By Courtney Trenwith
Gulf blue chips are now closely associated with most of the world’s biggest sporting events. But is the multi-million-dollar outlay actually bringing a return on investment?
If you watch a sports event these days — pick any, from soccer to horse racing and even darts — you’ll almost certainly also be exposed to several brands, whether you consciously notice them or not.
It could be the logo of UAE national airline Etihad splashed across a Manchester City jersey, a sports announcer commentating on the Mubadala World Tennis Championship or an Ooredoo banner at the Hejen camel racing festival. And you can’t watch the Melbourne Cup without recognising the Emirates Airline brand, which has become synonymous with the world’s richest two-mile handicap horse race.
Gulf businesses are increasingly spending millions of dollars associating themselves with a particular sporting event, team or stadium, making sports sponsorship a major style of marketing as emerging brands attempt to boost their profiles and sales globally. Sport has become such a huge industry in the region that in November leading legal firm Al Tamimi & Co established the first dedicated sports legal practice to assist with the complex deals being signed for sponsorship, as well as construction of new facilities, player contracts and broadcasting rights.
PwC has ranked Europe, the Middle East and Africa (EMEA) as the second largest sports market in the world, worth an estimated $42.8bn in annual revenues and increasing at about 4.6 percent annually. Sponsorship is one of the fastest growing segments, with $620bn spent every year.
The Middle East is increasingly tapping into this opportunity and is now widely considered the prime emerging sports market. New tournaments are quickly making their way onto the international circuit, whether it’s in Formula One racing, tennis, golf or marathons, and the required facilities are continuously popping up — all with the opportunity to raise hundreds of millions of dollars in naming rights.
Gulf-based companies also are using sport to boost their profile locally and abroad as they aspire to become global brands.
With still more than eight years until the FIFA World Cup in Qatar in 2022, six companies have signed up as sponsors, despite the controversies that already have surrounded the tournament. It’s a sign of the lucrative potential these brands, including Coca-Cola and Visa, have identified.
Football is the most sponsored sport, accounting for about 12 percent of the market, according to The Sponsorium. Commercial revenues in just the top 20 earning clubs reached €2.2bn ($3bn) in 2012-13, according to Deloitte. Much of that has been driven by Middle Eastern companies, in particular airlines and Abu Dhabi, which are associated with seven of the top 10 earning football clubs in the world.
The Gulf’s three major airlines — Emirates, Etihad and Qatar Airways — each are major sponsors of a top-ranking professional football club. The Qatar Investment Authority owns Paris Saint-Germain FC while the private equity firm of UAE deputy prime minister and member of the Abu Dhabi ruling family, Sheikh Mansour Bin Zayed Al Nahyan, the City Football Group, owns Manchester City FC, as well as the recently launched New York City FC and 80 percent of Melbourne Heart FC.
Qatar telecommunications provider Ooredoo has declared 2014 the year of sport. The government-owned company boasts a long list of sporting sponsorships, from grassroots events in its home market to the Algerian national football team and Myanmar Football Federation, two countries where it has recently bought mobile licences.
Gulf brands also are seeing the value in non-traditional sports such as camel racing (Ooredoo), hurling (Etihad) and darts (Dubai Duty Free).
Firms also are paying to name stadiums, including the Emirates Stadium in London and Etihad’s Australian Football League stadium in Melbourne and football stadium in Manchester.
“Whether you are watching the world’s leading football clubs in action, America’s Cup sailing or the US Open tennis, the presence of Middle Eastern-based sponsors is increasingly evident,” Deloitte consultant in the sports business group, Alexander Thorpe says.
“This has grown markedly in recent years. For example, at the start of the 2013-14 season, seven of the top 20 revenue-generating football clubs had a Middle Eastern shirt sponsor.
“The key players in this have been the airlines, who are all looking to become global brands, and therefore it follows that they have chosen wide and diverse sports’ properties to help achieve this. It works from both an inbound and outbound perspective; presence in the foreign markets publicises their brand overseas and from a domestic perspective, the particular popularity of sport in the region offers a great way to reach potential domestic customers.”
The head of consulting for IMG in the Middle East, Seth Holmes, says sponsorship puts a brand into action.
