It cost how much?

The unseen expenses of hosting the FIFA World Cup

11th April 2018

Hosting the FIFA World Cup can be an incredible event packed with entertainment, drama, and excitement — and that’s just on the field. After the Olympics, the World Cup is the biggest sporting event in the world, and there is a lot of pressure on the host country to not only put on a good show, but to make sure that everything goes smoothly.

Despite the pressure, there is no shortage of bids from countries vying to get picked. Bids for the 2018 World Cup included England, a joint bid from the Netherlands and Belgium, and the eventual winners, Russia. There were at least 5 candidates for the 2022 World Cup including Japan, Australia, and the United States. In the end, though, Qatar was picked to host the event.

There is a lot of excitement and positivity in a country when the World Cup is coming to town. I was living in South Africa at the time of the 2010 World Cup, and there was a definite buzz around the place. It’s a rare chance to see the best footballers in the world play in your country over the course of a month, and thousands of fans come to support their countries, bringing a good, if rowdy, atmosphere and business to the host country.

Previous hosts have also used the tournament as an opportunity to improve the infrastructure, with new roads and an upgraded public transport systems among the biggest areas of investment

However, there is another side to hosting a huge sporting event like this. The cost of the event can reach eye-watering figures, and every now and again venues built specifically for the tournament never really get used again.

When it comes to hosting the World Cup, one of the main issues is making sure that there are enough stadiums, and that they are up to FIFA’s standards. Previous hosts have also used the tournament as an opportunity to improve the infrastructure, with new roads and an upgraded public transport systems among the biggest areas of investment.

With the World Cup coming up this summer in Russia, and news coming out recently that it will cost $600 million more than originally planned, now is probably the best time to look back at the most recent World Cups — in South Africa and Brazil — and see how much they cost the government, and whether the countries are better off after the event.

High costs

Professor Daniel Plumley of Sheffield Hallam University, who focuses on the finance and governance of professional sports, lists several reasons why governments would want to host a World Cup — it can raise the profile of the country, create new jobs, and there is also potential for future investment. Of course, there is also the short term economic impact that comes with the thousands of football fans that flock to the cities to support their country. There are negative sides to hosting the World Cup as well, including the (often) short-term use of facilities, the cost of these facilities, and the higher taxes that can come with these extra costs.

The countries will never quite know until after the event if it was more of a success or a missed opportunity

When South Africa and Brazil were awarded the 2010 and 2014 World Cups respectively, the governments would have been delighted at the prospect of thousands of new visitors. It was especially important for South Africa, as it would be the first African country to host a FIFA World Cup.

Even though the tournament has been going on for decades, it is still a gamble. The countries will never quite know until after the event if it was more of a success or a missed opportunity. Plumley says that there will obviously be a plan in place for the facilities after the event “but when things do go wrong it’s very tough to paint a positive picture of that post-event”.

South Africa spent $3.9 billion on the 2010 World Cup, with $1.3 billion of that going into renovating old stadiums and building new stadiums. Most of the rest of the money went into transport and infrastructure improvements.

The tournament did contribute to record tourism flows, as the country made a return of $460 million, just over 10% of what it spent. The consensus regarding the tournament after all the figures were in was that South Africa was not going to physically make its money back from the World Cup, but it was a good marketing exercise and it was good for tourism.

The main issue following the tournament in 2010 is the stadiums, and the lack of use that they have had since 2010. The impressive Cape Town Stadium cost $375 million to build, and is now home to the two professional football teams based in Cape Town. However, both these clubs average around just 6,000 fans for a home game in a stadium that has a capacity of 55,000. To try and create more revenue for the stadium, there are other events that are hosted there, including Sevens rugby and big-name concerts. Despite these efforts, the stadium still costs $3.4 million a year to maintain.

However, this is not an isolated incident for stadiums built for the World Cup in South Africa; the Nelson Mandela Bay Stadium in Port Elizabeth and the Moses Mabhida stadium in Durban both run at losses, despite the fact that the Moses Mabhida stadium even offers bungee jumping from its arch that goes over the pitch.

Cape Town Stadium
It does look impressive to be fair…

Yet the 2010 World Cup is seen as a successful tournament, as everything ran smoothly and the country did very well in hosting it, but there is still a little bit of a bad taste in the mouth as a result of public funds being used to maintain stadiums that aren’t being used regularly or to their full potential.

Waste

The figures for the 2014 World Cup in Brazil are even more staggering. The Brazilian government spent around $15 billion on the tournament, with $3 billion of that going into stadiums. A total of 90% of the money for the stadiums was public money.

The amount of money that was spent on stadiums, which provide few long-term economic benefits, is truly astounding. Arena Amazonia cost $300 million to build in Manaus, a remote city in the rainforest which doesn’t even have a first division team.

Perhaps the most striking example of how little some of the stadiums are used is Arena Pernambuco in Recife, which can now be hired out for birthday parties

Only 11 events had been held there in the five months following the World Cup. Perhaps the most striking example of how little some of the stadiums are used is Arena Pernambuco in Recife, which can now be hired out for birthday parties. Arena Pantanal in Cuiabá can only attract between 500-1,000 people in its 42,000 capacity for its two local teams.

A final example is Estádio Nacional in Brasília which cost $900 million to renovate, making it the second most expensive football stadium in the world.

In its first year after opening it only generated $500,000. If it kept making this amount every year, it would take an astonishing 1,800 years to pay back in full.

