With the public release of the Annecy 2018 Olympic Winter Games application file this week, the numbers and plans for all three bids, including Munich and PyeongChang, are now exposed to analysis and criticism.
But one number required to be reported to the IOC – an amount that is loosely-based and largely fictitious – seems to have a significant bearing on each bid’s chance of success.
In the 2018 applicant questionnaire, the International Olympic Committee (IOC) asks “should you be accepted as a Candidate City to host the 2018 Olympic Games, describe how and by whom your candidature will be financed. What is your budget (in USD) for Phase I (Application) [and] Phase II (Candidature)?”
For 2018 Munich has by far the largest planned expenditures at $42.5 million (all monetary values in U.S. dollars), followed by PyeongChang at $31.5 million and Annecy at $21 million. But what does this really mean?
The IOC has been requesting bid budget amounts since the bid for the 2010 Olympic Winter Games that were won and recently hosted by Vancouver. For that campaign Vancouver budgeted $21.5 million while the two other finalists, Salzburg and PyeongChang, budgeted $6.5 million and $2.4 million respectively.
Then for 2012 – a summer Games bid, London’s initial budget estimate was $48 million while the estimates for the other four finalists, Paris, Madrid, New York and Moscow, were all under $25 million. London won.
Sochi, Russia proposed a budget of $27.5 million for their winning 2014 winter Games bid while PyeongChang followed at $21 million and Salzburg at $8.5 million.
I’m sure you’ve noticed a pattern; in each case the winning bid planned to outspend their competitors by a wide margin. Not only that – if you look at the past three winter Games bids – the proposed expenditures have skyrocketed as if the bidders have noticed the pattern as well.
This “bid auction” model seems to break for the 2016 summer Games cycle – but all four finalists for that bid proposed inflated figures similar to the amount that won London its Games. Chicago budgeted $49.3 million while campaign winner Rio de Janeiro came in at $42 million.
Normally, it might make sense – bids that spend more money on their campaigns avail themselves of more opportunities and will have a better chance of success. The only problem here is that these numbers aren’t much more than ink on paper; they usually bear little resemblance to the final price tag of the bid.
This week GamesBids.com spoke with Edgar Grospiron, Annecy 2018 bid chief, and asked him how his $21 million budget would be competitive against the two other bids that planned to spend more.
Grospiron said “for the moment the budget of $21 million is set up with public money and private partners, but as you can see, we don’t have the biggest partners, the biggest enterprises or the biggest French enterprises. Now into the bid we are already meeting with them to bring them to support the bid… – it’s going to come.”
So clearly, the Annecy 2018 Olympic bid committee plans to expand that budget based on new sponsorships as the campaign continues – and this is very common among all bids. However, the numbers in the questionnaire response will not change, or get reported again.
Another reason to dismiss the budget numbers as inaccurate is the different accounting methods used to derive the numbers. Often bids will use in-kind sponsorships such as airline tickets or accommodations from sponsors for traveling delegates – or take advantage of existing government services such as security or other human resources that aren’t charged to the bid. These may or may not show up on the balance sheet depending on how the accounting is done.
The IOC sets no limit on what bids may spend on their campaign and when things get competitive the purse strings usually loosen quickly.
For instance, despite budgeting $49.3 million, Chicago 2016 arranged additional sponsorships and reportedly spent at least $76 million on the bid – and that does not include in-kind gifts such city services used during the IOC evaluation visit. For 2014, Sochi’s $27 million budget estimate swelled significantly – some estimate to over $100 million – as the city vigorously pursued their Games. The Russian city went all out, even to the point of flying an entire ice rink in the worlds’ largest airplane to put on a skating show at the final vote in Guatemala City.
So even as meaningless as it seems, why is this budget number so closely connected with the final results of the bid? Statistically, the congruency is significant – so much so that it is has become an influential piece of data used in the GamesBids.com BidIndex.
Higher initial budgets allow bidders to attract expensive, experienced, high-end campaign management consultants who are very limited in this field – and by hiring the talent first, bid cities also keep them out of the hands of competitors. Agencies such as Vero Communications and their Chairman Mike Lee who were critical in the success of London 2012 and Rio 2016; Jon Tibbs Associates who helped bids for Sochi 2014 and Beijing 2008; Helios Partners who provided bid consulting for Vancouver 2010 and Sochi 2014; and a host of other key talent with extremely unique expertise and experience.
For marketing and communications of the 2018 bids Munich has secured Jon Tibbs Associates, PyeongChang has signed Vero Communications and Annecy has contracted Havas Sport and Entertainment, the second largest advertising group in France that worked with the unsuccessful Paris 2012 Olympic bid.
Since the Olympic bribery scandal of the late 1990’s, marketing bids has been more difficult because the IOC imposed major restrictions on how the bids may communicate with its voting members. That entirely changed the landscape, forcing bids to leverage better skilled people and more creative channels to relay their messages. The media became more important as the IOC was forced to increase the transparency of the bids, and bid communicators recognized the importance of the press in helping deliver messages after direct lines to the members were severed.
It is clear that a highly-skilled and experienced team is required to win an Olympic bid, and any serious bidder needs to understand this and recognize the realistic costs involved. Perhaps it is this understanding, a lack thereof, that is reflected in initial bid budget estimates.
