands that allegedly the IOC previously made of cities, led the IOC to conclude that in order to reduce the costs and increase the diversity of cities bidding for an Olympics the bid process itself required reform.17

The bid process, as reformed by Agenda 2020, spans approximately ten years and is split into two stages: (1) the Invitation Phase and (2) the Candidature Phase. The Invitation Phase is a new, non-binding one-year process that allows interested host cities the opportunity to engage with the IOC and receive feedback on their initial ideas.

Following the Invitation Phase, those countries that remain interested in becoming a candidate city are invited to enter the binding Candidature Phase. The Candidature Phase lasts approximately two years and is further subdivided into three stages:

  • Stage 1: Vision, Games concept and Strategy
  • Stage 2: Governance, Legal and Venue Funding
  • Stage 3: Games Delivery, Experience & Venue Legacy

During each stage, the candidate cities and the IOC maintain a dialogue and the IOC provides each city with a transfer of knowledge relating to the relevant topic(s) of the stage. Over the two-year period, the candidate cities make three official submissions to the IOC that relate to the topics of each stage.

The first submission requires the candidate cities to set out the concept for their games with a focus on development, legacy and sustainability. The second submission requires the candidate cities to set out their legal and governance structures and their available private and public funding. The third submission requires the candidate cities to set out their plans for delivery of the Games (with a focus on the athlete experience) together with their plans for legacy development.

After the first and second stage, the IOC Evaluation Commission18 (the “Evaluation Commission") review the candidate cities’ submissions and provide a report to the IOC Executive Board. After stage one and two, the IOC Executive Board confirms which candidate cities are to continue to the next stage (the Evaluation Commission has the power to recommend that a candidate city’s application is deferred to a later campaign).

During stage three, the Evaluation Commission undertakes a visit19 to each candidate city and the cities have the chance to present to the IOC Session prior to the secret ballot and election of the official host city by the IOC members. The host city is appointed seven years prior to the edition of the Olympic Games it will host.

 

Other Cost Cutting Reforms

Agenda 2020 also contained other cost cutting reforms. While it is not the intention of this short article to include a full analysis of these additional reforms, they are set out below to highlight the fact that the changes made to the bid process was only one aspect of the IOC’s attempts to reduce the costs to host an Olympic Games:

  • Joint bids - for the first time, the IOC will allow certain events at an Olympic Games to take place outside the host city or the host nation for reasons of geography or sustainability thus allowing cities and countries to share the financial cost and economic risk (as well as the benefits) of hosting an edition of the Olympics (Agenda 2020 – Recommendation 1(3) and 1(4)).
  • Travel costs – the IOC will bear the costs of travel for a limited number of candidate city delegates to pre-determined candidate city briefings and to bear all costs of the Evaluation Commission’s travel (Agenda 2020 – Recommendation 3(2)).
  • Reduced bidding fee – the candidate city bidding fee has been reduced20 from $650,000 to $250,000 payable in advance in installments across the three stages of the Candidature Phase. The second and third installments are only payable if the candidate city continues to the second and third stage (as applicable).
  • Transparent management – the IOC will introduce a transparent management procedure for any changes of requirement of an Olympic Games (Agenda 2020 - Recommendation 12(1)).
  • Ongoing review – the IOC and relevant stakeholders will review, on an ongoing basis, the preparation, delivery and management of the Olympic Games with a view to managing costs and complexity (Recommendation 12(2)).
  • Engage the International Federations – the IOC will enhance the role of the International Federations in the planning and delivery of the Olympic events with a view to using the expertise of the international governing bodies to streamline planning and make cost efficiency savings (Agenda 2020 - Recommendation 13).

 

Will smaller nations now be able to submit a successful bid to host an Olympic Games?

The case for

On the face of it, the changes to the bid process and the recommended cost cutting reforms should allow smaller nations to submit a successful bid to host future editions of the Olympic Games.

First, the replacement of the application and shortlist phases by the Invitation and Candidature Phase has meant that, arguably, the IOC members will elect a host city from a much larger pool of candidate cities and smaller nations are therefore more likely to make it to the final stage. Under previous bid processes, the IOC members were only able to choose from a shortlist of candidates chosen by the IOC Executive Board.21

Second, the ability of the candidate cities to engage regularly with and (gain feedback from) the IOC throughout the bid process should assist smaller nations. Nations without previous experience of submitting bids will be able to access the vast knowledge base accumulated by the IOC and use such knowledge to streamline their bids and cut costs thereby making a bid by a smaller nation more feasible.

