International Trade and Global Business

 

The Benefits of Hosting the World Cup are Likely a Mixed Bag

There’s no question the Cup delivers an instant jolt of national pride to the host country.  Russians are certainly experiencing a communal mood elevator as Moscow, in particular, basks in the positive attention. Great pains were taken to buff up streetscapes and roll out red carpets to the world’s soccer fans, some of whom traveled for days from Pacific ports and across taiga via the Trans-Siberian Railway. Since burnishing Russia’s sagging international reputation and sense of greatness is an important priority, especially for its president, Vladimir Putin, hosting the Cup must be seen as a valuable if fleeting coup de théâtre.
No free lunch at the new stadiums
Certainly, there is a short-term boost to the host economy as foreign and domestic fans consume hotel rooms, restaurant meals and tchotchkes. But economists who study such things conclude the boost is barely more than a blip and must be weighed against the enormous cost of building stadiums, providing security and other necessities.  In addition, tourists and businesspeople who might have visited during the Cup often cancel their trips, believing that crowds and higher costs are too much bother.  Residents of the country may shift purchases to services and products related to the Cup, but reduce outlays for non-Cup related costs, resulting in no net gain.
The stadiums despite their huge cost have perhaps the best chance of contributing longer-term benefits.  As is true in other parts of the world, new stadiums tend to attract ancillary development, such as new housing projects, office buildings, transport upgrades and an array of retail.  Countries that field weak football teams may choose to upgrade their franchises after the Cup, making them more competitive and attracting larger crowds to the stadiums. 
The problem with hosting the World Cup is countries must build 12 new stadiums, one with 80,000 seats and the others with 40,000.  Filling them all with football fans, concert goers and other types of paying customers year-round is not possible. Qatar, the next host, will have its hands full, even if its new stadiums aren’t, because the tiny Gulf state is not easy to travel to and even more difficult now because of the embargo slapped on it by its neighbors.
Stadium usage varies by country. For example, after the World Cup in South Africa stadiums built for the occasion averaged 14,000 people per event and some were not used at all.
One conclusion might be that hosting the Cup bestows unequal benefits, with developed countries benefiting more than developing ones.
Feeling good—for awhile
The feel-good factor has been studied and results show that pride and excitement can contribute to higher productivity in the short term.  Another study argued that temporary rallies in the host countries’ stock market were due to Cup results with no indication that the performance of the host team, if it had one, mattered.
Long-term employment showed no effect in one study, which looked at labor market behavior in Germany in the decades after the World Cup there in 1974.  Other studies based on decades of data came to the same conclusion regarding the impact on tourism and hospitality.
Media coverage and other attention paid to host countries have also been studied. Careful stage managing of a country’s image can provide an alternative narrative to foreign audiences, perhaps changing some minds to the point where a future visit becomes a priority.
 

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