By staff reporter Zhang Yingguang

A statue of Pan Pan the panda casts a long shadow on a sidewalk outside a Beijing stadium where the Asian Games were held 18 years ago. The jogging, smiling mascot still clutches a gold medal in its giant paw. But until recently, Pan Pan looked worn and weatherbeaten.

Pan Pan's appearance is better now that it's been freshly painted for the Olympics. But the necessary spruce-up was a reminder that anything built for major, short-term sporting events -- statues, stadiums, gymnasiums and the like -- require long-term maintenance. And that can be expensive.

The stadium behind Pan Pan, for example, cost several hundred million yuan to build but was seldom used after the 1990 Asian Games. The Beijing city government, nevertheless, has to spend millions every year to maintain the ageing stadium.

Now, many wonder how maintenance costs will be covered for Olympics venues including the huge -- and far more expensive -- National Stadium, also called the Bird's Nest, erected for the 2008 games on Beijing’s north side.

Since opening in April, the nearly US＄ 2.3 billion, 80,000-seat stadium has become a hot tourist attraction as well as a symbol of China's historic commitment to the Olympics. But upkeep will cost between 50 million and 70 million yuan a year.

Moreover, Bird's Nest is just one of 31 permanent Olympic venues in the capital city, including 11 new and 12 refurbished structures. Eight temporary venues will either be torn down or overhauled for new applications after the Olympics.

The municipal government's initial plan for post-Olympics venue maintenance, adopted in 2003, was based on a Build Operate Transfer (BOT) model. Companies were invited to bid for franchise rights to operate the Bird's Nest, Water Cube natatorium and other Olympic sites for a given number of years. Contract payments were to cover construction costs.

Almost all venues have followed the BOT model, technically freeing the city government from the burden of costly maintenance. But the pressure shifted to the franchisees and their creditors, including state-owned banks. And the government is not entirely out of the woods.

Caijing learned that most companies participating in BOT franchising are real estate or construction groups, including Beijing Urban Construction Co., North Star Real Estate and Beijing Tianhong. These groups get most of their funding through loans from state-owned banks. Ultimately, then, future Olympic venue risks will be shouldered by the banks, which in turn have support from the government.

“Olympic venue operating risks appear to have been passed on to state-owned enterprises,” explained Huang Wei, senior adviser to the Beijing Municipal Development and Reform Commission. “But if Olympic venues experience serious business losses, the BOT model will be tested. The government, as a venue owner, can experience loss.”

The president of the games' economic research association, Wei Jizhong, said Beijing hopes to avoid the “post-Olympic valley effect” that troubled venue operators in the cities of Sydney, Athens and Nagano after they hosted past Olympics.

Beijing officials have “a clear understanding” of the lessons learned by Athens and other former Olympics hosts, said the Communist Party secretary for the capital, Liu Qi. This awareness has been around since “the very initial organizing stage,” he said.

Nevertheless, Olympic venue operators are now struggling to find a workable, cost-effective business model. Water Cube franchisee China National Sports Group (CNSG), for example, announced in June a strategy that calls for removing most of the 11,000 seats after the Olympics and building an entertainment fitness center.

The plan calls for adding 10,000 square meters to the Water Cube and dividing it into seven sections including a commercial building, tennis courts and a water park. Businesses would cover more than 30 percent of the space.

Meanwhile, franchisee and Bird's Nest operator Beijing Citic Stadium Operating Co. plans to spend 500 million yuan to add a cultural mall with shopping, dining and entertainment. Company CEO Li Jian said the stadium is scheduled to host its first, post-Olympics performance during the next national day holidays, the first week of October.

Another company official, Zhang Hengli, said rights to some Bird’s Nest facilities, such as an athlete area and seating, are being sold. For example, rights to 70,000 seats have been sold to the energy company Sinopec for more than 30 million yuan. Other Bird’s Nest revenue sources include advertising, tourism, souvenirs and tickets. In addition, about 70 percent of the apartments in the 22-building, 3.3 billion yuan Olympic Village complex have been sold.

But according to the stadium operator, the revenues are unlikely to offset the enormous investment and maintenance costs. Wei thinks profitability will be “very difficult” for the venues after the games.

“Olympic venue construction concentrated in the same area, which has not happened in previous Olympics,” Wei said. “These venues face fierce competition for pieces of a small pie.”

An example of a successful sports stadium is the Hong Kong Coliseum, which reported revenues of HK＄ 40 million in 2003 and has had utilization rates of 97 percent, attracting up to 1.6 million people for events. Its success is tied to Hong Kong's stable performing arts market, something Beijing does not enjoy.

According to the Beijing Performing Arts Marketing Co., the capital city's production revenues, excluding tourism productions, totaled about 500 million yuan in 2004, fell below 200 million yuan the next year, and slipped to 156 million yuan in 2006.

Beijing's sports market is even weaker. Ticket sales this year for the city's Guo An soccer club, which plans to play in the Bird's Nest after the Olympics, has been less than 4 million yuan.

Citic hopes real estate gains offset stadium losses, Wei said, but “it is still unknown exactly how high the gains will be.”

“The possibility of a real estate market shock is perhaps the most uncertain factor for post-Olympics stadium operations,” Wei said.

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