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SBJ/December 3 - 9, 2001/Special Report
Barcelonas Games sites still shining
Published December 3, 2001
No NBA or NHL team could survive for long in Barcelona's Palau Sant Jordi. Built for the 1992 Olympics, it includes no luxury boxes or club seating. Hospitality areas are rudimentary, shopping opportunities on its concourse almost nonexistent.
Palau means "palace" in the Catalan language, but Palau Sant Jordi is a palace only in that it is cavernous and drafty, more like a vast college field house from the 1960s than a modern arena. In almost every aspect of its location and design, it fails to meet today's minimum standard. Set atop a mountain, Montjuic, in one of the few areas of Barcelona not served by a subway line, it has no electronic signs, no VIP restaurant.
"It's far from the Staples Center, Philips Arena, the First Union Center or any of the other arenas that opened in the late 1990s in the States," admitted Jordi Vallverdu, the director general of Barcelona Promocio Installacions Olimpiques S.A., the company that runs the venue.
Yet along with the adjacent Estadi Olimpic, a similarly unadorned, 55,000-seat outdoor facility with a 1929 facade, Palau Sant Jordi has turned a profit every year since the Olympics. Even with their lack of amenities, both buildings continue to bring a stream of sports, cultural and entertainment events to Barcelona, and serve as sites for business conferences, seminars, even weddings.
This puts the city in stark contrast with Sevilla, in Spain's opposite corner. Sevilla played host to a summer-long world's fair that same year of 1992, a very different event of similar scale. It has been left with an island full of useless buildings and an economy in recession ever since.
The difference was a coherent plan, for the continued success of Barcelona's outmoded venues is no accident. Vallverdu's company was created by the city even before the venues were built to ensure that they wouldn't sit vacant once the Olympics ended. "We realized back in 1986 when we won the Olympic bid that the Games are 16 days, but the venues must remain," Vallverdu said.
As part of the agreement, the city is obligated to cover any shortfall in the revenue of the four venues under the control of Barcelona Promocio. It hasn't paid out one peseta.
Building the Montjuïc venues, which also include a swimming facility, cost the city $500 million in the late 1980s. They were supposed to help Barcelona reposition itself as a world-class metropolis, but Montreal had tried the same tactic a decade before and nearly bankrupted itself. Vallverdu was asked to maintain at least a semblance of profitability in the years after the Olympics, generate some income, justify the money spent.
He wanted to do even better. As a model, he used Munich, which created a government-run company to run the venues of the 1972 Olympics. But Vallverdu altered the Munich blueprint. Instead of taking charge of all the Olympic venues, he chose to concentrate on four that offered multipurpose opportunities, from sports events to trade shows. He didn't want the swimming pool, or the spectacular outdoor diving venue, either.
And rather than hire staff to maintain, run and promote his facilities, which also include the Velodrom d'Horta cycling venue and a smaller indoor arena, he has tried to outsource whenever possible. His total staff for running the four facilities is a meager 45 employees. "It's a more American way of doing things," he said.
Barcelona Promocio was chartered in 1988 and had its first full year in control of the venues in 1993. In the years that followed, the four facilities have generated an estimated 30 billion pesetas — $200 million, based on a floating exchange rate — in incremental income for the city. Athens would be wise to take notice.
In some instances, the host cities and their national governments hardly care about the profitability of the Games, or what happens to the venues in the years that follow. For Tokyo in 1964, Moscow in 1980 and Seoul in 1988, the worldwide stage constituted an advertisement for the host country and its lifestyle that was worth any amount of money. Presumably, Beijing will be the same in 2008. Budgets don't seem to be a problem.
In a Western city, an Olympics or similarly scaled project needs to work economically. For a time after Montreal's financial disaster, this seemed an impossibility. In those years after Montreal in 1976 and before Peter Ueberroth proved in 1984 in Los Angeles that cities could actually profit from an Olympic Games, only one city — Seoul — mounted a bid to take on the Games in 1988.
Those Los Angeles Games, like the Atlanta Games that followed them a dozen years later, managed to keep costs low by using mostly existing venues. In 2000, Sydney's organizing committee constructed many of its venues far from the city center to gain convenience and safety, but appears to have paid the price in inaccessibility now that the Olympics have come and gone. That leaves Barcelona as a successful template for Athens in 2004.
(Lillehammer, Norway, is another, but Winter Games cities, which must build fewer large-scale venues but some that are far more specialized, are faced with different problems. So are the host countries of soccer's World Cup, which must access an array of outdoor stadiums across as many as a dozen cities.)
If Vallverdu had to do it again, he'd do some things differently. He'd fight to position the venues so they could work with restaurants, movie theaters and other entertainment opportunities. The shell of the stadium was already in place from a 1929 exhibition, but the top of the mountain, far from the subway line, is probably not the best place for the Palau Sant Jordi.
He'd also insist on luxury seating and VIP clubs for the venues. Not only does he have no mechanism for attracting corporate entities looking to entertain clients, but the prime seating he does have isn't even sold to the public. Hundreds of the best seats at Estadi Olimpic, plush lower-level seats covered in leather, are dedicated not for corporate or VIP sales, but as a royal box: for invited guests, the Spanish royal family, and other non-paying dignitaries. Palau Sant Jordi has a similar arrangement. "Most of the time, they are completely empty," admitted Barcelona Promocio's Mayra Nieto.
Considering the lack of high-end seat income, the company's record of profitability is amazing. More than 15 million spectators and 12 million other visitors have attended events at Barcelona Promocio venues. The Spanish soccer team Espanyol, which plays about the same role in the city as the Clippers do in Los Angeles, uses the stadium, as do the Barcelona Dragons of NFL Europe. But the vast majority of events have been brought in for short runs, from indoor windsurfing and artificial snow skiing to business conferences and high-end nuptials.
Sports has accounted for a third of the bookings; concerts slightly less. More than 35 percent of the dates have come from other events. Bruce Springsteen and Madonna both started world tours at Palau Sant Jordi, but the venue also hosted a radio-controlled car show and many other oddities. Now Broadway shows are coming, including "Les Miserables" in November 2002. There's no particular secret to such booking success, just aggressive sales and marketing from a company that knows its mission — and happens to be municipally owned.
Rentals start at $6,000 for a half-day of the arena, but almost all expenses — including security and cleanup — must be paid by the renter. A catering deal with Aramark brings in a flat fee and a percentage of proceeds on a sliding scale. Income from the four venues was 796 million pesetas in 2000, or about $4 million, which is about 100 million pesetas more than during the Olympic year of 1992.
Four million dollars a year won't cancel out the construction costs of the venues anytime soon. But by ensuring that they remain profitable, Barcelona Promocio is validating the city's ambition to better itself with the Olympics. The NBC news bureau that encamped here before 1992 is long gone now, and the attention of the world has moved on, but the opportunity for Barcelona's residents to see a steady stream of entertainment, sports and otherwise, hasn't abated.
Because of the way they've been managed, Barcelona's arenas and stadiums continue to add to its quality of life, long after the 16 days have gone. That alone would be a formidable achievement, considering the historical antecedents. Making money along the way just makes it that much sweeter.
Bruce Schoenfeld is senior correspondent for SportsBusiness Journal. He can be reached at email@example.com.