Manaus, the location of Arena da Amazônia, is a poor city where a quarter of the people there don’t have access to running water. Yet there is a stadium there that is barely used that costs hundreds of millions of dollars

Four of the 12 stadiums that were used for the World Cup are set to become white elephants (i.e. their cost vastly exceeds their usefulness). What makes this even more unbelievable is that FIFA only requires eight stadiums for a World Cup, but the Brazilian government decided to build four brand new stadiums in remote places. At the beginning of the project, the costs didn’t seem too high, but as construction went along the stadium costs increased by at least 75%. This meant that the government was forced to divert resources from infrastructure projects to ensure the stadiums were finished in time. In turn, it only delivered on half of the infrastructure projects that it pledged, but still had to pay the full costs.

Manaus, the location of Arena da Amazônia, is a poor city where a quarter of the people there don’t have access to running water. Yet there is a stadium there that is barely used that costs hundreds of millions of dollars.

Amazonia Arena Brazil
The Amazonia Arena cost $300 million

Professor Michael Leeds from Temple University in Philadelphia authored the book The Economics of Sports. He tells The Overtake that this as the classic case of winner’s curse “in which the person/team/country that wins an auction pays more than the prize is worth”.

Despite the substantial costs, Plumley doesn’t think any country would look at a World Cup and not want to be involved in it, as there can be some significant benefits from it, if done right.

FIFA has been embroiled in corruption claims for the past few years, and some of the claims have revolved around its awarding of the next World Cups to Russia and Qatar. Considering the problems that Russia has: the violence and racism in the stands, and that Qatar has: the lack of footballing structure and the incredibly hot weather, there have been claims that the bidding process was rigged.

Concerning the application put in to host the World Cup, Plumley believes it is too difficult for FIFA to decide on the best candidate. Any country can put a bid in to host the event, and they would always claim that they can pull it off and create a spectacle.

In Plumley’s view, the country puts its application forward, and if FIFA thinks it can cover the costs, then it will have to consider the country as a potential host.

FIFA’s billions

The World Cup is what generates FIFA’s revenue. The organisation took a net profit of $2.6 billion from the tournament in Brazil. Leeds believes that FIFA is in this for the money, and is not sure “we can reasonably expect it to act more ethically than a real estate broker or a used car dealer”.

FIFA has set up a legacy fund for the hosts of the World Cup, which amounts to $100 million to develop football in the respective countries. Asked whether this is enough, Plumley says although this is a substantial amount of money, it is still a relatively small amount compared to how much the World Cup costs, and how much FIFA makes from it. He adds that there is certainly an argument that FIFA could be doing more in terms of investment, as the World Cup is their flagship competition and it is their responsibility on them to help create a football legacy.

It seems like Russia will face the same problems that Brazil and South Africa have had before them

The word legacy will be put into almost every country’s bidding documentation, but according to Plumley, there are not many examples of a lasting football legacy happening in the long term. He adds that there is “more evidence to say there’s a lack of legacy rather than a lot of legacy from these events”. However, in big countries like South Africa and Brazil, it is very tough to create a legacy off the back of one event.

Russia’s problems

Looking forward, it seems like Russia will face the same problems that Brazil and South Africa have had. The cost of the tournament has increased, with the final bill now totalling at least $11.8 billion. Over $5 billion has been spent on stadiums, and at least 17 workers have died on these sites.

The stadium in Kazan cost $439 million and has a capacity of 45,000. The last game the local club, Rubin Kazan, played there attracted 8,000 fans, which means it will need to host commercial and cultural events after the World Cup to make it worthwhile. The Fisht Stadium in Sochi currently has no professional football team to play there and annual maintenance of the stadium could reach $8 million. Russia does intend to cut the capacity of a number of their stadiums after the tournament, but whether it is able to justify the millions of dollars spent on them is another matter. It is easy to look at the examples of Brazil and South Africa and wonder if some of the stadiums in Russia will become white elephants too.

Saint Petersburg Stadium
The St Petersburg Stadium, which will see use in the 2018 FIFA World Cup

Qatar, hosting the World Cup in 2022, won’t be perturbed by the cost of the tournament as it has considerable financial resources and wealth behind it that other countries don’t have. At least $10 billion will be spent on stadiums, and that number is likely to rise.

As the country will only use one of their current stadiums for the World Cup, seven new stadiums must be built. There have been major issues with the construction in preparation for the World Cup, chiefly the number of deaths that have occurred on construction sites. Approximately 1,200 unpaid workers have died since Qatar was awarded the tournament in 2010.

For future World Cups, FIFA will receive bids from many candidates, as there is still a high demand for the event. FIFA can’t stop countries from bidding, and it is the responsibility of the countries to decide whether they are able, financially and infrastructurally, to host an event of this magnitude. It will then be FIFA’s decision, whether they pick a country that has the majority of infrastructure in place already, or whether they take the tournament into new territories.

Too much money was spent on stadiums that are now being wasted

Plumley believes that FIFA is doing it fairly at the moment, as they rotate the strike in terms of continents. He adds that it’s FIFA’s directive, as the world governing body of the game, to take the game to where it has never been before, and give football fans everywhere the chance to witness the spectacle of the World Cup.

Looking back at the World Cups in South Africa and Brazil, it is clear to see where the mistakes were made. Too much money was spent on stadiums that are now being wasted. This is the fault of the host countries rather than the fault of FIFA.

However, FIFA can do a lot more in helping to set up more of a legacy than has been before. With the tournament going into new territories, an initiative that is positive for the game and for the fans, there will be pressure on FIFA to ensure that future World Cup tournaments do not leave countries with billions of dollars worth of debt and empty stadiums.

11th April 2018