SBJ/Feb. 3-9, 2014/In Depth

A mountain of challenges for Sochi

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Coca-Cola officials felt good about their Olympic hospitality plans. The company secured a hotel for the Games nearly two years ago. It invited guests and felt good telling them they would be staying at a newly built hotel near the venues. Everything was in place. But then, during the Christmas holiday and less than two months before the Games, Coke received alarming news. Its new hotel wouldn’t be ready.

The news jolted the company’s Olympic staff and sent them scrambling to salvage two years of work. Staffers immediately traveled to Sochi and explained to Sochi organizers and Russian officials what losing the hotel meant, and none of it was good. There would be a downsized hospitality program, canceled trips, a race to find other rooms.

Russia is undertaking the largest infrastructure project in the history of the Olympics, transforming a summer retreat into the home of the Winter Games.
Photo by: Getty Images
The Russians responded by pulling construction staff off a sister hotel in the mountains and working around the clock to complete Coke’s hotel, sources said. Coke, which declined to comment, survived with its guest program intact. Its hotel is set to open for the Olympics, but portions of the mountain hotel won’t. Losing construction workers meant that hotel couldn’t be completed in time for the Games.

SBJ Podcast:
Olympics writer Tripp Mickle and SBJ Olympics editor Tom Stinson discuss some of the concerns and issues facing the Sochi Olympics.

Stories of delayed hotels aren’t uncommon before an Olympics, but the volume has been greater for the Sochi Games than any Winter Olympics in recent history. It’s been a major behind-the-scenes issue for sponsors, national governing bodies and national Olympic committees ahead of the Sochi Games.

But it’s not only hotels that are an issue in Sochi. It’s food, dining and even things to do. And the list of challenges doesn’t stop at the trivial, like the quality of customer service and entertainment options for guests. It stretches to the serious, like potential terrorist attacks and protests of Russia’s anti-gay laws. The combination has created one of the most challenging Olympics in decades and stoked a degree of anxiety in Olympic circles few can recall.

“Everyone’s looking forward to the competition and the new venues, but for those who work in the industry, we’re heading over there with a bit of trepidation,” said Dave Mingey, president of GlideSlope, which works with several Olympic sponsors.

Jan Katzoff, head of global sports and entertainment consulting for GMR Marketing, added, “I can’t ever remember the convergence of this many issues hitting us at one time. I’m hopeful, but it’s certainly one of the more challenging environments we’ve had to work in.”

Starting from scratch

The Sochi Games represent an Olympics built from scratch. Not only were there no venues to host the Games when Sochi was awarded the event seven years ago, there were few hotels and no modern ski resorts.

The Russians are undertaking the largest infrastructure project in the history of the Olympics — an enormous, $51 billion job. Russia not only is building venues and improving its airport, as many host cities do; it is building hotels, ski resorts, rail lines and a new highway system.

“Russia did not only take the decision to establish a winter sport center,” said International Olympic Committee
People walk along the hotels and restaurants in Rosa Khutor,
Photo by: Getty Images
President Thomas Bach. “They at the same time took the decision to transform an old-fashioned summer destination for some Russians into an international sports and conference and winter destination. It’s a huge transformation of the whole region for which the Games serve as a catalyst.”

Any construction project that ambitious was bound to have problems, and Sochi has its share. Not everything will be completed in time. In Rosa Khutor, which will host alpine events, the Swissotel will have only three of its four buildings complete, and guests staying there said that they have been informed that a planned road to the hotel wasn’t constructed. Instead, they will have to take a gondola to reach their rooms.

Sead Dizdarevic, founder of the Olympic hospitality company CoSport, said issues like that are common any time new hotels are constructed for an Olympics. During the 2010 Vancouver Games, he and his staff worked 24 straight hours at the Fairmont Hotel in order to get it prepared for Olympic guests arriving the next day.

“In Sochi, it’s multiplied by those issues because of the number of new properties,” Dizdarevic said. “They have their own schedule, and no one can do anything about it.”

The delays in completing hotels has stoked concerns that the hotels won’t be prepared to meet Western customer-service expectations. To assist with that, CoSport will have 40 people working at three hotels in Rosa Khutor aiding hotel staff with everything from room service to linen requests. The company has done the same thing at previous Olympics, including the London Games, Dizdarevic said. He added, “It’s just here, it’s much more, and there’s less time to train their staff to provide services at Olympic time.”

The Olympics are being held in Adler, a city in the Sochi region with a population of 76,000. It had few restaurants and buildings before the Games. Many new restaurants and shops have been built for the Games, but not enough to accommodate all the corporate guests traveling to the area.

“It’s been one of the biggest challenges we’ve had,” said Steve Skubic, executive vice president at GMR Marketing, which is working with Visa, Procter & Gamble and other Olympic sponsors. “We’re utilizing hotels more for [food and beverage] than we have in the past.”

The lack of facilities in the area also affected planning for hospitality experiences like the Procter & Gamble Family Home, which will host athletes’ families, and USA House, which will host sponsors and U.S. guests. Adler doesn’t have the type of large restaurants and venue sites where those programs would usually set up. As a result, they opted to build temporary hospitality venues inside the Olympic Park.

Kim Kraus, P&G’s director of global operations, said that locating the facility in the Olympic Park will make it more accessible to friends and family.

“In London, we learned it was sometimes difficult for families to get to our Family Home, so this year we wanted [it] to be centrally located and convenient for families,” Kraus said.

Historically, sponsors’ programs include trips to local tourist destinations, but hospitality organizers said there’s little to do in Sochi. The organizing committee is offsetting that by hosting nightly cultural events headlined by the State Symphony, dancers from Russia’s famed Bolshoi ballet and others. Hospitality organizers are arranging private events headlined by athlete appearances and local performers.

