A bad investment or a boom in the economy? Here’s how profitable it is to host the FIFA World Cup.
If you are an avid football fan you would be well aware that organizing the FIFA World Cup hasn’t been a cheap venture for any of the hosting countries. Qatar spent US$220 billion for the preparation of the 2022 event; similarly, Russia and Brazil spent US$14 billion and US$12 billion on the tournament in 2018 and 2014 respectively.
All these figures probably make you wonder: Why would a country want to host FIFA at all? Are they getting anything out of it? Let’s take a look at how FIFA operates and the benefits of hosting the tournament.
What FIFA gives host countries
The first step toward understanding how countries make money from FIFA is figuring out the tournament itself. FIFA is a non-profit organization, it puts the money made from the tournament—by selling television rights, marketing rights, ticket sales and licensing rights to the game—back into developing the sport of soccer at international, national and grassroots levels.
FIFA isn’t responsible for the cost of setting up the infrastructure for the tournament, but it does allocate budgets for the organizing process. For instance, Qatar was allocated US$1.7 billion and an additional US$440 million to cover the prize money. It also provides host countries with access to a FIFA World Cup legacy fund which is meant to be used in the development of the sport in the country.
What tourists bring in
While FIFA is allotting some funds to each tournament, the figure is nowhere near the amount countries are spending to host the World Cup. Hence, host countries will hope to make this money back through travel and tourism. For instance, Qatar received over 765,000 visitors during the first two weeks of the tournament this year, with the numbers expected to rise to get closer to 1.2 million.
All of these visitors would need food and housing, and they would probably also tour the country while they’re there. This provides a massive short-term influx of money into the country. Those in leadership would use the promise of short-term profit as a way to convince taxpayers to spend money on tournament infrastructure.
Unequal distribution of profits
It is important to consider whether this short-term activity is actually beneficial to everyone in the country. According to the World Bank, a rise in the profit of local businesses doesn’t translate to an increase in the wages of service workers. Basically, FIFA is making the rich richer and isn’t benefiting the average Joe.
Also, even though FIFA can possibly benefit local businesses, this might not be the case if tourists purchase largely from FIFA partner vendors. This is because FIFA gets host countries to provide tax exceptions to it and its partners as a part of the betting process.
A toss-up between more or fewer tourists
Under perfect circumstances, the host country would have a situation similar to what happened during the 2010 FIFA World Cup in South Africa. That year, France won a match against Ireland and qualified for the finals. This brought almost 30,000 additional tourists to South Africa, creating more than 6,000 additional jobs.
This was a result of the fact that France is a bigger country than Ireland and thus would have more supporters and bring in more tourists. If Ireland had won instead, there probably wouldn’t have been quite as many tourists or jobs. Besides the unpredictability of the number of tourists visiting the host country for the tournament, there is a possibility that you might end up pushing potential non-Would Cup tourists away. People might actively avoid the host country during the tournament to circumvent things like inflated costs of products, hotels and traffic.
A lot of money goes into creating the infrastructure required for the tournament. But what happens to this infrastructure after FIFA is over? Once the tournament is over, this infrastructure is expensive to maintain and impossible to use frequently.
For instance, Brazil spent an estimated US$11.6 billion on infrastructure for the 2014 FIFA World Cup. A good part of it, EUR350 million (or US$428.72 million), had been spent on the construction of Mane Garrincha Stadium. But now the stadium is being used as a bus depot.
So, is there a point of spending money on FIFA?
The main reason why countries are willing to spend money on FIFA is to assert their soft power. It makes the country look like an attractive place to invest in. In the case of the current host, Qatar, projects related to the World Cup attracted a lot of foreign direct investment (FDI). But even then, this growth may just be temporary. The FDI trends of the previous three hosts have not shown any post-event growth.
For Qatar, the money spent on the FIFA World Cup is also a way to redeem itself for the human rights violations that occurred during the preparations for the tournament. This is referred to as sportswashing—wherein sports are used as a way to clean up a bad public image.
However, with the cons clearly outweighing any pros, it is hard to argue in favor of hosting. Ultimately, all that hosting the World Cup does for you is give you the public limelight for a little while. As per the World Cup’s history, it will eventually pass over and move on to the next country willing to spend billions of dollars on a sporting event.
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Header image courtesy of Unsplash