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FIFA World Cup in South Africa 2010: Economic scope and limits

School Economics and Social Sciences Department of Economics. FIFA World Cup in South Africa 2010: Economic scope and limits. Von-Melle-Park 5, 20146 Hamburg, Germany maennig@econ.uni-hamburg.de Phone: +49 (0)40 42838 4622 Fax +49 (0)40 42838 – 6251. Wolfgang Maennig.

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FIFA World Cup in South Africa 2010: Economic scope and limits

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  1. School Economics and Social SciencesDepartment of Economics FIFA World Cup in South Africa 2010: Economic scope and limits Von-Melle-Park 5, 20146 Hamburg, Germanymaennig@econ.uni-hamburg.dePhone: +49 (0)40 42838 4622Fax +49 (0)40 42838 – 6251. Wolfgang Maennig Conference “The Impact of Mega Sport Events”Cape Town, March 6th, 2008

  2. Ex-ante estimates of economic benefits of WC 2006 • 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

  3. Ex-post evidence of economic benefits Overnight stays of foreigners in Germany since 2000:Crowding-out of normal tourism Data origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments, Other collective accommodation establishments, Total; retrieved 14 December 2007.

  4. 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.

  5. Ex-post evidence of economic benefits Overnight stays of foreigners in France (Hotels) since 1993 Data origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments; retrieved 14 December 2007.

  6. Ex-post evidence of economic benefits Retail sales in Germany (%-change to previous year): Couch potato effect Data origin: Eurostat: Retail trade, except of motor vehicles, motorcycles and trade at filling stations, retrieved 18 January 2008.

  7. The paradoxical econometric evidence • 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)

  8. The paradoxical econometric evidence Attempts to explain the „paradox“ • Auctioncharacter of WC allocation • Compensatingdifferentials • Inefficientallocation of publicbudgetsand /or tax increases • Diversion decreasesproductivity • Harmfulredistribution • Quality of data • Methodologicalproblemsanddata (in)variance • Over-supply of sportfacilites, decreasingproductivity • „wrong“ architectureand urban planning

  9. Evidence for auction character 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

  10. Feelgood effect as major impact

  11. Image effects International perception of Germany Source: Wave 3/2005 and 3/2006 GMI-Anholt Nations Brand Index.

  12. Image effects n.a. n.a. Source: Wave 3/2005 and 3/2006 GMI-Anholt Nations Brand Index.

  13. Additional challenges for South Africa • 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?

  14. Additional challenges for South Africa Source: Maennig and Du Plessis (2007)

  15. Additional chances of the South African WC 2010 • 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

  16. Iconic (stadia) constructions Guggenheim Museum Bilbao – Bilbao, Spain Source: Frank Gehry, 1997, http://www.greatbuildings.com/cgi-bin/gbi.cgi/Guggenheim_Bilbao.html/cid_1028276211_Bilbao_017.gbi

  17. 4 The role of integrated and iconic buildings Iconic (stadia) constructions Sydney Opera House – Sydney, Australia Source: Jorn Utzon, http://www.greatbuildings.com/cgi-bin/gbi.cgi/Sydney_Opera.html/cid_sydney_005.gbi

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

  19. 4 The role of integrated and iconic buildings Iconic (stadia) constructions Masterplan P.E.

  20. Iconic (stadia) constructions Nelson Mandela Bay Stadium - Port Elizabeth Source: N.N., 2008e.

  21. Iconic (stadia) constructions KINGS PARK SPORTS AND RECREATION DEVELOPMENT PLAN CONCEPT SPATIAL PLAN 1 5 17B 7 16 5A 6 12 4 9 13/14/15 3 8 2B 2A 19 10 18 11 17A 11 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

  22. Iconic (stadia) constructions King Senzangakhona Stadium - Durban Source: Monnerjahn (2006).

  23. Conclusions • General experiencefromformer World Cups etc: • No positive effects on incomeandemployment(crowding-out, time-switching, carnival-effects; compenstingdifferentialsandauctioncharacter of allocationprocess…) • positive effects on feelgoodand international perception • South Africa 2010 with additional challenges… • Constructionindustryatfullemployment • Post tournamentusage of stadia? • … and additional chances • High potential fornoveltyeffect • No „couchpotatoeffect“? • Nocrowding-out of normal tourism? • High potential forimageeffects • SA plansforlandmarkstadiaand urban integration

  24. 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 (amasoccersolutions 2010) • Klaus Meinel (IAKS) • Hamburg University • Stellenbosch University

  25. 2.1 Direct income effects via (Sport) infrastructure investments US$/Euro = R13.4 bn. SA´pl US$/Euro ans (2006): R1.8bn

  26. 2.1 Direct income effects via (Sport) infrastructure investments Infrastructure costs are higher than stadia costs/ the case of in Hamburg Total german WC-induced infrastructure costs: R11,5 bn Source: Maennig/ Buettner 2006

  27. Ex-post evidence of economic benefits Retail sales in France (%-change to previous year) Data origin: Eurostat: Retail trade, except of motor vehicles, motorcycles and trade at filling stations, retrieved 18 January 2008.

  28. Ex-post evidence of economic benefits Tourism receipts in France Data origin: Eurostat: Current account, Services, Travel; retrieved 14 December 2007.

  29. Ex-post evidence of economic benefits Tourism receipts in Germany, 2004-2006 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.

  30. 1.2 Income effects due to (international) tourists – the reality Soccer WC 2006:Hotel PricesDifferencesto June 2006 • Occupancy rates • - minus 2,2% for Germany • minus 11,1% for Berlin • minus 14,2% for Munich http://www.destatis.de/indicators/d/vpigraf07.htm, nov 3rd, 2006

  31. 1.2 Income effects due to (international) tourists – the reality German income from international Soccer WC 2006 tourists Gross effect +1,5 bn € = 0,07% of GDP 2006 - carneval effect = net effect: 0,3 bn € (0,01% of GDP) Source: Deutsche Bundesbank (2006), p. 45.

  32. Ex-post evidence of economic benefits Overnight stays of foreigners in France (Hotels), 1996 to 1998 Data origin: Eurostat: Nights spent by non-residents - monthly data, Hotels and similar establishments; retrieved 14 December 2007.

  33. Ex-ante estimate of economic benefits of WC 2010 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.

  34. The paradoxical econometric evidence Attempts to explain the „paradox“ • Auctioncharacter of WC allocation • Compensatingdifferentials • Inefficientallocation of publicbudgetsand /or tax increases • Diversion decreasesproductivity • Harmfulredistribution • Quality of data • Methodologicalproblemsanddata (in)variance • Over-supply of sportfacilites , decreasingproductivity • „wrong“ architectureand urban planning

  35. Rostock Duisburg Hamburg Wolfsburg Frankfurt Schalke Dortmund M‘Gladbach Köln München (Bayern) München (1860) Wolfsburg Novelty effects of stadia (re-)constructions: 2006

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