Should the U.S. Really Try to Host Another World Cup?

DESCRIPTIONPhoto: zoonabar Many of the structures built for the 2004 Athens Olympic Games lie vacant.

There is a good section in the book Soccernomics about the economic impact studies that cities and countries sponsor when they are hoping to host a huge sporting event like the World Cup or the Olympics. The gist of it is that you can make an economic impact study say pretty much whatever you want, since it’s an exercise in speculation, and that the economists hired by bid committees make sure the numbers say yes.

The truth, however, is that most such events don’t provide much economic stimulus, and often turn out to be money losers. This isn’t to say that cities or countries shouldn’t try to host these events — but, as the Soccernomics authors argue, they should at least realize that what they’re doing is paying for the right to host a big party. The same is generally true for public funding of new sports arenas, as the economist Dennis Coates made clear not long ago.

Coates, who teaches economics at University of Maryland, Baltimore County and is the immediate past president of the North American Association of Sports Economists, is back with a stern warning for certain people with soccer fever. As it seems the U.S. is going hellbent for leather trying to land an upcoming World Cup, he wants to get ahead of the cheerleading to make clear how the economics will actually play out. His new paper, “World Cup Economics: What Americans Need to Know about a US World Cup Bid,” is an attempt to challenge “the rosy assumptions being made by U.S. bid leaders, and I hope it will force proponents to be more forthcoming with answers about what we can really expect from a U.S. World Cup.”

Coates’s central claim:

Despite bid organizers’ claims, the World Cup won’t be a boon for the American economy; in fact, it will likely cost the United States billions of dollars in lost economic impact. For example, economic estimates in support of the 1994 U.S. World Cup were later shown by economists to have been off by up to $14 billion. Far from having a positive economic impact, the last World Cup we hosted, a so-called major success, had a negative impact on the average U.S. host city of $712 million. Yet no one is discussing these figures despite the current economic troubles we face. … Few analysts who aren’t in the employ of the event boosters have ever found such events to pay for themselves in a purely dollars and cents view.

The recently completed South Africa World Cup is hardly an exception, with the bulk of the trouble lying in the gap between optimistic projected costs and actual costs:

The proposed budget for the 2010 games was about $225 million for stadiums and $421 million overall. Expenses have far exceeded those numbers. Reported stadium expenses jumped from the planned level of $225 million to $2.13 billion, and overall expenses jumped similarly from $421 million to over $5 billion.

And don’t forget the “ruins of modern Greece” — i.e., the abandoned facilities from the 2004 Summer Olympics in Athens. You think Greece might be feeling a bit of buyer’s remorse about now?


Hitek

Hello.

Please stop saying "stadia".

Thanks. :)

Colin

I read the report and am not terrible impressed. The author notes for example that one Japanese city gave a bunch of money to Brazil to have their training camp there. Well, the answer to that is simply not to pay teams to host their training camps. I also don't think opportunity cost plays much of a role, as the stadiums sit empty most of the year. Worst case scenario is that a few concerts get bumped to different dates to accomodate the WC.

Really, the only point that really seems to hold water are costs related to security. The solution there is to stop with the overkill we have been seeing. And why should local governments be on the hook for this? Why can't the organizing committee cover this with proceeds from ticket revenue? Ditto for the fanzones.

All we need to do is:

1. Host the games in existing stadiums. The infrastructure costs for the WC should be $0.
2. Don't pay teams to host their training camps. That's just a waste of money.
3. Have the WC organizers foot the bill for security, which does not need to be a commando-style operation.

Look, assuming 50,000 average attendance at games -- which I think is lowballing it -- ticket revenue should be around $160 million assuming an avg ticket price of $50 (which again is probably underestimating).

Am I to understand that costs such as security, renting the stadiums, etc. are going to be more than $160 million? Seems ridic.

If the NFL can host dozens of games with all of its attendant costs and make money, why can't the world cup?

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Paul

It can't be that hard to find all of 9 existing stadiums (with grass) in NFL cities ready to go. In South Africa it works out to 2-3 games per week and then the finals. That could be spread out further , we are a pretty big country you know. Security couldn't be any different than a super bowl game and we always love tourism. In the future however, I agree that any country should already have their stadiums in place and not build new. Its a waste from an environmental standpoint,if nothing else. Is Brazil going to build new for 2014. I have no idea, but it doubt it will be like Greece or South Africa.

Jim

PickMe- The City of Chicago asked not to be considered as a host site for any world cup bid. San Francisco (whole Bay area) is also not a part of 18/22 bid.

Also, the Chicago bid for the 2016 Olympic games did have several white elephants including building a new Olympic stadium in Washington Park that would be torn down after the games. This goes along with several other temporary game sites the city would have built than destroyed after the games.

MOHAMMAD AZEEMULLAH

The priority of man has shifted from feeding the poor in Africa to the billion dollar game show. It is hypocrisy.

lee schipper

Aren't there two issues here
1. OPM (or other peoples' money). Americans and others love to get rich on OPM. The public pays the upfront cost, and private entrepreneurs get the benefits.
2. A case of distribution of goodies. If visitors to the Games spend billions at the games, then they don't spend elsewhere. No merchant here in Berkeley noticed that a few Berkeleyans went to the World Cup in S. African and DIDN'T buy dinners out while there were enjoying the soccer.

So the pattern is the same regardless of whether stadiums need to be built or not, regardless of the bill for security, cleaning up.
1. OPM pays the up front costs
2. Local merchants, hotels, scalpers etc reap the benefits.

there is nothing wrong with #2, but why does it only happen if #1 occurs first. And why do the backers (usually those who profit from #2) always get the government and private backers alike to overstate the benefits and understand the costs?

