By Thomas Peeters, Victor Matheson, and Stefan Szymanski
The World Cup, the Olympics and other mega sporting events give cities and countries the opportunity to be in the world’s spotlight for several weeks, and the competition among them to host these events can be as fierce as the competition among the athletes themselves. Bids that had traditionally gone to wealthier countries have recently become a prize to be won by prospective hosts in the developing world. South Africa became the first African host of the FIFA World Cup in 2010, and this summer, Brazil is hosting the first South American World Cup in 35 years. Russia recently completed its first Winter Olympics in Sochi and will return to the international stage in 2018 when the World Cup heads to Eastern Europe for the first time.
On the surface, this might appear to be a leveling of the playing field, allowing developing countries to finally share in the riches that these events bring to their hosts. A closer look, however, shows that hosting these events is an enormously expensive and risky undertaking that is unlikely to pay off from a purely economic standpoint.
Because of the extensive infrastructure required to host the World Cup or the Summer or Winter Olympics, the cost of hosting these events can run into the tens of billions of dollars, especially for developing countries with limited sports and tourism infrastructure already in place. Cost estimates are often unreliable, but it is said that Brazil is spending a combined $30 billion to host the Olympics and World Cup, Beijing spent $40 billion on the 2008 summer games, and Russia set an all-time record with a $51 billion price tag on the Sochi games. Russia’s record is not likely to stand for long, however, as Qatar looks poised to spend upwards of $200 billion bringing the World Cup to the Middle East in 2022.
South Africa fan in Johannesburg during World Cup 2010
Why do countries throw their hat into the rings to host these events? Politicians typically claim that hosting will generate a financial windfall For example, the 2010 World Cup in South Africa, the focus of our paper, cost the country $3.9 billion including at least $1.3 billion in stadium construction costs. The consulting firm Grant Thornton initially predicted 483,000 international visitors would come to the country for the event and that it would generate “a gross economic impact of $12 billion to the country’s economy”. The firm later revised its figures downward, to 373,000 international visitors and lowered the estimated economic impact to $7.5 billion. Following the event, a FIFA report stated that “309,554 foreign tourists arrived in South Africa for the primary purpose of attending the 2010 FIFA World Cup.”
Our analysis of monthly tourist arrivals into South Africa during the months of the event, however, suggests that the tourist arrivals were even lower than this. The expected crowds and congestion associated with the tournament reduced the number of non-sports fans traveling to the country by over 100,000 leaving the net increase in tourists to the country during the World Cup at just 220,000 visitors. This figure is less than half that of Grant Thornton’s early projections and a full third below even the lowest visitor estimates provided after the tournament. We estimate that the cost to the nation per World Cup visitor lies in the range $4,700 to $13,000.
Our results provide a cautionary tale for cities and countries bidding for mega-events. The anticipated crowds may not materialize, and the economic gains from the sports fans who do come to watch the games need to be weighed against the economic losses associated from other potential travelers who avoid the region during the event.
Thomas Peeters is a PhD-fellow of the Flanders Research Foundation at the University of Antwerp. His main research interests are industrial organization and labor issues related to professional sports leagues. His work has been published in journals such as Economic Policy, the International Journal of Industrial Organization and the Journal of African Economies. Victor Matheson is a professor of economics at the College of the Holy Cross in Worcester, Massachusetts, USA. He is the author of numerous studies concerning the economic impact of major sporting events on host countries and is a member of the executive board of the North American Association of Sports Economists. Stefan Szymanski is the Stephen J. Galetti Professor of Sport Management at the University of Michigan. His research in the economics of sports includes work on the relationship between performance and spending in professional football leagues, the theory of contests applied to sports, the application of sports law to sports organizations, financing of professional leagues and insolvency, the costs and benefits of hosting major sporting events. They are the authors of the paper ‘Tourism and the 2010 World Cup: Lessons for developing countries’, which is published in the Journal of African Economies.
The Journal of African Economies is a vehicle to carry rigorous economic analysis, focused entirely on Africa, for Africans and anyone interested in the continent – be they consultants, policymakers, academics, traders, financiers, development agents or aid workers.
Subscribe to the OUPblog via email or RSS.
Subscribe to only business and economics articles on the OUPblog via email or RSS.
Image credit: South Africa fan in Johannesburg during World Cup 2010. By Iscar Blanco [Public domain], via Wikimedia Commons
The post Tourism and the 2010 World Cup appeared first on OUPblog.
Michelle Rafferty, Publicity Assistant
Iris Berger is professor of Professor of History, Africana Studies, and Women’s Studies at the University at Albany and author of Threads of Solidarity: Women in South African 
Industry, 1900-1980 and South Africa in World History. For many years, she was involved in anti-apartheid organizations in Upstate New York. In the following piece she recalls how sports have played a vital role in South African politics. You can check out other “Place of the Year” contributions here.