“A well planned and executed sponsorship can bring a brand to life, engage the consumer and affect brand consideration in a uniquely powerful fashion,” he explains. “Great sponsorship campaigns are rooted in a genuine understanding of the customer and the creation of a clear and relevant theme, which inspires creativity, communication and captures the audience’s imagination.
“Traditionally media has been the driving force for sponsorship, in terms of the most valuable and recognisable return but this is often the tip of the iceberg. A sponsorship can be leveraged through multiple channels, with public relations/communications and promotions being amongst the most regularly used disciplines.
“Increasingly social media and content creation are becoming the most effective means to engage a youth audience.”
Quantifying the return on investment in sports sponsorship is difficult and often intangible. Some brands demand quantitative data proving an increase in sales or brand awareness, while others compare the value of equivalent public relations or media exposure.
US-based The Sponsorium provides a sponsorship management, evaluation and reporting tool used by many Gulf companies, including Emirates.
“The best brands measure in advance of their partnership,” The Sponsorium head of strategic development Seth Leeds says. Companies are often looking to launch a new product, block competition, raise brand awareness and perception or simply back management’s favourite team.
Thorpe says key to every sponsorship decision is the exposure it provides.
“There are many reasons why companies choose to sponsor sports properties. It can range from clear commercially minded partnerships that fit into the wider strategy of an organisation to partnerships that are borne out of more personal motivations,” Thorpe says.
“However, at the core of nearly all sponsorships is the exposure it provides. By its very nature as a spectator focused business, sport provides a great vehicle for organisations to be seen, often to a degree that few other sponsorship properties can rival.”
Dubai Duty Free (DDF) has been sponsoring sporting events for nearly three decades and now values its return at about $300m annually. But they’re not necessarily sports you would expect; the retailer has ploughed millions of dollars into skiing, snooker, darts, horse racing and, a little more predictably, tennis.
It has the naming rights for the Dubai international tennis championship, which executive vice chairman Colm McLoughlin says is valued at $245m in advertising exposure for the DDF brand.
“It is very important to us that we achieve a return on our investment. We look at a long list of criteria, including the TV and print media coverage, the target audience of an event and many other aspects,” McLoughlin says.
“It has to be a good fit with our brand and it sometimes helps if we think we can build up an event over time as we did with our tennis. Now the Dubai Duty Free Tennis Championships is a world-class event consisting of men’s and women’s tournaments played back-to-back, which attracts the top tennis players in the world.
“The TV exposure, which helps position Dubai as a key sports and leisure destination, is key. It’s also important that the event is well received by the UAE residents and that it’s an essential part of the Dubai calendar of events.”
DDF uses independent evaluators such as Repucom, as well as the Australian Tennis Professionals’ (ATP) in-house system to determine the return on investment in the sport.
For example, McLoughlin says the business agreed to sponsor the first darts event in Dubai because it was unique and linked to its association with tennis.
“When we considered the growing appeal of darts worldwide and the fact that it would be staged at the DDF Tennis Stadium, the first time for an outdoor event, we felt that this was something that we could get behind and develop along with the organisers,” he says. “The first event, held in May of last year, was a great success and we have signed up for a further two years to be the title sponsor of the tournament for 2014 and 2015.”
Other international brands have openly revealed their benefits from sponsoring major sporting events. Consumer goods company Procter & Gamble says it earned $100m in increased revenue in 2010 thanks to its sponsorship of the Vancouver Olympics, while the London Olympics in 2012 added $500m in sales. Similarly, American conglomerate General Electric credits its seven-year relationship with the Olympics for $1bn in revenue.
The market is also becoming ever more complex. In December last year, tech giant Intel paid FC Barcelona $25m over a five-year period to have their logo put on the inside of team shirts. When players score a goal, they occasionally — but not always — lift their shirt over their heads, at which time the logo would become briefly visible.
Giles Morgan, global head of sponsorship and events at HSBC, which backs the Abu Dhabi HSBC Golf Championship and the HSBC Sevens World Series rugby tournament in Dubai, says the financial institution uses sports sponsorship to build relationships with customers in its most important markets “by creating spectacular brand experiences”.
