Wednesday, 22 July 2009

Bread and Circuses

Duas tantum res anxius optat,
Panem et circenses


In the period when the Antonine Emperors ruled Rome, the privileged elite enjoyed a level of wealth previously unknown. However the underlying mass of the Roman people saw their own standard of living fall – to placate their discontent, Roman politicians adopted populist methods such as providing free bread and arranging large scale entertainments (circuses).

Of course, nowadays we like to think that we are not so gullible that we can be distracted from the effects of a recession causing mass employment and financial hardship simply by being promised the chance to watch some circus games: even if it is the Olympics (2012), the Rugby World Cup (2015) or, maybe, the FIFA World Cup (2018). So instead we are told that the games will not only entertain us, they will also;

1) boost the economy,
2) create jobs,
3) bring in infrastructure investment,
4) increase the number of tourists spending their money in the host cities
5) and, as if this wasn’t enough, the broadcasting of the event across the world will also serve to advertise host cities across the world thus attracting even more investment and even more free-spending tourists in the future.

To support this enticing argument, for nearly every major sporting event that has taken place over the last 30 years or so, you will be able to find forecasts full of ex ante predictions of massive and positive economic impacts for countries staging a major sporting event. Unfortunately, what are harder to find are studies measuring the impact AFTER the sporting event have taken place to see if the predicted benefits actually materialised. In the small number of instances where comparisons are able to be made it becomes clear that the benefits are invariably greatly exaggerated, the costs are considerably underestimated, and the longer-term benefits are…well….negligible.

1)Boosting the economy

Hosting a major sports event is simply not a very effective way of boosting either the national or local economy. The investment bank HSBC analysed the effects of several major sporting events and concluded;

Host countries economies underperform world growth by 0.4% in the 12 months before a tournament and by the same in the year after.”

In the United States, where there have been repeated instances of professional sports teams moving from one city to another allowing comparative analysis to take place, several studies (including this one) have shown that rather than having a positive effect on the local economy, professional sport often has a negative effect.

The reality is that despite all the attention it receives in the media, professional sport only makes up a small percentage of our economic performance. The Premier League, for example, is recognised as the richest league in the world with a turnover of approximately £1.8 billion per annum, with the Football League adding in the region of another £350 million. Yet that £2.2 billion is a tiny percentage of the overall economic performance of the UK at large with its GDP of roughly £1,600 billion. It is little more than 1/8th of 1 percent of GDP.

In Germany in 2006 (where the Bundesliga had a turnover of just over £1 billion) the Germans invested nearly £5 billion specifically for the World Cup. This investment was all made in the expectation of a net economic benefit of £2.2 billion. (German Institute of Economic Research)

So what effect did the World Cup have on German economic performance – here are the figures for Germany’s real economic growth (i.e after allowing for inflation):

2005 +1.7%
2006 (World Cup year) +0.9%
2007 +2.7%
2008 +2.5%
As was recognised after the World Cup, the effects were negligible.

2) Job creation

This is always included in any bid for staging a major sports event. At the moment the England World Cup bid site includes the statement that “85,000 jobs were created by the [2006] tournament” which sounds OK until you chase up the figures; this leads you firstly to FIFA’s own site which tells us that “85,158 people worked on behalf of the LOC [local organising committee] during the event”.

However this includes;
15,000 volunteers, and,
1,000 volunteer drivers

It also includes;
280 temporary LOC staff
2,500 artists for opening and closing ceremony
19,200 security stewards
8,000 medical staff
800 hostesses
400 ticketing staff

As you guess most of the above were temporary jobs that only existed for the month or so of the tournament. In the event it was estimated by the German Institute for Economic Research (see above) that perhaps 9,000 permanent jobs would be created. It is also likely that many of these permanent positions are connected to infrastructure investment that would have happened in any case, regardless of the World Cup.

3) Infrastructure investment

For 2006, the German tourism authority calculated that £1.3 billion was spent on building and/or improving the football stadia used to host events whilst another £3 billion was spent on transport infrastructure. Looking at Bristol’s twin city of Hanover the figures were £55 million and £265 million.

Meanwhile for the 2010 World Cup the South African government is looking at a £1.3 billion spend on stadia (original estimate £630m) and another £1.2 billion spent on transport infrastructure (original estimate £680m) as costs begin to rocket.

The Brazilian government, in preparation for World Cup 2014, is currently forecasting a £550 million investment in stadia and has no idea how much it will need to invest in its creaking transport infrastructure.

