London hopes Olympics worth hefty price

London’s new Olympic Stadium (foreground) came with a price tag of $764 million. The Aquatics Center (background) cost $423 million.
London’s new Olympic Stadium (foreground) came with a price tag of $764 million. The Aquatics Center (background) cost $423 million.

LONDON — As sports upsets go, it was ‘‘momentous.’’

That was how former British Prime Minister Tony Blair described London defeating favorite Paris, 54-50, in the final round of voting for the 2012 Summer Olympics. By earning the right to host the Games, London scored a major victory for British pride. Celebrations in Trafalgar Square followed the July 2005 announcement, as did congratulations from the Queen, higher stock prices for British construction companies, and predictions of a London real estate boom.

The public, government, and investors embraced the Games as a transformative force, a catalyst for development, an opportunity to re-brand London for the future.


Then came the global game-changer, the financial meltdown that prompted austerity measures, protests, and greater scrutiny of big-ticket items. With a final price tag expected to reach $15 billion-$20 billion, the London Games, and the general extravagance accompanying the Olympics, now play much differently.

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When it comes to expensive Games, the Olympic movement is at an inflection point.

In the current economic climate, the London Olympics, the first post-meltdown Summer Games, will be watched for more than sports. While London organizers long ago exceeded original cost estimates of $4 billion, their concept of a more sustainable Games may be on target. Depending on what happens to the venues, the redeveloped areas, and the new infrastructure after the crowds depart, London could become a new model as cities and countries rethink how to bid for and host the Olympics.

Building on underdeveloped areas such as this is a substantial benefit of hosting the Olympics, say organizers.

‘‘It will be incumbent upon host cities in the future to make sure that local communities think that what they’re doing is proportionate and realistic and not profligate,’’ said Sebastian Coe, chair of the London Organizing Committee of the Olympic Games. ‘‘I don’t think in my lifetime I will ever see another Beijing. But I do think there is a big appetite for cities to stage the Games.’’

London did not want to join the cautionary Olympic tales of debt and neglected venues that stretch from Montreal to Athens to Beijing. In 2008, Beijing staged the ultimate extravaganza for more than $40 billion, including $300 million for the Opening Ceremonies.


Ironically, recent multibillion-dollar Summer Games are a world away from the London Olympics of 1948, the last time the city served as host. The ‘48 Summer Games were also known as the “austerity Games,” in part because the post-War competition took place during continued rationing in Britain, with athletes asked to bring their own food and housed at military camps and schools.

For 2012, London organizers placed an emphasis on legacy and sustainability long before the global financial crisis. Looking well beyond the closing ceremonies, they focused on reusing venues, regenerating impoverished east London, and re-branding the capital as a place where, as Mayor of London Olympic marketing adviser Daniel Ritterband said, ‘‘its better years are still ahead.’’

And so a prudent bid strategy in 2005 seemed prescient when markets crashed in 2008.

‘‘No Games will really want to be seen as the Games that reins it in,’’ said LOCOG CEO Paul Deighton. ‘‘They’ll just want to be seen to get there in a smart way.

‘‘You have to understand the value-for-money argument, have a very clear vision of why you’re doing this, and what are the long-term social, economic, and sporting returns. Not because it’s that hard to justify, but because it helps you structure what it is you want to accomplish.’’

Lasting effects


From the start, London organizers paid for and banked on what Deighton calls the ‘‘catalyst effect.’’ That is the Games’ ability to spur investment, job creation, and urban development and regeneration. Government support of a London bid, and the money that came with such support, initially hinged on how quickly the event could transform the city.

‘I don’t think in my lifetime I will ever see another Beijing.But I do think there is a big appetite for cities to stage the Games.’

The complexity and size of today’s Summer Olympics — 26 sports and 205 national delegations that include more than 10,500 athletes plus 600,000 international visitors — necessitate new transportation systems and new infrastructure. That is as true for London in 2012, as it was for Beijing in 2008, as it will be for Rio de Janeiro in 2016.

Olympic bid planner Terrence Burns applies the ‘‘3-to-1 rule’’ to construction projects, calculating that what normally takes 21 years is completed in the seven years Olympic hosts are given to prepare.

These days, nowhere is the Olympic catalyst effect and ‘‘3-to-1 rule’’ on greater display than in east London. With much of London’s Olympic budget directed toward Stratford, the impoverished, long-neglected East End district has been resurrected by the Olympic Park, a new shopping mall, new housing, new power and water systems, office buildings, and additional transportation lines. Government officials see London moving into the future by moving eastward.

In a crowded cityscape, east London is the rare place with room for growth and, with a push from the Olympics, it now appeals to investors from around the world. A Canadian teachers’ pension fund made a significant investment in the Westfield Mall, one of the largest urban shopping centers in Europe, which opened in September 2011 with 300 stores, restaurants, movie cinema, and casino.

