Does Hosting a World Cup Make Economic Sense?

By Mik Mrd

The World Cup is arguably football’s pinnacle of glory, with legends such as Pele, Bobby Moore and the late Maradona being part of previous victories. According to FIFA (2018), the international governing body of association football, the event brings in billions of spectators, with the most recent 2018 World Cup in Russia bringing in more than 3.5 billion viewers. While the event’s general aim is to provide entertainment to football fans across the world, its commodification has brought about everlasting effects to several countries’ economies. In this article, we will first lightly discuss the World Cup’s effects on the general global economy and then move on to in-depth analysis on the event’s effects on the host country, analysing changes in various aspects such as investment, GDP and many more.

The World Cup gives every country the chance to compete for the FIFA World Cup Trophy with prestige within the football world similar to the NBA finals with the features of national teams, a longer qualifying process, and quite frankly, much more viewership. When it comes to hosting the World Cup, countries are advised to make a bid which includes the evaluation of the infrastructure and commercial capabilities that the host country can project (FIFA, n.d.). More specifically, the evaluation of infrastructure includes quality and capacity of stadiums, facilities for participants, and transport and mobility. On the other hand, FIFA considers commercial aspects, such as predicted costs, and estimated revenues from tickets and media, to evaluate whether a country can host a World Cup. This is just the start of many more features that need to be considered to allow a country to host the World Cup.

To emphasize the effects of the World Cup, the event influences the general global economy. It is reported by Huijgens (2018) that a phenomenon called the ‘World Cup effect’ creates a -2.5% decline in the US stock market. This is attributed from the collective negative changes in participating countries’ stock markets that originate from their performances in the World Cup. Huijgens (2018) uses the example of France’s 2-1 loss to South Africa during the 2010 World Cup, which resulted in a sharp decline in the Paris Exchange. Huijgens (2018) highlights that this occurrence of declines due to losses happens to almost every country, which is bound to happen as there can only be one winner. The ‘World Cup effect’ is magnified through what Huijgens (2018) describes as theory of loss aversion, where the negative return of a losing country ‘is larger in magnitude compared to the positive return of the winning country’. Huijgens (2018) research concludes that this negative return contrasts with the +1.2% increase in other months observed in the study.

In the 21st century, the World Cup was hosted in 5 different venues, stretching from Asia to South America. The most notable effect of hosting the World Cup is the general economic expansion and increase in spending that the host country experiences. Hosting the World Cup requires minimum capacity and facility requirements for stadiums, thus creating many short-term jobs in the country. This is followed by the general increase in spending for various features, such as infrastructure, thus contributing to the GDP of the host country. These effects can be seen through the 2002 World Cup, which was jointly hosted by South Korea and Japan. It is reported by Lee and Taylor (2004) that more than 31,000 jobs were created in various sectors such as recreation and shopping. This assisted the generated economic impact of approximately $1.35 billion in output, with an additional $1 billion directed to income and value collectively (Lee and Taylor, 2004). Generally, host countries enjoy economic expansion in several sectors of the economy, thus increasing GDP.

The discussion of the need for new jobs contributes to the building of new stadiums and the general improvement of facilities. FIFA (n.d.) requires that host countries have a variety of stadiums with various minimum capacities starting with 40,000 for group stage matches and at least 80,000 for finals. Additionally, general transportation and methods of travel are heavily invested in host countries. An example is Qatar, hosts of the upcoming 2022 World Cup, who have reportedly invested around $11.5 billion in transport initiatives in 2017 with $2.7 billion specifically earmarked for rail, port and road projects. Liu (2013) proposes that this spending in preparation for the influx of tourists can be perceived by countries as an investment, hoping that ticket revenue and use further down the line can make up for the spending.