“We’re always trying to find interesting things for people to do, and it was harder in Sochi,” said Adam Dailey, founder of Ludus Tours, which hosts many friends and families of U.S. athletes at the Olympics. “London, Vancouver and Beijing are used to having tourists all the time. Sochi is a summer resort. It’s not built to host people in the winter. We’re always trying to be creative and this is one of the more challenging places to be creative.”

Security concerns

Construction delays and hospitality issues have been overshadowed for months by security concerns, and those concerns only spiked following reports that female suicide bombers, known as “black widows,” may be in Sochi.
Team USA athletes have been discouraged from wearing U.S. apparel, and national governing body executives say they are packing less team gear than they usually take to the Games.

Security staff for Olympic sponsors such as Dow and McDonald’s have been in touch with the U.S. and Russian state departments and communicating with other Olympic sponsors about the terrorist threat in the region. Many sponsors have hired outside event-response groups like International SOS to support them with crisis planning.

Security guards patrol Olympic Park in the Coastal Cluster.
Photo by: Getty Images
The time devoted to security and crisis planning is at a level and a degree that no one has seen since the 2004 Athens Games.

“The 6 a.m. to midnight calls for the last month have been devoted to reviewing our crisis plan and elevating everything we’ve done compared to the past Olympics to be sure we take care of our clients,” Katzoff said.

To ensure the Games are safe, Sochi organizers developed a security-pass system for ticket holders. They collected the names and information on ticket holders and provided them with credentials that will be checked along with tickets before spectators can enter the Olympic Park.

It’s unclear how the extra security will affect the spectator experience. Sochi organizers have done modeling to determine how fast they will be able to process guests at security gates, said Doug Arnot, the former director of operations for the London Games, but new programs like that are always difficult to execute.

“I suspect on the front end, the first couple of days and for high-demand events, it will be difficult and will require a lot of patience on the part of spectators,” Arnot said.

In addition to security, there’s real concern among corporate sponsors and public relations officials about Russia’s anti-gay laws. The subject continues to dominate headlines, and officials remain concerned that an athlete will protest the law while on the medal stand.

That concern is so pervasive that IOC President Bach discouraged athletes from using the podium to make a statement. Instead, he encouraged them to speak in a press conference.

“The IOC will take, if necessary, individual decisions on the individual case,” Bach said when asked how the IOC would respond if an athlete protests during an event or medal ceremony. “It is clear, on the other hand, that the athletes enjoy the freedom of speech so that if in a press conference they want to make a political statement, they are free to do so.”

Any protest would shine another spotlight on the issue, and that could devalue the Games at a time when sponsors are most tied to them through advertising in their home countries and activities on the ground in Russia.

Hoping for the best

Despite all the issues in Sochi, sponsors, the U.S. Olympic Committee, NBC and hospitality agencies say their guests haven’t canceled plans to attend the Games, and most remain optimistic that once the competition begins the issues dominating the headlines the last few months will fade away.

If they do, then many are optimistic that the Sochi Games will provide one of the best Winter Olympic experiences in history. It will be the first Winter Games where all the city venues — from ice hockey to figure skating to curling — will be located within walking distance from each other.

“We haven’t ever been able to do that,” Skubic said. “For guests, it could be a really positive experience.”

Olympic sponsors already have seen business benefits from the Sochi Games and anticipate more could follow if the Games are a success.

Coca-Cola has built a new bottling plant in the area and used the Games to gain market share and promote its local juice brands. GE has sold two gas turbines to Sochi to provide power for the Olympics. McDonald’s has used the Games as a catalyst to open its first restaurants in the region and introduce new products, such as smoothies and yogurt parfaits, to the Russian menus. And Visa has installed 1,500 new terminals in the Sochi region and upgraded many others.

“It’s the fastest-growing market for Visa globally, and having the Games there, it’s accelerated the growth of our business,” said Ricardo Fort, Visa’s senior vice president of global partnerships.

But the gains haven’t come easy. Sochi had power outages last year, though they weren’t tied to GE’s turbines, and McDonald’s was later getting into its restaurants at the media center and athletes village than it anticipated.

“[The Sochi organizing committee] had its challenge getting things turned over to us, but we had enough contingency built in that we’ll be up and running fine,” said John Lewicki, McDonald’s head of global alliances.

The hope now is that there is no terrorist event and the Games are remembered for the competition and their first return to Russia since the 1980 Moscow Games. There’s optimism that will happen.

“Everybody’s getting an ulcer about things being done on time and terrorism, but that’s going to be over and the Games will be great,” Dizdarevic said. “I have never seen anything like the Olympics. It’s beautiful.”





How to spend $51 billion

It has been widely reported that staging the Winter Olympics in Russia will cost the region’s governments roughly $51 billion, a figure far exceeding the $42 billion spent by China on the 2008 Summer Olympics, which had more venues, more events and more athletes. Here are a few other things that $51 billion could cover:

Dinner and a movie: Could buy Netflix AND Yum! Brands, which includes Pizza Hut, KFC and Taco Bell


Jamaica + Madagascar + Fiji = $51 billion in GDP

Real Madrid, Manchester United, Barcelona FC, New York Yankees, Dallas Cowboys, New England Patriots, Los Angeles Dodgers, Washington Redskins AND Twitter

Winter Olympics rights fees from 1960 through 2018: $4.8 billion

NFL and NHL combined franchise values (according to Forbes): $51.3 billion

Clayton Kershaw’s salary for 1,700 years (new contract with the Los Angeles Dodgers: 7 years/$215 million)

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