Michael B. Duignan (pictured below) one of Podium’s database of Games Experts for London 2012 and mega-event impact analysis on local business, is conducting research in to the effect of the Games on local businesses comparing geo-socio-economic specific experiences across London 2012′s Olympic boroughs. His article below attempts to highlight just a few issues with regards to the complexity of such impacts on local businesses. 


Winners and the losers?

The argument around the ‘winners’ and the ‘losers’ and who-gets-a-slice-of-the-Olympic-pie, is one of heated debate regarding the impact of mega-events like Sochi 2014. What appears however to be of growing concern are those stakeholders ‘less visible’ within such highly complex mega-projects. Those of local businesses. The notion of competition, and specifically ‘competing project interests’ can be applied very well to Olympic planning. If we look at previous Olympic’, both Winter (e.g. Nagano 1998 Games) and Summer Games (e.g. Athens, 2004) the odds are often stacked against embattled local businesses, and seldom deliver economic return on investment.

Displacement? Gentrification?

Reports from Sochi 2014 already echo findings from London 2012, Beijing 2008, Sydney 2000 and so on – those of potential economic threat for the locale. From planned people displacement, to the residual effects of gentrification through rising rents and house prices, existing occupants, if not directly, may find themselves indirectly squeezed out, due to unaffordable rent and operating costs. According to previous research, one of the key reasons for this lies in the often ‘invisible’ nature of local business due to their perceived lack of economic contribution – therefore making them particularly susceptible to re-development in favour of more marketable and profitable land uses. Using the dystopic images of chemically unfit, industrial wasteland, juxtaposed against a utopian vision to regenerate deprived areas simply formed the key justification for London’s bid success. As understood by many London policy and city planners, London’s East End was one of the last ‘greatest re-development opportunities’ in the city – but again this raises the question of who really benefits from such regeneration projects. 

However moving away from these potential economic effects for the locale, according to ‘Sochinskie Novosti’ (Sochi News) the only private local online newspaper claims gentrification effects may not effect the city. According to the paper although a common ‘Olympic effect’, the desire to gentrify and turn less economically developed areas in Sochi in to a middle class bourgeoisie playground may be hampered by the recent stagnation seen in the cities property market and over supply of real-estate. Therefore despite Putin’s ambition to turn Sochi in “the city for the rich”, Sochi News reports little such effects so far. The subsequent economic problems facing local businesses may therefore be non-existent, compared to reports seen in the majority of other Olympic settings.

Will local’s escape the chaos?

Alongside such effects, there are a number of emergent ways local businesses are noted to be
impacted by the Games. One of these is around the scenario of aversion markets forming. The risk of losing regular bread-and-butter income through local’s scooting off to avoid chaotic scenes is one that particularly resonates current research findings of London’s Olympic boroughs. Given the bustling nature of large tourism footfall, this perhaps may be assumed to outweigh some of the potential aversion market negatives? However, similar studies have highlighted the critical issue of crowd control methods in place. Most of us will have seen them – the Games-makers with the big foam hands, the securitisation of space through barricades and people marshalling, particularly for the local businesses of Greenwich damped tourist trade. With limited access to local areas due to tourists being funnelled from transport hub to Olympic venue – local businesses felt tourist trade was significantly lost. One responded claimed: “sounds stupid, but it almost feels we were ‘too close’ to the event”. 

The Sochi 2014 story so far?

So what’s the story so far with Sochi 2014? Will similar effects be seen in one of the least populated (approx. 329.000 people) Olympic cities to ever host the Games? Well, similarly to London 2012, key infrastructural projects, regeneration and the development of Russia’s national and Sochi’s regional tourism sector are key points on the agenda for this embattled city. With regards to business in the city, an impact report by Cushman and Wakefield Stiles and Riabokobylko highlights rather undeveloped retail sector with no shopping centres that meet ‘international standards’, and therefore a strong emphasis on city ‘public markets’. Alongside this, ambulatory business units, swapping hands based on the city’s seasonal demands (over 40% of the local population are engaged in seasonal private business) and the need to create a year-round tourism industry to extend up on existing summer tourism, via the use of the global image of hosting the Games is clearly justified. Turning a predominantly summer resort with a landscape dominated by Russian tourists in to what the Government hopes to double international tourism to 6 million visitors may however be a tough feat according to local telecommunications entrepreneur,  Vitaly Pishchuk. Americans have little incentive to cross half the planet for Caucasus slopes. Europeans have the Alps and it is even “expensive for an average Russian tourist” (…) “you can travel to Turkey or Spain for 300 bucks” (Source: State Journal, 2014). Such longer-term tourism benefit however forms one of Sochi’s 2014 main ‘legacy ambitions’ – alongside the creation of more commercial space (e.g. the Chaika Plaza and Sochi-Plaza etc), given the number of small retail chains operating in the city and the driving need to attract inward investment – a common economic objective of host cities. 