Sound like our economic and real estate collapse? Its the same thing

Lee Schipper
Berkeley

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Eric

Party pooper.

Bizprof

The beneficiaries of these mega-events are the private interests that form the cartel that organizes, promotes and sponsors the events. Cities and countries (meaning taxpayers) put up for infrastructure and their return is negative and/or psychological. But the cartel insiders, the organizing committees, the construction firms and consultancies, the business service companies, the IT firms, the sponsors (like Coke or GE) all make money and earn positive returns.

You can read more at: http://www3.interscience.wiley.com/cgi-bin/fulltext/122667978/PDFSTART

eremite

Fine. But not with my tax dollars please.

Lonely Pedant

Distribute the games among several CONCACAF member countries, and put one of the venues in Port-au-Prince.

Jim

Why are most of the comments nitpicking at the article mentioning greece and the disuse of the modern stadiums
But choose to ignore the 1994 comparison with an existing stadium going to the red.

Its also unrealistic to expect to have a winning bid while expecting organizers to pay security which other bidders will pay for.

Chris

Contrary to most of the posters, I will at least entertain the thought that it is easier to justify South Africa hosting a World Cup that it is to justify the U.S. doing so.

How does one measure the economic impact of thousands of vistors from around the globe discovering that South Africa is emerging from the impact of apartheid and is safe, modern, ready for business etc.? Any first-year MBA can tell you that it is difficult to measure the economic impact of advertising that helps build a good brand name.

I'm not saying that South Africa is all of those things (I don't know one way or another) or that visitors left South Africa believing those things, but I know that's what they were hoping for.

On the other hand, what does the U.S. get from hosting another World Cup if it doesn't receive the direct economic benefits? Our brand is fairly well established in the World.

Alpharetta

I live three miles from one of the equestrian venues from the Atlanta Olympics.

Our town doesn't have enough money to build enough soccer fields for all the kids who want to play, but we have over 300 stalls and a covered equestrian stadium taking up a huge part of our best park. Once a year we have a rodeo. Two or three time we have horse show.

I get angry every time I look at this terrible waste of our city's resources.

alexander

Still wondering why people are ignoring the very important productivity advantages of having the games in the USA.

The last US game (on a weekend) got 20million+ viewers. Soccer's popularity in the USA is not going to fall. By 2018 I would expect that to be the low end for US games. If the WC is in Europe, the US games will be help before or during work hours.

20 million people, 3 hours work lost, $10/hour (SUPER CONSERVATIVE) is $600 million hours of lost productivity, for a single team USA game alone. Hosted in the USA at 6 PM eastern and voila! Lets not forget the millions of other people who would be watching Germany, Spain, France, England, etc. Maybe hosting in America is not ideal, perhaps Brazil is, but its better than losing all that productivity because people are Red-Eyeing it to watch USA games live as they are played in Beijing.

Jed Davis

Absolutely, the Rugby World Cup!

misterb

What many commenters seem to forget is that these bids are competitive, and FIFA is notorious for getting what they want at the cost to the bidding countries. As we saw with Salt Lake City and the Olympics, civic boosters can get caught up in the excitement of winning, and lose all sense of fiscal responsibility.
The flip side is that the benefits for cities and/or countries may not be economic, but that doesn't mean that they are valueless. If government's only task was to accumulate cold, dead cash in a hole in the ground, we should worry about net "profits", but I prefer that we take our citizens' happiness into account.

girlyoda9

As someone who attended both the 94 and 2010 World Cup, I would love to see the event back in the US. I realize that holding it here would be costly but from what I've seen, the majority of expense would go to event security (which has gone up in cost since 94). Unlike South Africa, most of the infrastructure, including public transportation and stadiums itself are already in place (has anyone seen Dallas Cowboys Stadium, that place was created to hold events like the World Cup Final). Secondly, South Africa wanted to host the World Cup to show the world they were capable of doing so, to gain free publicity for their country, and because they are hoping those who visited will one day come back (I know I will). While America isn't hurting for prestige or attention, future tourist dollars wouldn't hurt (and if our dollar doesn't improve, you can expect to see a hordes of Europeans invading our shores during the event). And lastly, there's the fun factor. As a kid watching the 94 WC and then as an adult visiting SA, there's no better or cooler event to meet people of other nations and cultures and no bigger excuse to paint your face and dress in costume and scream your lungs out for your country (I've discovered that the World Cup is the best time/place in the world to display patriotic pride). I hope we do win one of the bids.

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johnpakala

soccer? puh-leeze,

isn't that the game where you kick a ball with your feet? the game that united states citizens have little or no interest in? the game that "the powers that be" have been pushing for 40 years to no avail?

yeah. host the world cup. good idea. and if you buy that....pssst.....

i've got a metric system for sale cheap.

Alex

How did the 1994 WC have a negative economic impact? I don't see this explained anywhere, but it is central to the issue.

I can only think of a few possibilities:

1) WC discouraging tourists who would have visited without the WC.

2) Extremely high security costs

3) Corruption on a massive scale

4) Transportation disruptions

Most of these were probably negatives, but I doubt they were of significant scale.

What gives?

mel

There is a clear connection between big sporting events and their most vocal boosters: invariably the biggest boosters have a huge financial interest. They are backed by those with smaller yet substantial financial interest. Hoteliers. Restaurateurs. Team owners seeking new, publicly financed stadiums. and municipalities seeking a free ride. In the Dallas suburb of Arlington, the upcoming Super Bowl is the excuse for spending huge amounts of state and federal money to build and pave roads and highways, money that would not have come along without the big ball game.