I had never paid much attention to rugby. My only previous encounter with the game occurred on September 22, 1981 when I joined 1,000 other demonstrators who marched in a downpour from the New York State Capitol to a stadium on the edge of Albany to protest the match between the Springboks and the local rugby team. As Pete Seeger led us in singing “Wimoweh,” the virtually all-white South African team trounced the Eastern All-Stars 41-0. Threats of violence had prompted Governor Hugh Carey to cancel the game and an explosion at the headquarters of the Eastern Rugby Union seemed to confirm his fears. But the United States Court of Appeals ruled that cancellation would be an abridgement of freedom of speech.
This brief immersion in the politics of professional sports left me unprepared for the events of June 24, 1995 when I arrived in Cape Town in mid-morning, groggy from the twenty-four journey from Albany. A year earlier apartheid had ended and Nelson Mandela was elected President in the country’s first democratic elections. Determined to fight my jet lag and adjust to local time, I walked from my quaint guest house at the foot of Table Mountain to the bustling Main Road and caught a cramped mini-van taxi to the city center. Getting off at the train station, I was mystified by the quiet. Only the Zimbabwean women street vendors, displaying soapstone sculptures and crocheted sweaters, broke the silence. When I ventured a few blocks to a small café for lunch, I found the crowds I’d been expecting – but they were all huddled in front of the television set intent on following a rugby game between South Africa and New Zealand, cheering boisterously when the local team scored. The scene was repeated at my next stop – the Bo Kaap Museum in the former Muslim quarter of the city, now furnished as a nineteenth-century house.
Only when I returned to the guest house in mid-afternoon and found everyone there glued to the screen did I finally realize that I had unwittingly stumbled onto an historic event. Just as the anti-apartheid movement had enlisted the national passion for rugby in the interests of liberation, Mandela saw that hosting the World Cup might offer an opportunity for a symbolic reconciliation between the black-dominated government and the white minority, now ousted from its exclusive hold on power. This time I joined the group to witness – and celebrate – the victory of a new South Africa and see to Mandela walk onto the field in his team’s bright green cap and uniform, his shirt bearing the number of the team’s white captain.
Invictus, Clint Eastwood’s new film dramatizing these events will no doubt resurrect memories of the country’s ecstatic response in 1995, when South Africans were still celebrating the country’s transformation from a bastion of racism to a “rainbow nation.” But fifteen years later, life sometimes seems more complicated, even on the playing fields. The recent furor over the gender identity of the South African running champion Caster Semenya, which provoked heated controversy both internationally and in South Africa, mirrors the issues now confronting a nation struggling to overcome a legacy of poverty and unemployment, and to face the more recent challenge of HIV/AIDs. It’s an open question of whether, in this more difficult context, the current President Jacob Zuma will be able to use the World Cup soccer championship in 2010 to reinvent the country’s image and to renew people’s commitment to a shared national identity.
Michelle Rafferty, Publicity Assistant
I dare you to watch the trailer for this December’s Invictus—the story of how a newly elected Nelson Mandela used the 1995 Rugby World Cup to bring his people together—without feeling slight heart palpitation. Particularly in a scene where we see Mandela speaking with a political confidante:
“This rugby, it’s a political calculation,” she says.
“It is a human calculation,” responds Mandela.
Sounds like one awfully loaded conversation about rugby, but if there’s anything history, cinema, and Nike commercials have taught us, it’s that the game ultimately represents something much bigger than itself. From taking a stand (1980 Moscow Games boycott) and breaking social barriers (Jackie Robinson, Dara Torres) to beating odds (Nancy Kerrigan, Lance Armstrong) and growing up (Mighty Ducks 1, 2, and 3), sports are often the metaphors and inspiration of our lives. Which leads us to our big announcement… as it moves to the forefront of the global sports arena once more, we are excited to announce South Africa as Oxford’s “Place of the Year.” The 2010 World Cup—arguably the most important international event the country will host since officially becoming a post-apartheid, democratic nation only 15 years ago—signifies further transformation, quantifiable in millions of dollars worth of new infrastructure.
How much new infrastructure?
According to FIFA, contributions from the South African government total (in rands “R”):
Stadium and precinct development: R9.8 billion
Transport: R13.6 billion
Broadcast and telecommunications: R300 million
Event operations: R684 million
Safety and security: R1.3 billion
Event volunteer training: R25 million
Ports of entry infrastructure: R3. 5 billion
Immigration support: R630 million
Communications, hosting, legacy and culture: R504 million
Which translates to…
According to consulting firm Grant Thornton, which drew up the financial impact report for South Africa’s World Cup bid committee:
R55.7 billion to the South African economy
415,400 jobs
R19.3 billion in tax income to the government
The World Cup has received mixed reviews however: Economy boost or money suck? Increase in jobs or class divider? Interna