However, despite the plans, there are reports that Sochi 2014 will not turn out to be so economically viable. Like a good old party, the Olympics has a miserable record of clawing back the significant funds required to stage them. With a potential cost over-run of over US$50bn (although this represents a modest 2.4% of the country’s GDP) – Sochi is appearing like it will be no exception to the rule. 

However, if we look away from the national economics, will there be a more prosperous future for Sochi’s small and medium sized (SME) communities? Of course, given the scale of tourism that comes with the advent and action of the Games, significantly higher footfall should grace the streets of the city; however this will be contingent upon the issue of crowd control methods. This will be particularly an interesting one to watch – given Russia’s ‘police state’ approach, the high-security threats of the two suicide bombers, ‘tooth-paste bomb threat’ warnings and the installation of warships in to the Black Sea (Source: NBC, 2014).  Alongside issues of control, as previously discussed the risks of gentrification of the city’s housing market may follow the ‘Olympic effect’ trend, where we may see rising rents drive existing local businesses out of central city and host Olympic geographical locations. Claims of displacement due to necessary Games infrastructure also dominate the headlines of major global newspapers. With reports of thousands of residential displacement along the coast (Source – Huffington post, 2012), Putin’s prestige project appears to be favouring private financiers of whom are investing significant sums of money to develop Sochi’s coastline with spas and resort hotels to accommodate Olympic tourist traffic. Marina Nagabedian a local convenience store owner close to the Olympic Park feared small businesses were never a priority “because we don’t look perfect enough” (Source: State Journal, 2014). What we are yet to realise is the extent to which aforementioned effects will continue to impact both in the short and long term, small local business communities in and around Sochi.

Mega-events and the role of the media?

But will we ever truly find out the local ‘costs and casualties’ of the Sochi 2014 Winter Games? Similarly to Beijing 2008, the ‘darker’ elements may continue to remain in the shadows of the cities ‘Olympic legacy’. The Committee to Protect Journalists (CPJ) claim the “poor climate for press freedom” and Russia’s approach to self-censorship may be suppressing media coverage on the mentioned sensitive issues discussed in this paper. Although international papers have uncovered scandals around potential corruption, worker exploitation and the eviction of local residents without little or in some cases no compensation – alongside the displacement and bankruptcy limited local reports exist (Source: CPJ, 2014). CPJ claim that since Putin’s return to presidency the state has continued to pass laws to directly and indirectly curb media and internet freedom to report – particularly for local media of whom are dependent up on municipal budget for survival seldom comment on the ‘political, social and economic city issues’. According to Olga Beskova, editor-in-chief of ‘Sochinskie Novosti’ (Sochi News):

 ‘Local media largely ignore issues crucial to Sochi residents directly affected by the arrival of the Olympics on their doorsteps’ (Source: CPJ, 2014). 

To conclude?

So whether the actual truth emerges is to be seen. However it is clear to hypothesise that similarly to cases seen in the delivery of previous Olympic Games, there is the realisation that mega-events provide significant opportunity for business development and growth. There are, of course a variety of winners and losers in this highly complex business game. With respect to local SME communities however, a recent study by the University of Greenwich highlighted how some entrepreneurs used the Games as a ‘test-pad’ to try out new ventures for example offering opportunities to open pop-up shops and restaurants to test the market and gauge customer interest in products and services. Alongside the potential Games related tourism benefits, longer term economic and tourism development hopes – local business may find Sochi and future Games a platform for opportunity, rather than party they’re not invited to. To conclude, we must appreciate the gargantuan nature of mega-events, and the role of local businesses within them. Although there are clear threats to local business and residential communities in the wake of mega-event planning, there is also the argument that it provides a platform for significant opportunity too. 

Michael B. Duignan