World Cup Host Nation Financial Success Hinges on Stadiums

The bidding process to host a World Cup is long and arduous, and the construction of brand new facilities and infrastructure can weigh heavily on a nation.  Hosting the FIFA World Cup is no small feat.  Brazilian government and its citizens have experienced first-hand the difficulties of preparing for the world’s largest sporting event.

One of the most important criteria for any nation vying to host a World Cup is the size and number of stadiums available to host matches.  FIFA’s requirement for stadiums is extensive and considers a variety of factors including size of the field, accessibility for spectators, available space for media, hospitality outside of the stadium, even the lighting of the stadium.

Some Brazilian workers and citizens have made it clear they are unhappy with the placement and future use of some of the stadiums which were constructed from scratch, drawing the world’s attention to the issue through civilian protests.  An examination of the construction of stadiums and infrastructure of past World Cups confirms the concerns of Brazilians.

Twelve stadiums were selected to host the 2014 World Cup in Brazil.  Reportedly $11.3 billion has been invested into infrastructure surrounding the World Cup, one third of which went into stadium development.  Brand new stadiums were built in Manaus, Natal, Cuiaba and Brasilia to accommodate for the magnificent event.  Each of these stadiums holds more than 40,000 spectators and boasts great architectural features.  However, these cities have only third division teams and will most likely not recover financially from playing in such a massive stadium after the World Cup.

Before FIFA selects a nation to host the World Cup, it does consider the future use of the stadiums which need to be constructed to host the event.  For the 2010 World Cup, South Africa built or renovated ten stadiums which cost approximately $1.1 billion (£687 million).  The World Cup cost South Africa an estimated $3.36 billion (£2 billion) total.  Since the World Cup in South Africa, reports indicate many stadiums have been mostly unused by both rugby and soccer leagues in South Africa.  One report in the World Policy Journal following the 2010 World Cup states,

…in Johannesburg, the behemoth Soccer City stadium looms over Soweto housing, still without flush toilets or adequate trash removal.

The 2002 World Cup hosted by Japan and Korea saw the construction of ten stadiums, most of them specifically for the purposes of the World Cup.  John Horne penned an article in Third World Quarterly in 2004 titled “The Global Game of Football: The 2002 World Cup and Regional Development in Japan” where he examined the costs of hosting the 2002 World Cup.  Horne notes that the professional soccer league in Japan, called the J-League, was created in 1993 and was relatively young.  Japan perceived hosting the World Cup as an opportunity to recover from a recession in the late 1980s by boosting the sport locally and cashing in on international tourism during the tournament.  The majority of the funding for these World Cup stadiums, calculated at 70%, came from government bonds which would be repaid over a longer period of time.  Niigata Stadium and Oita Stadium cost $250 million and $210 million respectively, and over $125 million of the funds used to build Oita stadium was collected from bonds.

Japanese culture focuses on building large structures because of the powerful symbol associated with the facilities.  However, Horne suggests that the World Cup stadiums built in 2002 have left a negative impact financially on Japan.  Keeping the stadiums operational after the World Cup has caused financial pitfalls for owners.  The Wing Stadium in Kobe will finally be paid off shortly after 2030.  The Sapporo Dome costs close to $21.8 million (£13 million) per year to keep in operation.  Many of the other stadiums could not manage to schedule enough profitable events, resulting in financial losses.

FIFA continues to line up bidders to host their quadrennial tournament because of the historic financial success they receive.  Heidrun Homburg’s financial history of FIFA reveals that after the very first World Cup in 1930, FIFA earned a gross income of 63,253 Swiss Francs (SFr) while only spending 23,403 SFr (currency conversion unavailable).  Homburg calls the World Cup FIFA’s “golden goose”.  FIFA more than doubled their net profits from the World Cup between 1986 and 1994, receiving 21.7 SFr in 1986 and 57.1 SFr in 1994.  By 2002, FIFA earned 1,442 million SFr from the World Cup.

Not every nation has struggled to fill stadiums after hosting a World Cup.  According to Fabio Chisari, author of When Football Went Global, the 1966 tournament hosted by England became a turning point in World Cup viewership and recognition.  Stadiums in England were inspected for capacity, size of the field, and, for the first time, media accommodations including the positioning of television cameras.  England could easily match the first two criteria and spent money on expanding to match the need for broadcasting cameras, interview rooms, and commentary positions.  Chisari explains that the infrastructure and technology used to broadcast the 1966 World Cup to Europe and other parts of the world made the FIFA World Cup a truly international event.

Nations such as Brazil, South Africa, and Japan cited the boost in tourism, increase in job opportunities, and investment in infrastructure as reasons to host the World Cup.  Perhaps these nations hope to match the financial success of England in 1966 or, more recently, France in 1998.  However, reports show that France spent less than $500 million on stadium development, only building one new stadium, and simply updated existing stadiums.  World Cups of 2002, 2010, and 2014 have demonstrated that to host the world’s largest sporting event comes with certain expectations for the stadiums within the host country, and costs as well as risks associated with those expectations. It is both the duty of FIFA as well as the host country to do the financial due diligence to understand the level of impact these preparations will have on the country’s economy before choosing to enter for a bid to host the tournament. The plan for the stadiums afterwards must also be realistic and thoroughly thought out, with multiple exit strategies available in order to avoid the financial predicament of Japan, South Africa, and potentially now Brazil.

The 2014 World Cup in Brazil took over six years of preparation and will last exactly thirty-two days.  If the trend continues, the financial impact of the stadiums built to host the World Cup will last much longer.

 

What do you think about the impact of stadium costs on the host nation for the World Cup? Let us know in the comments section below, or via Facebook or Twitter.

Reporting on the business side of the world's game.