Third, the ability to submit a bid that contemplates certain events taking place out with the host city or nation will allow nations to pool resources, infrastructure and knowledge is an option that may be more favourable to smaller nations who are, perhaps, more willing to share the limelight of hosting an Olympic Games than larger nations.

The case against

Judgment of Agenda 2020’s cost cutting impact should be withheld until the first full cycle of bidding and hosting under the auspices of Agenda 2020 are complete at the conclusion of the 2024 Olympic Games. However and despite it being too early to truly determine Agenda 2020’s impact, there are a number of subsisting aspects of hosting an Olympic Games that may still undermine a smaller nation’s ability to successfully bid to host an Olympic Games.

First, the vast infrastructure needed to accommodate the various events (and the visiting athletes) would, in the post Games era, far exceed demand for such buildings amongst many city’s native populations. Smaller nations may be put off submitting a bid by the risk of having a city scattered with unused facilities.

Second, the requirement in the reformed bid process for candidate cities to make three submissions (as opposed to one application) may in itself act as a deterrent to smaller nations. Submissions of this nature require meticulous preparation and are a considerable investment; they take up valuable time and resources (both financial and human) that may be better used elsewhere and have no guaranteed beneficial outcome. Smaller nations lacking the sporting budgets of their larger counterparts may therefore still struggle to make the case to their electorate that such a commitment is worthwhile.

Third, Agenda 2020 still does not allow a nation to submit a bid to host an Olympic Games throughout its territory. Such a concept would arguably be more attractive to smaller nations as, for example, there would be a greater likelihood that the required infrastructure would already be in existence if all of its cities rather than one city were able to host Olympic events.22

 

Budapest 2024 - Agenda 2020 already a success story?

Arguably, the fact that Budapest (a city with a population approximately one fifth23 (and covering an area approximately one third) the size of London) is a candidate city to host the Olympic Games in 2024 is proof that Agenda 2020 has already been successful in widening the pool of cities willing and able to submit a bid to the IOC. Certainly, those officials responsible for submitting Budapest’s Stage One bid cite Agenda 202024 as reason for confidence in their city’s prospects.

Further, the IOC 2024 Evaluation Commission working group has recently concluded its analysis of the four candidate cities Stage One bid and commented that all four cities had submitted “extremely strong” bids.25 It therefore seems unlikely that the Evaluation Commission will exercise its right to make a recommendation to the IOC Executive Board that Budapest’s bid should be deferred.

However, it should be noted that Budapest’s positive view is not universally held. Indeed, nations smaller than Hungary have cast doubt26 over whether the reforms go far enough and whether they have reduced the cost of candidature to such an extent that would ever truly be able to consider hosting an Olympic Games.

 

Conclusion

It is clear that money spent on hosting the Olympic Games is money not spent on other things that a city or a country might need. Where at one time, hosting an Olympic Games was to be viewed only as a positive opportunity and a source of civic pride; in recent years, candidacy has been considered by some nations as too great a financial risk to accept.

The IOC’s Olympic Agenda 2020 offers (at the very least) a glimmer of hope that the worrying trend of overrun and ever-increasing budgets together with adverse economic consequences may become a thing of the past. However, it is too early to tell what the true impact of those reforms will be, whether they go far enough and whether they will in fact achieve the IOC’s aim of broadening the pool of potential Olympic Games hosts to allow more than the World’s richest nations to host the World’s best party.

 

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About the Author

Emma Mason

Emma Mason

Emma is a trainee solicitor in Squire Patton Boggs’ sports litigation department who has completed seats in corporate, international dispute resolution and a secondment to Chelsea Football Club. During her traineeship Emma has, from a sporting perspective, assisted with the sale of a Championship football club and the provision of advice to various International Federations and Premier League football clubs.

Stuart McInnes MBE

Stuart McInnes MBE

Stuart McInnes MBE is a consultant in our sports law team and is based in the London office. Stuart is a well-known and highly regarded arbitrator at the Court of Arbitration for Sport (CAS). He has broad experience of cross-border litigation involving multijurisdictional issues. 

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