[quote=EconProf]What are some economic and real estate take-aways from the Sochi, Russia Winter Olympics? I’ll offer mine, but first, what we know about what Russia spent to hold the Olympics there. Reportedly $56 billion was spent on hotels, resorts, infrastructure, sports facilities, roads, and the personnel to run the actual event. All this for two weeks of full usage. Those wonderful facilities will now be underutilized for a few decades until Sochi can hold another winter olympics. I wonder what their hotel occupancy rates will be for the rest of this winter.
My take-aways:
1. While capitalist Vancouver spent $7.4 billion on their recent winter olympics, Putin spent seven times as much. The opportunity cost of that ego trip is all the Russian schools, roads, orphanages, rail lines, and apartments that did not get built in that largely poor country. He should be ashamed.
2. As any private sector investor will tell you, the cost of building for peak demand periods must be covered by revenues in the long run. So Sochi prices must be unduly high year-round to cover costs, including during the off-season. When the hotels are 20% occupied will their rates be super-high, or will the Russian taxpayer have to subsidize Sochi further?
3. Reportedly many of the hotel rooms remained unfinished, and massive corruption boosted costs. This is the inevitable result of government-directed allocation of resources rather than private sector actors who generally suffer from their mistakes.[/quote]
While there is more than a thread of truth to what you say, would the private sector have been any less corrupt in Russia I wonder. Were the Vancouver Games entirely private sector run? While comparing costs is useful, it should be remembered the Sochi games were explicitly targeted so it was never a matter of ‘if’. The cost of savings lives is a hard one to quantify. I’m not offering an apologia to Putin, but the games passed without incident and Russia won the most medals, with the US trailing fourth. What happens to Sochi now? I guess we’ll have to wait and see. Should more be spent on education, infrastructure? Always.
