World Cup financial gains rarely materialize for host

Although some countries and cities have managed to profit from well-run major sports events such as the FIFA World Cup and the Olympics, they're far from the norm, and most host venues need to tread carefully before deciding to hold them, a prominent professor of economics says.

Brazil likely to regret the massive sums spent to host World Cup and Olympics, expert says

Manaus's massive new soccer stadium cost $318 million to build and is only going to be used to host four of Brazil's World Cup games. (Paulo Fridman/Bloomberg)

Although some countries and cities have managed to profit from well-run major sports events such as the FIFA World Cup and the Olympics, they're far from the norm, a prominent professor of economics says.

Victor Matheson, a professor of economics at the College of the Holy Cross in Newton, Mass., says prospective hosts need to think twice about whether the massive outlays of cash are worth it in the long run.

"The economic benefit is typically zero," Matheson says in an interview set to air on CBC's Lang & O'Leary Exchange on Tuesday. And even when there is a modest gain, "it's not enough to justify the price tag," he says.

Huge costs, nebulous gains

The World Cup starts on Thursday, but the run-up to kickoff has been dominated by talk of a crippling transit strike threatening to bring traffic to a halt as the world descends on Brazil, amid stories of heavy-handed crackdowns on protesters.

FIFA itself has been mired in allegations of bid-rigging and bribery over which cities get to host the World Cup.

Major sports events are often trumpeted as having economic benefits down the line that will more than cover the sticker price of hosting the games themselves, but as the costs escalate into the stratosphere, fewer and fewer cities are willing to pony up. Host cities consider the case of Sochi, Russia, which shattered the record (held by Beijing in 2008) for the most expensive Olympics ever, with costs a reported $51 billion for the Winter Games this past February.

Because the IOC and FIFA make their money from selling TV and merchandising rights, they have no incentive to keep costs from ballooning, Matheson says.

"On paper, the IOC and FIFA don't care whether it costs $51 billion to host the Olympics in Sochi or $14 billion to host the World Cup in Brazil, because 'I'm not paying those costs,'" Matheson says.

There's very little evidence you get any sort of economic benefits from these things— Victor Matheson

FIFA has been excoriated for giving the 2022 World Cup to the desert nation of Qatar — a sun-parched patch of Middle Eastern sand where the daytime temperature in the summer sometimes eclipses 40 C, and where eight gigantic soccer stadiums capable of hosting upward of 50,000 people will need to be built. All that, in an area roughly twice the size of P.E.I.

Brazil's facilities for games starting this week are rumoured to be not yet completed. And even those that are — such as the $318-million stadium being built in Manaus, an Amazonian city 4,000 kilometres from Rio that can't be reached by road — are already being described as white elephants before they've hosted a game.

Those venues may follow in the ignoble footsteps of Sarajevo's now-decrepit venues from 1984, or Greece's abandoned softball stadium built in 2006, or Beijing's rarely used Water Cube that hosted swimming events in 2008.

"Specialized sports infrastructure like bobsled runs and soccer stadiums, there's very little evidence you get any sort of economic benefits from these things," Matheson says.

The Olympic softball venue in Athens, built in 2006, is shown as it looked in 2012. Host cities of major sports events often end up with useless facilities later on. (The Associated Press)

In the modern Olympic era, Matheson says, host cities that turn a profit are the exception, not the rule. Montreal's 1976 Olympics, for example, famously landed the city a debt of $1.5 billion that it only managed to pay off 30 years later, in 2006.

On the flip side, the 1984 Olympic Games in Los Angeles set the bar for a profitable Games, mainly because there were no other bidding cities willing to enter the hot political climate (the Soviet Union was refusing to attend those Games) and most of the facilities were already built. The L.A. Games were the example the IOC was always able to hold up to prospective bidders, Matheson says.

Some hosts come out ahead

​Matheson singles out some recent major sports events for leaving behind a genuine positive economic legacy. The 1994 World Cup in the U.S. was a financial windfall, mainly because most of the venues were already built. And the newfound fan interest and added money led directly to the creation of Major League Soccer in America, which is now successful and financially viable. 

A street vendor sells flags along a Sao Paulo street in the lead up to this week's games. (Nacho Doce/Reuters)

Similarly, the Spanish city of Barcelona likely benefited from hosting the Games, as it became a more popular tourist destination internationally afterward.

"If you've got a city that's a hidden gem and you spend a bunch of money advertising yourself and then you offer something the world doesn't know about, it can work," he says, noting that Barcelona is now the fourth-biggest destination for tourists in all of Europe — something it wasn't before, Matheson said.

Spending on such events has escalated so rapidly that the only willing bidders end up being deep-pocketed governments in places where the locals can't really oppose the leader's plans — such as the 2022 Olympics, where the only two willing bidders are China and Kazakhstan, or the 2022 World Cup, which was controversially awarded to Qatar.

"Once you see people voting with their dollars, maybe the IOC and FIFA have some real incentive to reform the bidding process," he says.

Catch the entire interview on Tuesday's show, or come back to this story after it has aired to watch the video here.