FIFA World Cup in South Africa 2010:

Economic scope and limits

Von-Melle-Park 5, 20146 Hamburg, Germanymaennig@econ.uni-hamburg.de

Phone: +49 (0)40 42838 4622Fax +49 (0)40 42838 – 6251.1

Wolfgang Maennig

School Economics and Social SciencesDepartment of Economics

Conference “The Impact of Mega Sport Events”Cape Town, March 6th, 2008

• DFB/ Rahmann et al (1997)– about 340,000 foreign tourists, – spending between US-$ 0.62 and 1.1 billion – Additional income of up to 3,5 bn € from tourists and constructions

• German Association of Chambers of Industry and Commerce (2006): – 60,000 new jobs

• Postbank (2005, 2006)– 1 mio. foreign tourists– Spending 850 mio. €– GDP +0,3%

• German Federation of Hotels (2006)– 3,2 mio. foreign tourists – 5 mio. additional hotel beds to be sold– Each tourist to spend 150-200 € per day– 3,4 bn. € additional income

Ex-ante estimates of economic benefits of WC 2006

Overnight stays of foreigners in Germany since 2000:Crowding-out of normal tourism

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

4000000001

/200

0

07/2

000

01/2

001

07/2

001

01/2

002

07/2

002

01/2

003

07/2

003

01/2

004

07/2

004

01/2

005

07/2

005

01/2

006

07/2

006

01/2

007

07/2

007

Ove

rnig

ht st

ays

Raw data Seasonally adjusted dataData origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments, Other collective

accommodation establishments, Total; retrieved 14 December 2007. 3

Ex-post evidence of economic benefits

Overnight stays of foreigners in Germany, 2004 to 2006/ “time-switching”

Data origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments, Other collective accommodation establishments, Total; retrieved 14 December 2007.

2200000022500000230000002350000024000000245000002500000025500000260000002650000027000000

Jan

Feb

Mar

Apr

May Ju

n Jul

Aug Se

p

Oct

Nov Dec

Ove

rnig

ht st

ays

(sea

sona

lly a

djus

ted)

2004 2005 2006

4

Ex-post evidence of economic benefits

Overnight stays of foreigners in France (Hotels) since 1993

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

1600000001

/199

3

07/1

993

01/1

994

07/1

994

01/1

995

07/1

995

01/1

996

07/1

996

01/1

997

07/1

997

01/1

998

07/1

998

01/1

999

07/1

999

Ove

rnig

ht st

ays

(Hot

els)

Raw data Seasonally adjusted data

Data origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments; retrieved 14 December 2007.

5

Ex-post evidence of economic benefits

Retail sales in Germany (%-change to previous year): Couch potato effect

-6,00%

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

01/2

005

03/2

005

05/2

005

07/2

005

09/2

005

11/2

005

01/2

006

03/2

006

05/2

006

07/2

006

09/2

006

11/2

006

01/2

007

03/2

007

05/2

007

07/2

007

09/2

007

11/2

007

Perc

ent c

hang

e in

reta

il sa

les

(sea

sona

lly a

djus

ted)

Data origin: Eurostat: Retail trade, except of motor vehicles, motorcycles and trade at filling stations, retrieved 18 January 2008.

6

Ex-post evidence of economic benefits

• Positive novelty effect on number of spectators and clubs income (eg. Noll 1974; Coffin 1996; Quirk/ Fort 1992; Kahane/

Shmanske 1997; Maennig et al 2006, Clap/ Hakes 2005) but:

• Most studies with no positive impact on regional income and employment (eg. Baade/ Dye 1990; Rosentraub et al. 1994, 1997; Baade 1996; Baade/ Matheson 2002, Hagn/ Maennig 2008a and b)

• Some with negative economic effects (eg. Coates/ Humphreys 1999, 2001, 2003)

• Only few with positive effects (eg. Hotchkiss et al 2003, Jasmand/ Maennig 2008)

