Is there an economic benefit to hosting the World Cup? You would expect the answer to be ‘yes’.
When the US won the bid in 2018, President Donald Trump was in his first term. He called it “a very special event”, adding that it was “probably certainly one of the biggest, and maybe the biggest sporting event in the world”. He also tried to persuade the rest of the planet to call it “soccer”.
The potential upside should be enormous. Millions of fans descend on your country (more than 5 million fans are expected to attend this year’s tournament, according to FIFA), and they will all spend money on transport, accommodation and beers. This creates exactly the kind of party atmosphere that can boost a country’s ‘animal spirits’. This is the almost-century-old idea that a spontaneous wave of optimism can sweep over a country, increasing consumer and business confidence enough to give the economy a meaningful boost.
So far, things have not gone as well as expected. In the weeks leading up to kick-off, hotel bookings were tracking lower than forecast, while the conflict in Iran has meant flight cancellations, higher prices and a drop in carrier traffic from the Middle East. In March, flights from Dubai airport were down 66 per cent on the year – and numbers have not yet fully recovered. Then there are visa and immigration policies to contend with – never ideal if you are trying to persuade fans from 48 countries to cross your borders wearing national football shirts.
The global backdrop has made things more difficult – but research tells us that hosting the World Cup is almost always a bad deal anyway. One study found that US host cities during the 1994 World Cup experienced cumulative losses of up to $9.3bn, instead of the expected $4-billion gain. Economists think that the 1974 World Cup held in Germany had no long-term impact on employment, while each tourist attracted to the 2010 World Cup effectively cost South Africa $13,000 in stadium construction. The benefits of higher visitor numbers and a national party atmosphere can pale in comparison to the costs of hosting a huge event.
It turns out that the real draw isn’t hosting the World Cup, but winning it. Economist Marco Mello found that victory in the tournament significant;y increased growth in the two quarters after the competition, with the boost driven by exports, rather than consumer spending. The theory is that triumph on the pitch enhances a country’s international standing, boosting demand for the kinds of products it sells.
People aren’t that moved by the host country’s efficient stadiums and competent infrastructure. What sticks is who won. Unsurprisingly, customers would rather buy from the tournament’s winners than its organisers.