So yeah, that story I didn’t get to from Friday: It was in Sportico, the new “business of sports” publication (always take with a grain of salt anyone who covers “business of,” unless they also make a point of covering “labor of” and “consumer rights of”), and was about the economic impact of the World Cup. And it included a surprising (if you’re only dimly paying attention to economics) voice arguing that the World Cup packs more bang for its bucks than, say, the Super Bowl or Olympics:
Victor Matheson (professor of economics, Holy Cross) explained, “If you have [an] event that people will travel to, [there is] some potential impact (i.e. new spending in the city as a result of the event). But the impact is smaller than one might guess and way smaller than the leagues or other boosters try to tell the public.”
That’s not the case with the World Cup, though–even as FIFA controls nearly all commercial rights tied to the quadrennial tournament. “Because of the long nature of the event and the ability to accommodate lots of tourists, [a city] realistically could be looking at hundreds of millions in new spending due to foreign tourism during a World Cup,” Matheson said.
If you’re even only dimly paying attention to this website, you’ll recall Matheson as one of the foremost pooh-poohers of economic windfall claims: He’s appeared here in the past citing the economic impact of a baseball postseason as statistically indistinguishable from zero, noting that attendance at Broadway shows actually fell when the 2004 Republican National Convention was in town, and calling a plan to move the Olympics to Florida “batshit crazy.” (Matheson has a way with a quote. Also that plan was exceptionally batshit.) In the case of the World Cup, though, he’s willing to move the decimal point a couple of spaces to the right, and call hosting the event a windfall — though it’s still important to remember that the hundreds of millions of dollars would just be in economic impact, which Matheson himself memorably defined as: “Imagine an airplane landing at an airport and everyone gets out and gives each other a million bucks, then gets back on the plane. That’s $200 million in economic activity, but it’s not any benefit to the local economy.” What gives?
As Matheson emailed me when I asked about it, he’s done several studies on the World Cup (unsurprising, as he moonlights as a college soccer referee), including his most-cited paper, 2004’s “The Quest for the Cup: Assessing the Economic Impact of the World Cup,” which he co-wrote with Robert Baade of Lake Forest College. After running through all the reasons why sports impact predictions are often overstated — they assume all local spending by fans wouldn’t have happened without the sports event, they ignore crowding-out effects where sports tourists just take up hotel rooms that would have gone to regular tourists, etc. — Baade and Matheson found that during the 1994 World Cup in the U.S. “the average host city experienced a reduction in income of $712 million relative to predictions” of what they would have received without the Cup, though some cities fared better and some even worse. Among the apparent reasons:
- Crowding-out effects from other tourists steering clear of town during Cup games, to avoid high hotel rates and “rowdy” soccer fans. And because matches aren’t held on consecutive days, people who are scared off likely disappear more than just the dates on which games are being played.
- Residents may flee town as well during the Cup, or at least stay away from areas where games are being held, which could put a damper on downtown restaurant spending, say.
- Increased interest from locals in watching the World Cup, once it being in town makes them realize soccer is a thing, could make them stay home to watch on TV if they don’t have tickets, which, cf. above.
So the World Cup is no great shakes either — what’s the deal with that “hundreds of millions in new spending,” then?
The answer is it’s not actually all that much money compared to what Cup boosters claim: One projection cited by Baade and Matheson had the 1994 Cup creating $4 billion in economic impact, which, just no. And even a few hundred million in economic impact likely translates into just a few tens of millions in actual city revenue, since only a thin slice of that spending is paid out in taxes. So a World Cup could be good if you own a restaurant across the street from the stadium, but it’s not going to make a huge difference in a city’s budget.
Which brings us to the main plus about the World Cup, according to Matheson: If enough stadiums are already in place that you don’t have to spend a ton of money to build new venues, then even a small windfall is free money, and nothing to turn up your nose at. That’s likely to be the case for the 2026 Cup — but wasn’t for, to pick one example, the 2014 Cup in Brazil, with predictably tragic results.
The lesson, then, is the same for the World Cup as for all sports megaevents: Don’t believe the hype about economic impact, but if you keep your costs low enough, you might see a modest bump in local revenue. That’s a less dramatic way of saying it than Sportico’s “World Cup’s Duration, International Draw Make Event Economically Worthwhile For Host Cities” — cough bus parking lots cough — but it’s also less likely to result in excited city officials blowing billions of dollars in fits of exuberance.