The paradoxical econometric evidence

Attempts to explain the „paradox“• Auction character of WC allocation• Compensating differentials• Inefficient allocation of public budgets and /or tax

increases• Diversion decreases productivity• Harmful redistribution

• Quality of data• Methodological problems and data (in)variance• Over-supply of sport facilites, decreasing productivity• „wrong“ architecture and urban planning

The paradoxical econometric evidence

FIFA contract and obligations for Capetown• Sufficient back-up power grids to deal with any power failure• No construction within the host city for the entire duration of

competition• Billboards up to 1 Km from stadium and along mayor routes for

FIFA-approved advertisers only – income goes to FIFA• Free office space with food, beverages for local OC• „no limit“ telephone, internet, and communication equipment for

FIFA• Special traffic lanes for FIFA teams and officials• City has to supply a „fenced fan-park“• Budweiser the only beer for the event

• „From the contract it appears that the potential spin-offs … won´t be accruing to the host cities and neither will local business be able to cash in.“

Source: Weekend Argus, 25/26th march, 2006, pp.1+3

Evidence for auction character

10

Feelgood effect as major impact

International perception of Germany

4

4,2

4,4

4,6

4,8

5

5,2

5,4ex

cels

at

spor

t

Ric

h cu

ltura

lhe

ritag

e

cont

empo

rary

cultu

re

Wel

com

e

Clo

se fr

iend

s

Vis

it if

mon

eyno

obj

ect

2005

2006

Source: Wave 3/2005 and 3/2006 GMI-Anholt Nations Brand Index.11

Image effects

12

4

7

2

6

2 2 2 2

1

2

3

4

5

6

7

8

I/05 II/05 III/05 IV/05 I/06 II/06 3_06 4_06 1_07 2_07

Rank

pos

ition

Anholt´s Nation Brand Index Rank of Germany

Image effects

Source: Wave 3/2005 and 3/2006 GMI-Anholt Nations Brand Index.

n.a. n.a.

• Construction industry in South African at full capacity

• Stop for construction works in the host cities during WC

• SA electricity capacity and additional consumption by WC

• Investments of some R10bn into stadia, all with minimum capacity of 40,000 spectators– almost fully financed by public funds – post-tournament usage?

13

Additional challenges for South Africa

14

City Expenditure (US$ millions)

Capacity season 2010 Inhabitants (2004)

New Stadiums Cape Town 403.1a,b 68,000c 2,984,885 Durban 278d 70,000e 3,129,298 Nelspruit 118.8f 43,500g 484,245 Polokwane 111.2h,i 45,000 h,i 532,673 Port Elizabeth 159.9j 40,000j 1,054,359

Upgraded Stadiums Bloemfontein 34.1k 48,000l 655,332 Johannesburg: Ellis Park 29.2m 65,000m 3,225,407 Johannesburg: Soccer City 208.5n 94,700n Pretoria 25.7o 55,000o 1,531954 Rustenburg 20.4p 45,000p 405,554 Total 1388.9 574,200

Additional challenges for South Africa

Source: Maennig and Du Plessis (2007)

• South African boom and declining poverty indices/ high potential for novelty effect

• No ´couch potato effect’?

• No crowding-out effect on regular tourism, longer stay of tourists?

• Lower density of sporting facilities in SA/ No problems with diminishing returns?

• Potential for image effects

• SA plans for iconic (stadia) constructions and urban integration

15

Additional chances of the South African WC 2010

Source: Frank Gehry, 1997, http://www.greatbuildings.com/cgi-bin/gbi.cgi/Guggenheim_Bilbao.html/cid_1028276211_Bilbao_017.gbi

Guggenheim Museum Bilbao – Bilbao, Spain

Iconic (stadia) constructions

Source: Jorn Utzon, http://www.greatbuildings.com/cgi-bin/gbi.cgi/Sydney_Opera.html/cid_sydney_005.gbi

