Categories: Lifestyle

World Cup: The Economic Impact On Previous Host Cities

First held in 1930, the FIFA World Cup has become one of those significant — and increasingly critical — competitions, where countries around the world share in a universal language: sports. For spectators, the value lies in watching athletes at the top of their game compete. For the cities that host the event, it holds the potential for a much needed economic, or reputation, stimulus, as the business of sports brings in lots of money.

Hosting the World Cup is no an easy task, though: it requires new infrastructure, which, in turn, requires new jobs. It means new tourists, which means new tourism revenue. Less tangibly, it can stimulate a sense of national pride and allow visitors to experience the host city from a different perspective.

However, while modern and renovated buildings might spring from the event, and the streets might be temporarily flooded with travelers, the benefits don’t always last. Brazil spent between an estimated $11 and $14 billion on the World Cup in Rio in 2014 and attracted one million tourists, per Mirror. But now, many of the stadiums are irrelevant, turned into parking lots or used to host weddings. According to BBC, about 170,000 people lost their homes as buildings were torn down in advance of the World Cup.

So, is hosting the World Cup really worth it? More importantly, who is making all the money?

In 2014, FIFA raised a $4.8 billion of revenue — and turned a $2.6 billion profit — thanks to broadcast revenue, sponsorships and ticket sales, and they’re expecting to raise around $6 billion in 2018, as 3.2 billion people around the world tune in to the tournament. Its corporate partners also benefit, exempt from income and sales taxes due to tax-free zones within World Cup venues.

For other countries, the bill they face in the wake of the games is worth it. For example, the 2002 World Cup — hosted by Japan and South Korea — also ran up billions of dollars, empty hotel rooms and expensive stadiums. One stadium alone cost $667 million and requires $6 million annually to maintain it, with only 40 percent of that expenditure able to be recouped each year. But that’s not the point. For the two countries, the price was not just about what they physically built, but the advances in diplomacy between the nations, the countries’ reputation on the world stage and general morale.

While the Russian government predicts the boost to the country’s GDP could run up to $30.8 billion, economists are more skeptical. Despite the approximately $11 billion spent on preparations — including building new stadiums and upgrading aging infrastructure — they believe any fiscal boost will be short-lived. Even if the one-month long event is a massive success, the economic stimulus will be minor compared to the country’s $1.3 trillion economy.

The final impact remains to be seen. But, at the very least, it introduces visitors to Moscow and allows visitors and residents alike to see the potential a different narrative; one where the sense of international community possessed more longevity then the economic boost.

Lead image via YouTube

Kim Bussing

Kim Bussing is a writer and editor who covers lifestyle, finance, entertainment, technology, and business for Knew Money. She is passionate about discovering new trends and helping demystify the nuances of finance.

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