Finally, the hosting of the World Cup provides the host country with an opportunity to improve international perception. The vast international exposure provided through media broadcasts puts the host nation in the spotlight, a chance to display their newly built facilities and the public. Allmers and Meannig (2009, pg. 35 – 36) suggest that Germany’s hosting of the 2006 World Cup improved their alleged ‘hard and cold’ perception held internationally, with the international community coming to perceive Germany’s cultural heritage in a more positive light after the World Cup. This ultimately leads to a multiplier effect on tourism, beginning with the influx of those visiting due to World Cup related reasons and continuing with the improved perception.

The previously discussed reasons direct us to believe that there is economic sense to hosting the World Cup. However, this only applies to some countries, specifically those classified as developed countries. Returning to the point of the building of new facilities, Matheson (2012, pg. 13) proposes that these buildings are unlikely to produce ‘urban development’ in local neighbourhoods. Matheson (2012, pg. 12 -13) uses the South Africa World Cup 2010, where it is argued that these stadiums end up being unused by the community after the World Cup. He expands on this, comparing Germany’s well-established Bundesliga, where stadiums built for their World Cup in 2006 are still used today, to the South African Premier Division, where capacities less than 10,000 fill only a fraction of the stadiums built for their World Cup. Furthermore, as Germany already has an established league, it is more likely to already have stadiums that meet requirements, thus leading to less spending and more enjoyment of revenue. This contrasts with South Africa, where the nation would have to spend hefty amounts to meet requirements and only enjoy revenue from match tickets during the World Cup.

Furthermore, developing countries that host the World Cup require more focus on marketing and fewer attendees. Matheson and Baade (2004) suggest the higher prices on airline tickets due to further distances and the feeling of uncertainty when visiting a new country may put off some tourists from attending. This suggestion holds when we consider developing countries are usually further away from those countries who have higher chances of winning such as France, translating to more tourists from that specific nation to attend. Additionally, Matheson and Baade (2004) also suggest that locals can be reluctant to purchase the high-ticket prices. They use the joint World Cup 2004 with South Korea and Japan as an example. Their research highlights the contrasting purchasing power parity per capita income with Japan owning just under $10,000 more than South Korea, which is then used as a reason to justify the higher percentages of attendees in matches in Japan relative to matches in South Korea. The 2004 World Cup was a unique event, but the need for travel and differences in purchasing power produced a difference in percentages of attendees.

What we can observe from these arguments is that while hosting the World Cup is seen as an economically sensible thing to do, there are differences in factors to consider whether the bidding country is classified as developing or developed. The increase in spending and tourism are aspects to be enjoyed by any country when hosting global events, however, developing countries need to tread carefully, as new infrastructure could end up being unused and expected expenditure could be overestimated. A prime example is the Estadio Nacional, built for the 2014 World Cup Brazil, now used as a municipal parking lot (Manfred, 2015). The upcoming 2022 World Cup will be hosted by Qatar. The country’s QNB Stars League does not hold much prestige, with teams being fairly small and average attendances unable to reach 1000. With the addition of Covid-19, it will be interesting to see how Qatar fare during and after the World Cup.

Allmers, S., & Maennig, W. (2009). Economic Impacts of the FIFA Soccer World Cups in France 1998, Germany 2006, and Outlook for South Africa 2010. Eastern Economic Journal, 35(4), 500-519.

Huijgens, J. (2018) The World Cup Effect.

FIFA (2018) Global broadcast and audience summary

FIFA (n.d.) GUIDE TO THE BIDDING PROCESS FOR THE 2026 FIFA WORLD CUP

Lee, C-K. Tracy, T. (2004) Critical reflections on the economic impact assessment of a mega-event: the case of 2002 FIFA World Cup.

Liu, Y. (2013) Assessing the Long-term Economic Impacts of the World Cup as Mega-sport Event The People, Ideas, and Things (PIT) Journal.

Manfred, G. (2015) Brazil’s $3 billion World Cup stadiums are becoming white elephants a year later. Business Insider.

Matheson, V. (2012). Assessing the infrastructure impact of mega-events in emerging economies. College of the Holy Cross, No. 12-03.1-34

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