Sydney Opera House – Sydney, Australia

4 The role of integrated and iconic buildingsIconic (stadia) constructions

AOL Arena Hamburg

18http://www.architekten24.de/mediadb/news/4703/index.jpg

Masterplan P.E.4 The role of integrated and iconic buildingsIconic (stadia) constructions

Nelson Mandela Bay Stadium - Port Elizabeth

Source: N.N., 2008e. 20

Iconic (stadia) constructions

1

2B2A 34

5A

5

8

7

6

1110

912

13/14/15

11

16

17A

17B

1819

KINGS PARK SPORTS AND RECREATION DEVELOPMENT PLANCONCEPT SPATIAL PLAN

1. Cricket 2. Hotel/sports fields 3. Baseball/Softball

4. Hotel/sports accommodation 5/5A. Multi-model transport hub 6. Football/athletics

7. Proposed railway station 8. Aquatics 9. Rugby

10.Athletics 11. Archery 12. Cycling

13. High performance centre 14. Indoor sports centre 15. Tennis

16. Equestrian 17A/B. Golf/trails 18. Canoeing

19. A1 Racing

Iconic (stadia) constructions

King Senzangakhona Stadium - Durban

Source: Monnerjahn (2006).22

Iconic (stadia) constructions

Conclusions• General experience from former World Cups etc:

– No positive effects on income and employment(crowding-out, time-switching, carnival-effects; compensting differentials and auction character of allocation process…)

– positive effects on feelgood and international perception

• South Africa 2010 with additional challenges…– Construction industry at full employment– Post tournament usage of stadia?

• … and additional chances – High potential for novelty effect– No „couch potato effect“?– No crowding-out of normal tourism?– High potential for image effects– SA plans for landmark stadia and urban integration

Thanks to• Andreas Abold (Abold Marketing)• Swantje Allmers (Hamburg University) • Gerkan, Marg & Partner Architects • Heinrich Clausen (OC Athletics World Championships

Berlin 2009)• Stan du Plessis (Stellenbosch University)• Alex Maheri and Alfred Rosen (ama soccer solutions

2010)• Klaus Meinel (IAKS)

• Hamburg University• Stellenbosch University

2.1 Direct income effects via (Sport) infrastructure investments

… in comparision to the costs of the WC2006 stadia?

Location

Costs (in Mio. €) Federal State City User Other

Capaci-ty 2006 (only

seated) Population Berlin 242,0 196,0 0,0 0,0 0,0 46,0 74.500 3.390.000 Dortmund 36,0 0,0 0,0 0,0 36,0 0,0 67.000 590.000 Frankfurt 126,0 0,0 20,5 64,0 0,0 41,5 48.000 650.000 Gelsenkirchen 192,0 0,0 0,0 0,0 33,8 158,2 51.000 278.000 Hamburg 97,0 0,0 0,0 11,0 16,0 70,0 50.000 1.700.000 Hannover 64,0 0,0 0,0 24,0 0,0 40,0 45.000 525.000 Kaiserslautern 48,3 0,0 21,7 7,7 18,9 0,0 48.500 100.000 Köln 116,5 0,0 0,0 25,5 25,0 66,0 45.000 1.000.000 Leipzig 90,6 51,0 0,0 12,2 27,4 0,0 42.655 494.000 München 280,0 0,0 0,0 0,0 280,0 0,0 66.000 1.300.000 Nürnberg 56,0 0,0 28,0 28,0 0,0 0,0 45.000 490.000 Stuttgart 51,6 0,0 15,3 36,3 0,0 0,0 54.500 590.000SUM 1.400,0 247,0 85,5 208,7 437,1 421,7

Shares abs. rel. Source: FIFA Fußball-Weltmeisterschaft 2006 OC

Public funds 541,2 38,7% < http://w w w .ok2006.de/stadien/index.html >

private investors 858,8 61,3% http://f ifaw orldcup.yahoo.com/06/de/loc/index.html

= R13.4 bn. SA´pl US$/Euro ans (2006): R1.8bn

US$/Euro

Infrastructure costs are higher

than stadia costs/ the case of in

Hamburg

Tabelle 2: Infrastrukturkosten der einzelnen WM-Austragungsorte (Fortsetzung 2)

