Empty Nest Syndrome for Post-Olympics Beijing

(Beijing) - First-time visitors to China's National Stadium, or Bird's Nest, are usually amazed by the grandeur and grace of this historic centerpiece built for the 2008 Summer Olympics in Beijing.

But for many Beijing residents, the Bird's Nest is little more than a curious venue for a hodgepodge of infrequent recreational events and pop music concerts.

The stadium that seats 90,000 and cost 3.6 billion yuan hosted only a dozen events last year. Moneymakers included the Italian Super Cup football match, a stopover by athletes with the TTR World Snowboard Tour and a Rock Records 30th anniversary concert.

It was otherwise quiet except for tour groups and skiers and skaters who reveled in the manmade snow and ice that covered the field of the enclosed stadium every winter since 2010.

Yet the Bird's Nest is relatively busy compared with other stadiums built for the Olympics in Beijing. Most are struggling to meet financial targets due to weak revenues from their main money sources – tourists and special events leasing.

An exception is the Water Cube, which hosted swimming events during the 2008 Olympics. Lin Xianpeng, a management professor at Beijing Sport University, said post-games revenues at the Water Cube have been "remarkable" if compared to other sports venues across the country.

Nationwide, only about one-third of all major sports venues break even every year, according to a Beijing Sports University report released last year. The rest lost a combined 280 million yuan in 2010 alone.

According to the National Audit Office, China splashed out nearly 19.5 billion yuan for new buildings, 36 venue renovations and 66 training centers to prepare for the 2008 games.

State agencies provided financial support based on the argument that civic pride attached to dramatic sports halls is worth the cost. But most private investors have steered clear.

Shrinking Ticket Sales

The Bird's Nest and Water Cube, which occupy opposite sides of a giant square, are Beijing landmarks that attract busloads of tourists from near and far every day.

But the public's passion for the Olympics held four years ago has been wearing off: The number of stadium visitors fell 40 percent in 2010 from the previous year, and another 30 percent year-on-year in 2011, BSAM Chairman Li Aiqing told the official People's Daily last August.

Visits to the Water Cube have also declined, said Yang Qiyong, deputy general manager of National Aquatics Center Co. Ltd., the venue's manager. Only 2.08 million people visited last year, down around 30 percent from the year before.

The Bird's Nest "is definitely a must-go" for capital city tourists "but a glimpse from outside is enough," said Ran Wenlan, a 61-year-old visitor to Beijing who lives in Chongqing.

Ran refused to buy a 50-yuan ticket for a chance to walk inside the structure, but peeked inside from outside a fence and took a photo from a pedestrian overpass nearby.

Indeed, tourist ticket sales account for a large but shrinking proportion of annual income for the Bird's Nest. It provided up to 90 percent of the funds soon after the Olympics but fell to 42 percent in 2011, in part because revenue from other channels increased.

The stadium now has more than 500 licensed products on sale, which since 2008 have brought in more than 6 million yuan.

But the revenue pales in comparison with the stadium's steep annual maintenance costs.

The Bird's Nest spends about 80 million yuan a year maintaining the facility, Li said.

The Water Cube faces a similarly heavy burden: Yang said its 88 million yuan in revenues last year failed to cover costs topping 99 million yuan. Some 58 percent of the venue's expenditures last year were tied to labor costs, which have been rising, and utility bills, Yang said.

The Bird's Nest and Water Cube are also burdened with debts from their construction projects and post-Olympics renovations designed to prepare them for commercial functions.

"If not for debt servicing, both venues could have made a profit," Lin said.

Beijing's experience is not unique. Maintaining sports venues after an Olympics is a headache in host cities worldwide.

Athens, site of the 2004 Olympic Games, built 22 stadiums. All but one has been abandoned amid the country's economic turmoil. With walls now covered by graffiti, these venues still cost US$ 124 million every year to maintain.

Commercial Flop

The Beijing municipal government hoped to minimize construction and maintenance cost of these stadiums by recruiting private investors.

Through a system referred to as the Public-Private-Partnership, a consortium led by the state-run investment firm CITIC Group won a tender in 2002 to build the Bird's Nest.

The consortium teamed up with Beijing State-owned Assets Management Co. Ltd. (BSAM) to form National Stadium Co. Ltd., which became the official builder and operator of the stadium.

BSAM controls 58 percent of the stadium while the rest is held by the consortium, including CITIC, Beijing Urban Construction Group and the U.S. urban design consultancy Golden State Holding Group Corp.

The initial agreement was that the consortium would manage the stadium for 30 years.

But it shifted the oversight responsibility to BSAM only one year after the Olympics, as National Stadium went through a low-profile restructuring in 2009 that gave BSAM the management rights to the Bird's Nest.

CITIC officials had hoped to make money "by selling stadium name rights and leasing space for commercial events and large-scale sports competition," said Wang Zipu, a professor of the Capital University of Physical Education and Sports.

Wang said an early analysis had concluded that selling the right to rename the stadium could earn the Bird's Nest operators at least 450 million yuan in 30 years.

Indeed, even while the games were under way in 2008, more than a dozen domestic and international companies reportedly showed interest in buying the rights to put a corporate name on the Bird's Nest.

But the strategy flopped, in part because of strong public opposition to the idea of re-branding and commercializing the iconic structure, Wang said. The Beijing government also intervened in stadium management, Lin said, and blocked a CITIC attempt to sell the name rights.

In August 2010, BSAM's Li put the final nail in the coffin by announcing that rights to name the Bird's Nest and Water Cube were not for sale.

Sports fans flocked to the Bird's Nest for the Italian Super Cup matches, held three times over the past four years. But domestic sports teams have been unable to meet that international event's high benchmark for ticket revenues.

The Beijing Guoan Football Club, a leading team owned also by CITIC, flirted with but eventually abandoned the idea of using the Bird's Nest as its home field. One reason was the high leasing price.

Guoan was willing to pay up to 300,000 yuan per day to rent the stadium, but that's much less than daily tourist ticket revenues for the stadium, Lin said, and far below what the Italian cup can afford.

Neither do tax policies help the Olympics venue operators.

Most of Beijing's Olympic venues are levied a business tax equal to 5 percent of income, Lin said, while culture industry firms such as the National Grand Theater manager pay only 3 percent.

They are also subject to corporate income tax, value-added tax and taxes levied for various local services such as urban construction.

Lin said, though, that stadiums should not be judged solely in terms of their monetary value. An Olympic stadium can also benefit a community by offering low-cost space for local residents to recreate, for example, and provide public shelter after a natural disaster.