The Olympic organizers felt that the Olympic events could successfully be held in Sochi regardless of how warm it was, I believe that many factors go into deciding the locations with climate being one of them but not the only one, I believe very few people would travel to an excessively cold region.
I think this Winter Olympics was the worst. It even shows as the media coverage is horrible on the subject. The people that competed in it, just don't like the conditions and the place. It was all and all,just a terrible place to have them. I hope it brought in decent money though.
No it didn't make any sense to have it in such a warm spot. However Russia is known to have very cold winters usually and this was a freak of nature. In fact most of the time North America had colder weather than Russia this year. However that is due to climate change.
Where the Olympic games get located is a huge political problem in that cities vie for the honor and do everything possible to convince the Olympic committee to go here or go there. The winter games really and truly require cold weather and, in a day and age where money is tight, it seems senseless to add the expense of creating snow on top of the myriad other expenses associated with putting on the games.