Introduction
One cannot but encounter the fact that mega-sporting events incorporate both millions of television viewers and numerous in-person attendances. Surely, many cities and countries draw particular attention to coming up with the ideas of how to win the bid to host international events due to a high probability of facing economic windfalls. A peculiar thing is that a number of developing countries can be characterized by an increased focus on hosting mega-sporting events, hoping to reap predominantly financial benefits. For all that, the question on whether international events are worth return on investment continues to be hotly debated within today’s societies. The focus here lies in arguing that many widely-acknowledged economists come to directly criticize the purported rewards of mega-sporting events. Obviously, this paper aims to shed the light on whether Olympics and the World Cup may play a crucial role in boosting the economy.
The Cost of Mega-Sporting Events
Indisputably, hosting the major international events brings substantial costs as well as potentially adequate rewards. According to the FIFA statue, a host country needs to offer at least 8 fine football stadiums that are capable of accommodating up to 60,000 visitors. In particular, it is worth saying that the FIFA recently put the accent on the jointly hosted World Cups; the thing is that neither of the two countries could meet all the FIFA’s requirements, and, therefore, the committee took a critical decision to endow both North Korea and Japan to share hosting the World Cup. As a result, the governments succeeded in shifting the expenses to less costly. However, the financing in host countries still remained unknown to a great extent. Moreover, the potentially large financial benefits that the host countries expected to gain appeared to be less optimistic in fact.
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A New Era of Host Countries
Hosting Olympic Games actually requires pretty much the same operating expenses. It is important to indicate that the Olympic Games occur as a mega-sporting event, obliging host cities and countries to provide an appropriately-designed infrastructure so as to stage all the events. As for the expenses, one has to take into consideration that, for instance, Nagano’s financing exceeded the sum of $1billion, whereas Atlanta’s total reported sum is approximately $600. Apart from seemingly the least costly mega-sporting events, one has to make an emphasis on probably the costliest sporting spectacles. To be precise, Beijing spent more than $20 billion in order to provide the specialized infrastructure. Significantly, the operating expenses of international events emerge to be extremely large; moreover, one has to understand that they are constantly growing. On the one hand, unprecedentedly huge cost of mega-sporting events can be explained by a dire need for the extended infrastructure for the games, whereas, on the other, a large increase terrorist activity requires a sharpened focus on most optimal security arrangements. It is important to highlight the fact that security measures alone are likely to run into huge sums of money. To make it clear, Winter Olympics in Salt Lake City can be described by an unprecedentedly huge budget allocation ($300 million) towards the enhancement of security arrangements throughout the Olympic Games. The question naturally arises as to whether mega-sporting events are worth the financial compensation that the host nation may obtain.
Rosy Projections for Sports Events
Surely, prospective economic surveys conducted by mega-sporting event boosters usually incorporate optimistic forecasts. For instance, it was predicted that the 1994 World Cup would result in the United States winning at least $4 billion. Considering South Africa’s focus on becoming a host country in 1995, it becomes evident that the major factor that contributed to a strong desire to place a bid was a high probability of getting thousands of new jobs and a substantial boost to its economy; yes, a strong desire to host Rugby World Cup alluded to that “... South Africa had emerged from its years of racial oppression and served to unify the country.” (Matheson & Baade, 2004, p. 1094) ; yet, economic gains can hardly outweigh the expenditures.
Inevitably, mega-events boosters often report highly optimistic projections for the international games. The Olympic Games committee forecasted $1 billion boost to the U.S. economy as a result of the 1996 Summer Olympics in Atlanta. All the rosy assumptions about the Olympic profitability are nourished by the idea that the expenditures have to be necessarily qualified as investments that increase the chances of a windfall gain.
Doubts about the Expediency of Holding Sports Events
Although the claims that major international events are likely to lead to the overall growth in the economy, one should be conscious that many economists and journalists actually consider such projections as absolutely untrustworthy. Unlike event boosters who usually conduct ex ante evaluations, some independent researchers focused on ex-post evaluation of particular sporting events. In estimating the overall economic effect of an international American football completion (IFAF), the researchers questioned the argument that the event actually constituted the economic windfall; the positive economic returns of the 1999 NFL were much challenged by some other researchers; in their view, the reported financial profits were nothing more than a well-constructed myth. In other words, mega-sporting events greatly exaggerated the economic returns as a result of an international competition. Looking into the core of the 1994 World Cup, independent researchers came to understanding a highly controversial concept of the given mega-sporting event. The focus here lies in claiming that official reports providing the expected monetary returns had nothing to do with the actual boost to the economy.
Exaggerated Claims of Economic Windfall
The tendency to exaggerate monetary returns as a result of hosting mega-sporting events can be explained by certain reasons. It is important to know that the increase in tangible expenditures can be a “gross” as contrary to a “net” aspect. Significantly, direct expenditures are usually evaluated by subsidy specialists, and the procedure itself relies on simply calculating the sum from the receipts available. Arguably, disregarding the dimension of a substantial difference between gross and net expenses comes to be one of the major reasons why international sporting competitions fail to increase economic growth. It becomes clear that in-depth surveys on the actual expenditures by the visitors would indisputably give the chance to estimate direct expenses in the most appropriate way. Contemplating upon such international competitions, one cannot help but become aware that large attendance at the World Cup or Olympic Games permits a convergence for the two aforementioned concepts. Supposedly, mega-sporting events could be identified as “zero sum”, yet influencing the host country dramatically. In any way, international events boosters fail to objectively assess the situation and continue to blindly patronize sporting events.
