Economic Impact of Hosting the FIFA World Cup

Subject: Sports
Pages: 8
Words: 2218
Reading time:
8 min
Study level: Bachelor

Executive Summary

There is an extreme level of prestige associated with hosting the FIFA World Cup due to the immense advertisement efforts and the inflow of tourists that will undoubtedly contribute to the economy by staying at hotels, paying for restaurants and transportation, as well as engaging in various tourist attractions. However, the consensus remains to be established as to whether the extended economic costs targeted at meeting the demands of FIFA are worthwhile. Therefore, the report will examine the impact of holding the FIFA World Cup in a country with the focus placed on the economic (business) perspective. The main areas for analysis include job creation opportunities and implications, the impact on taxpayers, and the future prospects of trade and increasing GDP. The supporting environmental perspective will be discussed in terms of the adverse effect of the event on the environment, while the tourism perspective will reveal how the industry changes when there is an influx of new visitors to a host country. Even though there are multiple advantages to hosting FIFA World Cup events, it is imperative to be realistic in terms of the cost-benefit analysis and the long-term effect of the championship on host countries. Recommendations as to how states should act to mitigate the challenges that come with hosting the World Cup will be made to ensure that future championships do not repeat the mistakes of the previous events.

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Introduction

The FIFA World Cup is a global sporting event attracting millions of viewers worldwide. It is being held every four years, with the host country changing every time as states bid against one another to win the rights to become the location for the next World Cup to be held. Throughout the history of the event, economists gave disagreed as to the economic and other benefits of being the host. FIFA usually lays down strict conditions for countries that want to host the World Cup, which enables increased spending (Cernel, 2018). For instance, hosts must have high-quality stadiums and meet the demand for the increased inflow of tourists as well as players. There should be high-quality transportation amenities available for players as well as the tourists coming to the location.

FIFA does not cover the expenses; instead, all of the financial resources are to be allocated by the government of the host country. Moreover, there have been cases when the infrastructure created specifically for the events was not used later and even had to be demolished. Therefore, the high standards set by FIFA are demanding and challenging for countries, and it is imperative that countries that want to become costs consider both the advantages and disadvantages of their position. This report aims to discuss the impact of the FIFA World Cup with the focus placed on the economic perspective. In addition, the environmental and tourism perspectives will be analyzed to offer a comprehensive overview of the effects of holding the event.

Analysis: The Business/Economic Perspective

Job Creation

In preparation for the football matches, host countries are expected to meet the infrastructural demands while also engaging in increased marketing and advertising efforts. Because of this, countries increase the number of businesses and thus create new jobs. For example, research conducted by Brazil’s Ministry of Tourism found that hosting the FIFA World Cup in 2015 in the country resulted in the generation of more the one million new jobs. More than 700,000 of the jobs were found to be permanent, which means that the government continued seeing the economic benefits of the tournament even after its closing.

In South Africa, jobs were also created as a result of the World Cup hosting, even though the numbers were not as high as in Brazil. For instance, more than 2,100 workers got employed to construct the Green Point stadium in Cape Town. According to FIFA findings, 99% of the newly-employed workers were locals (Christou, 2018). Moreover, 1,200 of them were explicitly trained to work at the stadium. This allowed them to develop skills that can be used in construction work following the World Cup. Nevertheless, it should be noted that the need to improve or build infrastructure is directly associated with the increase of new jobs. Thus, in countries such as the United Kingdom, where there is an abundance of stadiums, hotels, restaurants, and good transportation infrastructure, there would not be as many jobs created as in countries that need their infrastructures to be improved.

Impact on Host Country Taxpayers

The World Cup has shown to be the most lucrative but costly soccer even because those who pay for the tournament to be held are not necessarily those who reap the benefits and profits. As mentioned by Sheetz (2018), FIFA profits in billions of dollars of revenue every four years after the World Cup is held while the nations hosting the event get the bill of $10 billion or more. For instance, when Russia was hosting the tournament in 2018, the preparation resulted in an $11.8 billion bill, as reported by the USA Today (2017). Notably, more than 70% of the funding was to come from public funding, which entailed the increased taxes.

It is challenging for the populations whose countries are planning to host the World Cup to agree with the fact that they are the ones who would be the ones expected to cover the majority of the expenses. Some may see it worthwhile as the may be long-term economic benefits of hosting the tournament. Others are more skeptical because the reports on the comparison between the costs of the event and the economic impact show that the latter loses. In the case of Brazil, for instance, the country’s preparations for the World Cup were at around $11-14 billion, while the expected economic benefit was $3-13 (Hall, 2018). Therefore, despite the strain endured by the taxpayers of host countries, the financial outcome does not always meet the high expenses that states endure.

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Possible Future Economic Benefits

It remains unclear whether holding the FIFA World Cup is beneficial for host countries on a long-term basis. There may be a temporary inflow of tourists coming in the next several years after the Cup, thus boosting the economy. The novelty effect increases the likelihood of more tourists coming to visit a new country, especially in the light of the post-World Cup improvements in infrastructure. However, there are not many tangible economic effects of the event after its ending aside from the general “feel-good” effect for the population that improves their perception of their home countries. The increased security and belief in the position of one’s country increase the confidence of local business people to invest and work on boosting the economy (Liu, 2013). In addition, the “feel-good” effect increases the purchasing power of citizens while also enhancing the vitality of domestic industries. Even though such effects are hard to measure in terms of the economic impact, it is widely accepted that a positive attitude toward one’s country can influence a host country on a long-term basis.