“Our sponsorships reflect our business and brand, and must meet the needs and goals of the business and be a sound investment,” Morgan says. “We see this as an investment to help grow our business around the world.
“There is a very clear rationale for our sponsorships. The value is in connecting with our customers through their sporting passions. We support those sports that embody many of the values we hold dear, so for HSBC it makes absolute sense for us to invest in golf and rugby sevens, especially in emerging markets where there are huge opportunities for growth.
“If we take the Abu Dhabi HSBC Golf Championship as an example, Abu Dhabi is a major hub for international trade and connectivity so it makes absolute sense for HSBC to sponsor one of our major events here. Now Abu Dhabi is famous for trade but in the future Abu Dhabi will also be a world famous golfing destination.
“Abu Dhabi is the gateway to the Middle East and an important centre for international trade so it mirrors the HSBC business very well and the tournament gives us a great platform to interact with our customers in the UAE — with world class golf on offer in a stunning location, the Abu Dhabi HSBC Golf Championship has become one of the highlights of the social calendar.”
More than 60,000 people attended the Abu Dhabi HSBC Golf Championship last month, while more than half a million fans attended the rugby sevens’ tournament, including 9,000 who Morgan says engaged with the bank in its exclusive fan areas.
“We conduct significant audits on our sponsorship portfolio and investigate opportunities. It is a serious business decision and involves all the research, analysis and consideration you would expect of any major investment by a leading financial institution,” Morgan says.
“We have an in-depth evaluation mechanic for thorough analysis which can measure the ROI of our sponsorships and benchmark all sponsorships in our portfolio.”
Thorpe says recent recessionary pressures have seen businesses become more demanding in understanding the value of their investment. Sponsorship deals are increasingly inventive, with more than just money swapping hands. Rights holders may receive services such as flights or cheaper electricity bills, while sponsors are demanding a corporate box to watch games, use of a stadium’s facilities for events and access to players for promotional purposes.
“A great example of this has been [British football club] Manchester United, whose commercial strategy of splitting their rights by category and geography has helped them grow commercial revenues by 30 percent in 2012-13, with further significant growth set to come,” Thorpe says.
“We expect this approach to become more common, especially for those organisations with a truly global appeal.”
Ooredoo ties its sponsorship into community activities, such as broadcasting cricket matches to blue-collar workers in industrial areas and promoting better driving habits using its star motorcycle racers Mashel Al Naimi and Fahid Al Sowaidi.
“Sport is helping to take the Ooredoo brand across Qatar and around the world. That’s why we look for sponsorships that enable us to play an active role, and look for events as well as clubs that we can work with to promote,” Ooredoo director of public and community relations Fatima Sultan Al Kuwari says.
“We have a very diverse customer base, and we look to connect with the sports that matter most to our different customer constituencies. So while football sponsorship is an obvious channel to a very broad customer base, there are other sports — such as motor racing — which touch a smaller group, but which generate incredible enthusiasm amongst those customers.”
Al Tamimi & Co regional head sports law and events management Stephen Bainbridge says lawyers are increasingly being asked to tweak contracts to ensure both sides gain as much as they can out of a sponsorship deal.
“You’re looking at hundreds of millions in the top bracket for a global event all the way down to the supply of air conditioning services [when the company] is doing it as a value-in-kind, maybe all they get is a sticker they’re allowed to put on their vans that says ‘we supply such-and-such an event’,” he says.
According to Bainbridge, brands are “absolutely” making money out of their sponsorships.
“There’s often a major outlay in the beginning; it may not be profitable in the first year, perhaps not even its second, but we’ve seen that the world takes notice, interest grows and the sponsorship sometimes comes afterwards,” he says.
“When a budget is done, you’re looking at a five to ten year, sometimes 20-year budget. We see the sale of stadium-naming rights often done on very long-term deals, so you may suffer a short-term lack of return but it’s often put out there as an investment anticipating that the life of the asset will continue.”
And as the business of sport grows ever more in the Middle East, a region known for its desire to do things differently, other unique sponsorship ideas are also likely to spring up.For all the latest lifestyle news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.