Another reason why positive economic returns as a result of being the host country are likely to be exaggerated consists in the prevalence of the “crowding out” effect. To be precise, international tourists may potentially supplant some regular visitors. A typical estimation approach to figuring out economic impact will distinguish huge influx of event tourists that the host cities are often not ready to deal with ( Essex & Chalkley, 1999) , but will disregard a number of those attendants who were simply displaced. Consequently, one can assume that event boosters will definitely fail to provide trustworthy reports due to not covering the aspect of those visitors who were displaced. On the whole, one should know that event boosters tend to deliberately skip with the seriousness of financial losses that the host country is likely to encounter; inevitably, they put the accent on a large number of event attendants who might potentially reap economic windfall, whereas some negative effects of mega-sporting events are simply omitted. In particular, many constant clients in the hotels that “....raise prices in the face of increased demand” (Poeret, 1999, p, 61) will most likely release their reservations due to possible hassles.
Hosting the Olympics: An Economic Curse?
Speculating on mega-sporting events, one has to know that host countries often fail to see high rates of return on their investments. To put the matter differently, costly expenses are not always worth return on investment. The stadiums that the competition committees oblige the host countries to build or refurbish in accordance with international standards are usually left unused after “... the games went away .” (Voigt, 2010) One has to take into consideration the fact that the specialized infrastructure often starts to decay, since there is no an adequate demand for it within the society. On the other hand, it is important to pinpoint that an international sports event can be characterized by boosting trade openness and multiplying financial transactions of the host country. Additionally, the host country can be given the status of an extremely prestigious region from the perspective of a highly specialized infrastructure that the participants could take an advantage of; apart from the above-said, mega-sporting events occur as an opportunity to showcase the country’s most remarkable characteristics. Surely, a country’s reputation should not be underestimated from the perspective of the way it may boost the economy; regardless of this fact, the masses of publicly self-conscious people express their concerns over the financial adequacy of the Games themselves; indeed, many argue the idea that mega-sporting events are definitely not worth the cost.
Poor Awareness of Olympic Bidders
Among the costliest international sports events, it is important to make an emphasis on the Sochi Winter Games; Russian Federation spent approximately $50 billion in order to create the infrastructure and venues. Despite the fact that the Sochi Winter Games were held at a high level, it did not prevent Russia from facing a relatively negligible boost to the economy. All in all, the given sports event did have positive regional effects; specifically speaking, the 2014 Sochi Winter Games contributed to the substantial tourist wave splashes, which resulted in a long-term prospect of tourism industry, respectively. Arguably, new waves of tourists overrode the inexpediency of the specialized infrastructure afterwards.
Throughout the last decade, the nations that have hosted mega-sporting events can be identified as having emerging economies; one has to be conscious that developing countries are more willing to put forward bids to host sports events compared to developed countries, and this trend should be taken seriously. Government financing occurs as extremely significant for emerging economies. Surely, developing countries put a lot of effort into investing mega-sporting events wisely; yet, large operating expenses make major sports events hotly-debated today. Obviously, large government spending is definitely not good signal for developing countries. For instance, Brazil successfully built huge stadiums in order to host the Olympics; however, this infrastructure will most likely be unused once the Games come to an end, since the stadiums were built predominantly in small cities. The question naturally arises as to whether the cost of Olympic Games is worth monetary rewards; and the answer is probably not. In view of many experts, spending billions of dollars only to host a sports event does not make sense, whereas investing in citizens to fight poverty would endow Brazil with an opportunity to help improve the lives of its people. Yes, emerging economies should first think about whether wining the right to host Games grants reasonable benefits.
A Reconsideration of the Role Played by Mega-Sporting Events
Recently, Norway took a critical decision to withdraw its bid for the Olympics due to increased concern over an extremely high price of hosting Winter Games. Surely, it is high time to draw particular attention to reinterpreting the importance of Olympic Games; both economists and journalists make numerous attempts to get the public to grasp all the illusiveness of positive economic returns. Significantly, the actual budget for the Olympics emerges to exceed the expected expenses; and emerging economies, including Brazil, are likely to be greatly damaged by these irrational expenditures. After a thorough contemplation, one can assume that mega-sporting events may potentially bankrupt the host countries even though event boosters often raise hopes of substantial economic gains as a result of hosting international sports events. Unfortunately, hosting the World Cup or Olympics Games does not actually pay off, and, that is why, investments in megs-sporting events have been strongly associated with money-losing propositions for developing countries. Instead of spending millions at mega-sporting events, an increased focus on financing social programs in general and job-training projects in particular would definitely be a great deal; an ability to wisely allocate the budget increases the chances of putting an end to poverty and other social constraints.
Conclusion
In sum, it becomes evident that mega-sporting events are indisputably not worth the return on investment; building the specialized infrastructure in order to host the World Cup or Olympics Games occurs as a high-risk investment that emerging economies have to beware of. Yes, it remains a widespread stereotype among the emerging economies that hosting mega-sporting events will result in substantial economic gains; in any way, the actual evidence identifies the opposite outcomes. In particular, winning the bid to host international sports events does not guarantee that the economic returns will exceed the operating expenses (Solberg & Preuss, 2007). Overall, one has to know that hosting the Olympics incorporates the hidden costs that event boosters methodically conceal, and a mega-sporting event itself will most likely make things worse for the host country. That is why, leveraging the World Cup or the Olympics to optimize economic growth within the host country emerges to be a highly questionable belief.
References
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Voigt, K (2010, June 11). “Is there a World Cup economic bounce?” CNN.com. Retrieved from http://edition.cnn.com/2010/BUSINESS/06/11/business.bounce.world.cup/index.html