Analysis: The Tourism Perspective

The positive influence of the FIFA World Cup on tourism in host countries is among the most cited short-term benefits of the event. The argument is that sporting events are the reason why fans from around the world flock to the host country. As a result of that, local hotels and restaurants make more money, thus contributing to the boost in the economy. Because of this, countries seek out to become hosts of the FIFA World Cup because the event generates extensive advertising on the tourism destination, creates opportunities for repeated tourism, provides the grounds for tourists’ daily spending in the destination higher than in other tourism modalities, and improve the overall image of the host countries. This is especially relevant for emerging tourism destinations in unpopular countries for travel as they get the opportunity to develop their tourism efforts overall and facilitate a change in the traditional route (Domareski Ruiz, Chim Miki and Dos Anjos, 2018). It should be noted that the majority of destination management organizations that deal with the organization of the FIFA World Cup agree that there is usually a shift in tourism demand on both long- and short-term basis (Domareski Ruiz et al., 2018). However, the additional revenues do not usually counterbalance the investment costs required by host countries, which points to wasted output and lost financial resources.

Analysis: The Environmental Perspective

Even though the FIFA World Cup is among the most highly anticipated events for the worldwide audience, the history of the tournament’s sustainability has been inconsistent. In 2014, the hosting of the matches in Brazil was called the “Green Cup” or “Copa Verde” as a dedication to environmental sustainability and efforts of undoing the ecological damage caused by the hosting in South Africa. However, not only that the event was among the most expensive World Cups ever, the estimation of the carbon footprint was embarrassingly high compared to the previous event. Precisely, it was estimated that the Rio 2014 events resulted in the generation of 2.72 million tons of CO2 emissions while the 2010 World Cup in South Africa generated 1.65 tons, which was far less compared to the supposedly “eco-friendly” event in Brazil (Sturrock, 2018). Moreover, the carbon dioxide that was dumped into the atmosphere throughout Rio 2014 was equivalent to the CO2 produced by around 560,000 cars in the span of a year (Sturrock, 2018). Therefore, there is some concern over the future World Cups, the 2022 Qatar in particular, as to whether the event would have as devastating of an effect on the atmosphere. The country has a hot climate and all amenities will have to use high-power conditioning, which adds to the adverse environmental impact.

Conclusion

To conclude, the FIFA World Cup is an opportunity that many countries would like to seize due to the extreme marketing potential of the event and the attracting of attention to host countries. What many states fail to consider is the fact that the economic toll that taxpayers must endure exceeds the financial outcomes of these events. To meet the high standards of FIFA, countries engage in increased infrastructural development, which creates new jobs for the population and provides them with new skills that they can use in their future work. However, some infrastructure is not needed after the event and is abandoned or demolished, which points to the wasted effort. Similarly, the inflow of travelers and the improved performance of the tourism industry occurs for several years after the event, but the long-term impact of the World Cup in this area remains unnoticed. Finally, considering the fact that the preparation for the sports events and their holding entails the use of many resources, the environmental impact of the FIFA World Cup remains to be adverse. Despite the efforts to dedicate new World Cups to ecological sustainability, host countries were unable to meet the ‘green’ standards. Overall, the damaging effects of the FIFA World Cup for global economies are questionable, with the negatives often outweighing the positives.

Recommendations

The analysis of the impact of the FIFA World Cup from the economic, tourism, and environmental perspectives has shown that there are unrealistic expectations of host states as to the benefits for their economies. Therefore, before bidding to become the host country for the next World Cup, it is important that governments consider several things. First, it is necessary to assess the infrastructural capacity of the country and estimate the costs that will come with the increased investment in new buildings and transportation. To minimize waste that comes with erecting new structures, it is recommended to repurpose old buildings and improving stadiums instead of investing in new ones. This will still create jobs while avoiding the problem of resources being wasted on infrastructure that is not needed after the World Cup ends. When it comes to financing, it may be a good idea to reduce the burden on taxpayers and seek sponsorships from governmental and private businesses within the host country. The sponsors will benefit from being heavily advertised instead of putting the strain on taxpayers from the general population who will have to pay for the event years to come.

To address the adverse environmental impact of the FIFA World Cup, host countries can follow Germany’s example. The country did not build any new stadiums and worked on incentivizing football fans to travel on free public transportation as opposed to cars. Stadiums used solar power and rainwater collection technologies to keep pitches hydrated. In addition, it was estimated that the carbon dioxide emissions into the atmosphere during Germany’s time hosting was between six to eight times less than during South Africa’s hosting. While these results are commendable, more efforts should be made by FIFA to establish high standards of sustainability for host countries. In the absence of such standards, the World Cup will continue being unsustainable.

Finally, to reap the benefits of the increased flow of tourists to new World Cup destinations, it is important that countries advertise themselves well. The mere focus on the available stadiums and the infrastructure created specifically for the event is not enough – it is necessary that marketers present the historical and cultural value of countries that is interesting to tourists. This is important for guaranteeing the long-term benefits of the World Cup for the tourism sector.

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Reference List

Cernel, S. (2018) The World Cup effect: requirements and costs of infrastructure. Web.

Christou, L. (2018) World Cup 2030: The economic impact of hosting the FIFA tournament. Web.

Domareski Ruiz, T. C., Chim Miki, A. F. and Dos Anjos, F. A. (2019) ‘Competitiveness, economic legacy and tourism impacts: World Cup’, Investigaciones Turísticas, 17, pp. 49-70.

Hall, S. (2018) Does hosting a World Cup make economic sense? Web.

Liu, Y. (2013) Assessing the long-term economic impacts of the World Cup as mega-sport event. Web.

Sheetz, M. (2018) Here’s who is getting rich off the World Cup. Web.

Sturrock, L. (2018) The environmental impact of the WORLD CUP – are FIFA scoring sustainability goals? Web.

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USA Today. (2017) Russia’s 2018 World Cup costs grow by $600 million. Web.