The problem with the investment figure for stadia above is two-fold. Firstly, often stadia become “white elephants” after the events; the “bird’s nest” stadium in Peking, for example, has not hosted a single sports event since the Olympics whilst the Zentralstadion in Leipzig was completely rebuilt for World Cup 2006 to a capacity of 44,000 at a cost of £100 million. It now hosts FC Sachsen Leipzig who attract an average crowd of 7,500. Secondly, as mentioned before, the stadia themselves only directly benefit a small minority of the general population – the followers of the football clubs whose stadia are rebuilt or upgraded.

As for transport infrastructure – often expenditure on this is included as part of a major sports event bid even if it was destined to take place regardless of whether the event happened or not. In Bristol the likely example will be the BRT Route from Ashton Vale which is increasingly being mentioned in relation to the World Cup bid despite having no funding connection with it at all.

4) Boosting tourism

A constant in the World Cup 2006 benefit equation was that Germany would receive a million foreign tourists who would bring in additional expenditure of £1.6 billion. In fact post event studies of tourism show that Germany received closer to 2 million foreign tourists for the World Cup – the bad news is that the economic uplift for tourism in Germany in 2006 was £340m – well short of the anticipated £1.6 billion. Instead of receiving £1600 per tourist – the German economy benefited from just £170 per tourist.

Did the World Cup really boost German tourism? At first glance the figures would appear to say so. In 2005, Germany received 21.5 million international visitors whilst in 2006 that figure went up to 23.6 million – an increase of 2.1 million or roughly the number of international visitors that arrived during the World Cup. This is a rise of approximately 9.7%. However, in that same year the UK’s international visitor numbers also increased by 9.3%, whilst Italy’s went up by 12.4% without the assistance of a World Cup. In fact, every country in Europe with the exception of Hungary and Turkey saw their tourism numbers increase but only Germany spent billions on a World Cup. How much would Germany's figures have risen even without the World Cup? - the average for Europe was 5%, which is more than half the German increase. In fact, at least two German cities reported a decrease in hotel bookings as high-spending business visitors stayed away to avoid the crowds.

5) Marketing

The final benefit put forward to justify major sports events is the concept that by being a venue for a major sports event this will somehow publicise the city and attract future business and tourism revenues.

The two main ways in which this is usually said to happen is through foreign visitors who come to a city to watch sport and through the TV audience who will see the sports event taking place in the city and think “that looks like a nice city, I will go and visit it myself”.

In the last set of tourism figures (from 2007), Bristol attracted 470,000 foreign visitors an increase from the 403,000 of 2006. Based on the figures from Germany, where a third of tickets were sold to overseas visitors whilst of the 18 million who went to the Fan Parks about a million were from overseas that would give us a figure of just under a 100,000 foreign tourists coming to Bristol – an increase of just over 20%. Based on the figures from Germany this would see £17m added to Bristol’s tourism figures. But based on Hannover’s expenditure figures it would have cost £320 million to get them here, alternatively based on the figures for Rustenberg in South Africa which is similar in population to Bristol it would have cost £65 million. Not a good return on investment.

Never mind there are always the billions watching on TV….well, lets think about that a moment. Do you know anybody who watched the World Cup in 2006 and said “saw the World Cup, really impressed with Leipzig, so we've booked a holiday there”? You watch football to see a football game not to scout out your next family holiday.

The Premier League is broadcast to 600 million households in over 200 countries and is believed to be watched by 1.2 billion people a week. If the idea that a large audience watching a game of football on television increases tourism than we would see two things: we would see cities that have teams in the Premier League attracting large numbers of tourists, and we would also see changes in tourism visits for cities that either get promoted or relegated from the Premier League. Neither holds up when looking at the figures – London dominated the tourist market followed by Edinburgh and then the larger cities of Manchester, Birmingham, Glasgow and Liverpool. The list then proceeds through Oxford, Bristol, Cardiff, Cambridge before reaching Newcastle and Leeds. We then have the “footballing hotbeds” of Brighton, York, Inverness and Bath before we get to Nottingham. The list is finished with Reading, Aberdeen and finally Chester.

There is no place for the following places that had a Premier League side in at least one of the four seasons prior to the year the figures were collated; Blackburn, Wigan, Sunderland, Middlesbrough, Portsmouth, Bolton, West Bromwich, Norwich, Southampton, Leicester and Wolverhampton. Simply put, the number of tourists visiting your city is probably not influenced by the fact that the TV shows a game played in your city to a worldwide audience, and there appears to be no correlation in changes in tourism figures after, for example, Leeds, West Bromwich, Southampton, Leicester, Portsmouth, etc were either relegated or promoted.

So the conclusion has to be that hosting the World Cup will fail to deliver in pretty much every one of the five areas that it is being sold on. In the end, we are back to the Antonine Emperors – the only good reason for hosting the World Cup is because it might be entertaining, and if we are being entertained and kept happy we tend not to complain as much as we ought.

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