‘‘If you told people four or five years ago that international pension funds would invest in this part of London, they would have laughed at you,’’ said Neale Coleman, a Mayor of London adviser and board member of the Olympic Delivery Authority.

‘‘People always say, ‘Oh, we could have spent the money better if we didn’t have the Games.’ But you never would, would you? You would never have been able to accelerate development in this part of town in the way that you have.’’

Yet, urban regeneration is an easier sell than a $764 million Olympic Stadium, the $423 million Aquatics Center, and the $150 million Velodrome, the ultra-modern architectural anchors of the Olympic Park in Stratford.

On July 27, the opening ceremonies will take place before 80,000 spectators at the Olympic Stadium. During the 16 days of competition that follow, crowds will fill state-of-the-art venues, all testament to sports as spectacle that the Games inspire. But once the Olympic flame is extinguished, the capital known for iconic landmarks doesn’t want Olympic-sized white elephants left behind.

‘‘We’ve built very few new venues for these Games,’’ said Deighton. ‘‘Where we’ve built them, we’ve worked very hard to build them in a way that gives them the best chance of having a very viable long-term future; I think it creates a blueprint for how these events can be done in the future.’’

The poster venue for the London Games and its more sustainable model is the 12,000-seat Basketball Arena, the largest temporary venue ever built for the Olympics. The arena’s steel frame and white-rippled, plastic exterior will be deconstructed after the Games, shipped elsewhere and reused, possibly at the 2016 Rio Olympics.

With the removal of two temporary wings, the Aquatics Center will scale down from an Olympic capacity of 17,500 to 2,500 for smaller events and the 800,000 community swimmers expected each year. In a first-of-its-kind design and construction feat, Olympic Stadium seating can downsize to a range between 25,000 and 60,000 for a future occupant, likely the West Ham soccer team.

But underscoring the difficulty of finding, as London Mayor Boris Johnson put it, ‘‘legacy solutions’’ for venues, the bidding process for the stadium’s future occupant has been fraught with legal issues and delays. Whether the delays merely frustrate organizers or foreshadow other post-Games problems remains to be seen.

‘‘London had a very clear plan on what they wanted the Games to do from a legacy perspective,’’ said Burns, who has handled the branding and technical planning of four winning Olympic bids. ‘‘Time will tell whether it’s successful or not. They’ve done all they can do to ensure there is a legacy based on what they’ve spent.’’

Rebuilding images

Aside from physical transformation, host countries call on the Olympic catalyst effect to remake their image. Stratos Safioleas, an Athens-based strategic consultant for the London Games said the Olympics represent a valuable investment because of their ‘‘ability to project the importance of a country.’’

Beijing and Rio fall into the category of emerging powers making a grand entrance on the world stage, of treating the Olympics like a geopolitical debutante ball. London wants to communicate, Ritterband said, ‘‘that it is not old school or old Europe, but very much a relevant, cosmopolitan, modern city.’’ To move beyond Big Ben and Beefeaters, London Olympic logos, mascots, and venues look purposely, sometimes controversially, futuristic. During the Games, the city will promote its interest in everything from high-tech business to high fashion.

‘‘Emerged markets will use London as a benchmark as to whether they would go ahead and bid for future Games,’’ said Ritterband. ‘‘Can an established city advance, change perceptions? Does it mean as much to a developed city as it does to a developing city?’’

For the foreseeable future, as Tokyo, Madrid, and Istanbul compete for the 2020 Summer Games, those are multibillion-dollar questions. London organizers will not know for another five or 10 years whether the Olympics have paid off in the way they envisioned. And as they learned from the build-up to the Games, a lot can happen in that time span.

When Rome withdrew from the 2020 Olympic bid process in February because Italian Prime Minister Mario Monti deemed such a financial investment ‘‘irresponsible,’’ Burns saw the decision as ‘‘a bit of a canary in the coal mine for the Olympic movement.’’ He advocates a system that rewards more financially prudent behavior by bidders.

But today it’s hard to set the catalyst effect in motion and sell the importance of a country without the billions that build architecturally striking new venues, modernize transportation systems, and turn blighted land into an Olympic Park. The Games and the business of transforming cities and countries don’t take well to half measures. And once the competitive spirit takes hold, extravagance is hard for hosts to resist.

‘‘There’s a danger with the Olympics in always benchmarking them by the previous Games,’’ said Hugh Roberston, British Minister for Sport and the Olympics. ‘‘In a sense, the challenge for us is not to be benchmarked by Beijing, which was a state throwing everything at an Olympic Games and saying, ‘We’re a global superpower.’ Competing against the Beijing Olympics is an arms race we’re not going to win.

‘‘We may do the Olympic movement a huge favor by bringing this down to size. My guess is we’ll bring it down to a certain size, but it’s still large and there’s a lot more to do.’’

Shira Springer can be reached at