2010 Olympic organizers wrestle with weakened economy
Cutting travel and freezing new hires are among the plans of Vancouver Olympic organizers to create a larger financial umbrella to protect the Games from the economic storm brewing around the world.
While there has been no indication that any revenue for the 2010 Games is in immediate danger, organizers can't be naive, said John Furlong, the chief executive officer of the committee, known as Vanoc.
"All of the things we have relied on have stood up," Furlong said in an interview with The Canadian Press.
"But our feeling was that given the rapid changing environment around us and the fact that it was affecting everybody, we just simply took the position that it's just not reasonable to assume that we would not be confronted with new challenges."
A revised Games budget will be presented to Vanoc's board of directors at a meeting Tuesday.
The current budget is $1.6 billion, which doesn't include the $580 million spent on the venues. Major revenue generators for the Games are sponsorship and ticket sales and both targets were exceeded for 2008, organizers have said.
A scheduled budget review had already been underway but Furlong said the market crash this fall forced everybody back to the table.
"For us to continue without improvising and preparing for a potential challenge here and there would simply not be responsible," Furlong said.
Cuts are being made both to internal operations at Vanoc and to Games-time operations, he said.
Furlong said fewer new hires will be made in the months leading up to the Games and fewer trips will be made for Games business.
For example, he said the committee is reviewing whether hard copy publications can be placed online instead of printed.
Furlong said contingency planning so far hasn't extended to looking for other "official" suppliers in case existing contracts fall through, but now that they're about to start spending $1 billion, they're looking for strict guarantees that any new dealers will be able to deliver what they promise.
They're also looking for new revenue streams, such as increasing the number of seats available in B.C. Place Stadium for the opening and closing ceremonies.
The ultimate goal, Furlong said, is to have a contingency fund that could make up any shortfalls.
The current contingency fund is $100 million.
It will be higher in the revised budget, Furlong said, but he declined to give a figure.
"I don't think what we're doing will hurt us long term at all. Ultimately it will lead to a better outcome," he said.
General Motors has committed $67 million to the Games, in cash and in kind. But last week the company went to the federal government seeking a $2.4-billion loan and $800 million in cash immediately to get through liquidity problems.
And GM isn't the only sponsor in trouble.
Teck Cominco, contracted to provide the metal for the 2010 medals, is selling off assets and slashing capital spending in a bid to cut expenses as it struggles with debt.
Nortel, which is the communications supplier for the Games along with Bell, lost $3.4 billion in the third quarter of 2008.
Furlong said Games sponsors have indicated they view the Olympics as a top priority and not a single one has defaulted on commitments.
From his company's point of view, the Olympics is helping counter the perception that Nortel is in trouble, said David Johnson, general manager of Olympic programs.
"It allows us to talk to new customer segments, it allows us to get past the muck of today's environment to talk about something that's positive," he said. "[It's] a very positive message in a very dark time."
In London, British Olympics Minister Tessa Jowell had earlier made headlines by saying Britain would probably not have bid for the 2012 Games had it known that a global economic downturn was coming.
But the International Olympic Committee is on board with the need to be fiscally responsible, Furlong said.
When the IOC last visited in Vancouver in October, members said they were helping Vancouver organizers split the must-haves from the nice-to-haves.
In a recent address to European Olympic committees, IOC president Jacques Rogge stressed the need for organizers to hold down the cost of the Olympics.
"The Games are not anymore in a growth mode, they are in a conservation mode," he said.
Rogge said the IOC has secured about $900 million US in global sponsorship revenue for the 2009-12 Games through deals with nine sponsors.
From 2005 to 2008, the committee had 12 sponsors, raising $866 million US, but Johnson & Johnson, Kodak, Lenovo and Manulife declined to renew their contracts.
Vancouver organizers depend as well on the money raised by the IOC and Furlong said he's confident they'll make good on the commitment.