Bramham: Vanoc shows how to run a tight, transparent Olympic budget
By Daphne Bramham
January 30, 2009 10:00 PM
Balancing a budget in these uncertain economic times is no mean feat even for executives that have years of experience in their industry.
Sure, Vanoc has backtracked from earlier projections of an operating surplus. But spare a few kind thoughts for Vanoc’s executives who have worked overtime sorting out how to stage the 2010 Winter Games without an operating deficit and without substantively altering the plan.
And if you’re of a mind, you might even pray that they got it right because the B.C. government is on the hook for any shortfall. However, the operating costs — with the exception of security — are funded almost exclusively by private sources.
The only sacrifice any athletes and visitors will notice is that medals will not be awarded each night at the Whistler Celebration Plaza. The plaza will still be constructed and there will be nightly entertainment. Medals will now be awarded at the venues and, as a result, there’s no need for triple redundancies on power or full broadcast facilities at the plaza. It means a savings of $5 million, which is an indication of just how closely Vanoc is monitoring every expenditure.
Vanoc plans to get by with fewer staff to save $12.9 million. Staff wages rose only two per cent this year and not the promised three, while the management team took no wage increase at all. However, the senior managers did get their annual retention bonuses.
Is Vanoc’s new operating budget perfect? Probably not. Are there still risks to its forecasts? Absolutely.
A huge one is that
Vanoc has yet to finalize the rental fees for Whistler and Cypress. There are agreements-in-principle with Fortress Investment Group and family-owned Boyne Resorts, but no final contracts.
Vanoc chief executive John Furlong says there is “a box around the costs.”
Still, with only a year until the Games, both resort owners are in the enviable position of knowing that the Olympics cannot go on without their mountains.
And Fortress, in particular, is cash-strapped and Whistler/Blackcomb is one of its biggest holdings. In the past four months, the money manager/hedge fund has gone from a multi-billion company to a troubled one. Its shares have fallen to $1.34 from $31 when the company went public in February 2007. That’s a drop of 96 per cent.
Fortress is so cash-poor that it stopped disbursing its $750 loan to Millennium for the Vancouver Olympic athletes village, which resulted in the city of Vancouver stepping in.
But where Vanoc faces the most uncertainty is in its revenue projections. The global economic meltdown has caused every company to rethink every expenditure on everything and that includes the Olympics.
As a cushion, Vanoc has set aside $27 million of its $100-million contingency fund to cover unexpected revenue shortfalls. It has also reduced its projections for international, domestic sponsorships and marketing royalties by $8.3 million less than the original budget.
However, there are a few interesting — dare I say risky — assumptions in the budget.
Vanoc boosted its projected merchandise revenue to $53.82 million from $46 million and ticket sales’ revenue by $17.5 million to $260.45 million based on its experience to date.
But retail sales are down in all of the key Winter Games markets — Europe and North America. European sales declined in each of the last eight months. U.S. sales have dropped in each of the last three months and while B.C. posted growth of 1.3 per cent in retail sales last year, Central 1 Credit Union predicts a 1.2-per-cent decline in the coming year.
As for ticket sales, the Super Bowl — the National Football League’s biggest party — is also a marquee sporting event that attracts a similar kind of affluent and enthusiastic sports crowd.
For this weekend’s game, there was a marked decline in corporate spending on everything from ticket buying to hospitality suites to advertising.That’s a troubling harbinger for the International Olympic Committee and Vanoc.
Still, there was something reassuring in the grim faces of the Vanoc executives at Friday’s media briefing. They do seem to be taking this seriously and they’re even telling us how they plan to make ends meet.
Now, if only the various levels of government would be as transparent about their Olympic-related costs and their spending oversight, we might all be able to breath a little easier.
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