Ort Bereich Zurechnung Nr. Name Zuständig Kosten

(in Mio. €)

1 S-Bahn, Modernisierung des Bhf. Stellingen

DB AG Station & Service 1,9

2 Verbesserung d. Zuwegung vom S-Bahnhof Stellingen zum Stadion Stadt HH 1,8

3 Attraktivitätssteigerung der Verbindung zw. S-Bahnhof Stellingen u. d. Shuttlebuskehre Stadt HH 4,0

WM-bedingt

4 Umbau des Vorplatzes Bhf. Othmarschen und Einrichtung des Busshuttles zum Stadion Stadt HH 0,5

Summe 8,2

1 Erneuerung der Eisenbahnüberführung Reichs-bahnstraße u. Modernisierung d. Bhf. Eidelstedt DB AG 0,8

nicht-WM-bedingt

2 Ausbau Flughafenterminal 2, Flughafenvorfahrt

Flughafen HH GmbH

nicht verfüg-bar/ kein WM-Projekt nach Aussage der Stadt Hamburg

ÖV

Summe 0,8 Summe 9,0

1 Ausbau Sylvesterallee f. Busse, Taxen u. Fuß-gänger Stadt HH 0,6

2 Ausbau Hellgrundweg Stadt HH 0,6 3 Ausbau Stadionstraße Stadt HH 0,3

4 Umbau der AS Hamburg Volkspark an der A7 einschl. Umbau Schnackenbugsallee Bund/ HH 2,7

5 Neubau Busparkplatz mit ca. 70 Stellplätzen an der Schnackenburgsallee Stadt HH 1,9

6 Interims-Busparkplätze (ca. 300) Stadt HH 1,0

7 Ausschilderung Arena Stadtnetz Stadt HH 0,2

8 Zusätzliche Kameras zum Verkehrsmanagement Arena (AD Nordwest, AS Volkspark Stadt HH 0,3

9 Dynamisches Parkleitsystem Arena Stadt HH 0,8

10 Vernetzung operativer Leitzentralen Stadt HH 0,0

11 ÖPNV Leitsystem zweisprachig (Deutsch/ Englisch) Stadt HH 0,0

12 Internet-Plattform zur WM 2006 (Verkehrsinfo-Hamburg.de) Stadt HH 0,1

WM-bedingt

13

Verbesserung d. Erreichbarkeit der Parkplätze im Stadionumfeld einschl. der Herrichtung von ca. 8000 Parkplätzen u. d. Verbesserung eines Fußweges vom Parkplatz zum Stadion Stadt HH 6,1

Summe 14,5

1

A7 HH-Othmarschen - N HH-Waltershof (4. Elbtunnelröhre), 8-streifige Erweiterung (Tun-nelbau) Bund 874,3 nicht-WM-

bedingt

2 OU Fuhlsbüttel (1. + 2. BA), 4-streifige Anbin-dung an den Flughafen Bund 223,9

IV

Summe 1.098,2

Hamburg

Summe 1.112,7 Gesamtsumme Hamburg 1.121,7

Source: Maennig/ Buettner 2006

2.1 Direct income effects via (Sport) infrastructure investments

Total german WC-induced infrastructure costs: R11,5 bn

Retail sales in France (%-change to previous year)

-6,00%

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%01

/199

6

03/1

996

05/1

996

07/1

996

09/1

996

11/1

996

01/1

997

03/1

997

05/1

997

07/1

997

09/1

997

11/1

997

01/1

998

03/1

998

05/1

998

07/1

998

09/1

998

11/1

998

01/1

999

03/1

999

05/1

999

07/1

999

09/1

999

11/1

999

Perc

ent c

hang

e in

reta

il sa

les

(sea

sona

lly a

djus

ted)

Data origin: Eurostat: Retail trade, except of motor vehicles, motorcycles and trade at filling stations, retrieved 18 January 2008. 27

Ex-post evidence of economic benefits

Tourism receipts in France

7000

7500

8000

8500

9000

9500

10000

10500

11000

Q I Q II Q III Q IVRece

ipts

from

inte

rnati

onal

to

uris

m in

mill

ion

US-

$ (s

easo

nally

adj

uste

d)

1996 1997 1998

Data origin: Eurostat: Current account, Services, Travel; retrieved 14 December 2007.

