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Aug. 3, 2016

Sherri Henry: The business of the Olympics

Aug. 3, 2016

Sherri Henry, who teaches introductory and international business courses for the Broad College of Business, also leads a summer study abroad program, “Business of the Olympics: Olympic Venues Explored.” Since 2012, this program has taken students on international Olympic site visits around the world to research and explore a variety of multinational industries and companies connected to the Olympics.

This summer, students are currently in Sydney, host of the 2000 Summer Olympic Games.

With years dedicated to this program, Henry provides insight into the complexities behind business operations of the Olympic Games—before, during, and after.

What are the local and global industries that are most impacted by the Olympic Games?
Many industries are connected to the Olympic Games on numerous scales. The Olympic Partners Programme is a group of companies from around the world that agree to high-level sponsorship contracts with the International Olympic Committee. Some of these include Visa, McDonald’s, Dow Chemical and Coca-Cola. Just being connected to the Olympic Games and having your name everywhere gives companies the opportunity to make a great deal of money. Other companies sponsor athletes and teams, which is also a prolific marketing opportunity for brands.

On the other hand, people assume local businesses profit but that isn’t always the case. The ones that profit aren’t goods or services, but places like shopping malls. Westfield Group (an Australian shopping center company, now Westfield Corporation) discovered this out and strategically built its London shopping center so athletes and participants attending the London Olympic Games would have to walk through its mall to attend events. This proved to be very clever and led to great revenue generating opportunities.

Are there any industries that suffer as a result of hosting the Olympic Games?
The students in our program research smaller, local businesses and the return on investment because they don’t usually fare well. For example, a bar in Whistler, British Columbia, planned for a substantial increase in business, so it expanded its patio area and seating since it was located on the edge of the planned “main stage” area. Unfortunately, their location was behind the main stage and fans preferred not to be behind the action. Another example is food trucks: many assume food trucks will do well because of the population influx, but when mega-events happen in cities, new laws are enacted to regulate when and where trucks and cars can be on the road.

What is the most time-consuming and costly part of preparing a city and business for the massive population influx?
Oftentimes one of the biggest expenses to a host city is infrastructure. Roads, athletic facilities, hotels and other buildings need to be constructed to accommodate the population influx connected to this type of mega-event. There are many additional costs that affect safety and security of athletes, spectators, corporate employees, spectators, and the community at large. With good planning, infrastructure improvements may benefit the local area and businesses, like transportation, logistics, and beautification. But many host cities fail to plan well and don’t anticipate construction needs and timelines. This leads to a big socio-economic hit to the well-being of the communities and countries, which can last for years.

What are the biggest surprises businesses have when preparing for big events like this?
Businesses that develop feasible and actionable business plans for before, during, and after a mega-event usually fare better than other businesses. One surprise to residents of host cities is the lack of availability for tickets to events for local people. Sponsors tend to scoop up so many seats (and then not attend) that many seats go empty while local spectators can’t get a ticket to events.

What issues might Rio encounter that other games before did not?
Rio de Janeiro has declared a “state of public calamity in financial administration” and warned that the situation is so dire it impedes the city’s ability to meet Olympic Games commitments. This is huge! Recently, the acting governor stated “total collapse in public security, health, education, transport, and environmental management” is possible. Besides the Zika virus, there are issues with health regarding the water and sanitation in Rio, as well as additional financial issues. The metro line construction funded for the Olympic Games is affected by this and will only have limited service. The Rio government is having difficulties paying salaries and pensions, hospitals report limited supplies, and security is a large issue the city needs to address. Violent crime has risen and security has worsened, but the government promised Olympic security would not be compromised.

Story by Caroline Brooks

Reprinted with permission from Broad College of Business

Photo courtesy Sherri Henry