28

Ex-post evidence of economic benefits

Tourism receipts in Germany, 2004-2006

2000

2500

3000

3500

4000

4500

Jan

Feb

Mar

Apr

May Jun Jul

Aug Se

p

Oct

Nov DecRe

ceip

ts fr

om in

tern

ation

al

tour

ism

in m

illio

n U

S-$

(sea

sona

lly a

djus

ted)

2004 2005 2006

Data origin: Deutsche Bundesbank: Zeitreihen Datenbank: Dienstleistungsverkehr mit dem Ausland, retrieved from <http://www.bundesbank.de/statistik/statistik_zeitreihen.php?func =list&tr=www_s201_b02> on 14

December 2007.

29

Ex-post evidence of economic benefits

Soccer WC 2006:

Hotel PricesDifferences

to June 2006

http://www.destatis.de/indicators/d/vpigraf07.htm, nov 3rd, 2006

Occupancy rates

- minus 2,2% for Germany

- minus 11,1% for Berlin

- minus 14,2% for Munich

1.2 Income effects due to (international) tourists – the reality

German income from international Soccer WC 2006 tourists

Source: Deutsche Bundesbank (2006), p. 45.

+1,5 bn € = 0,07% of GDP 2006Gross effect

- carneval effect

= net effect: 0,3 bn € (0,01% of GDP)

1.2 Income effects due to (international) tourists – the reality

Overnight stays of foreigners in France (Hotels), 1996 to 1998

6600000

6800000

7000000

7200000

7400000

7600000

7800000

8000000

8200000

8400000

8600000

Jan

Feb

Mrz

Apr

Mai

Jun Jul

Aug Se

p

Okt

Nov Dez

Ove

rnig

ht st

ays

(sea

sona

lly a

djus

ted)

1996 1997 1998

Data origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments; retrieved 14 December 2007.

32

Ex-post evidence of economic benefits

Grant Thornton (2004 and update)

• 190.000 overseas tourists (each watching 4 matches), staying 15 days

• 43.000 african tourists (3 matches), staying 15 days• 32 teams, 10.500 international media, 5.000

international VIPs, 500 FIFA officials• Additional income of R21.3 billion• 196,400 jobs in the short-run• 368,250 annual jobs 2006 - 2010 as a consequence of

WC-related construction activities• updated estimate: 300,000 overseas visitors,

spending US-$1.36 billion (ZAR 9.3 billion) during WC 2010.

Ex-ante estimate of economic benefits of WC 2010

Attempts to explain the „paradox“• Auction character of WC allocation• Compensating differentials• Inefficient allocation of public budgets and /or tax

increases• Diversion decreases productivity• Harmful redistribution

• Quality of data• Methodological problems and data (in)variance• Over-supply of sport facilites , decreasing

productivity• „wrong“ architecture and urban planning

The paradoxical econometric evidence

Ham

burg

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

Sch

alke

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

Dor

tmun

d

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

Mün

chen

(B

ayer

n)

0

5.000

10.000

15.000

20.000

25.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

Ros

tock

0

5.000

10.000

15.000

20.000

25.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

Wol

fsbu

rg

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

M‘G

ladb

ach

Wol

fsbu

rg

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5

0

10.000

20.000

30.000

40.000

50.000

60.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6

Dui

sbur

g

0

5.000

10.000

15.000

20.000

25.000

30.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5

Fra

nkfu

rt

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5

Köl

n

0

10.000

20.000

30.000

40.000

50.000

60.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5

Mün

chen

(18

60)

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5

Novelty effects of stadia (re-)constructions: 2006