By Anil Bhoyrul
Anil Bhoyrul argues that FIFA could be the only winner when the World Cup comes to the Middle East
It wasn’t quite a JFK moment, but pretty big anyway. Do you remember exactly what you were doing when FIFA announced that Qatar had won the rights to stage the 2022 World Cup?
I remember exactly where I was. Sitting in front of this computer, writing the headline “Qatar fails in World Cup bid.” The story had been written. All I had to do was press “send”, once FIFA’s dreadful leader Sepp Blatter announced the decision. We all pretty much knew 2022 would go to either Australia or the US.
But never mind that. Against all odds and expectations (including those in Qatar itself), Qatar won the 2022 World Cup rights. Ever since, there has been no shortage of conspiracy theories and sour grapes over exactly how the tiny Gulf state got to win the biggest prize in sport. Who paid who, and how much, is the general thrust of the many arguments.
Amidst the many theories, which will no doubt carry on for the next nine years, one not too insignificant point appears to have been overlooked. How much is this all going to cost? And is it going to end up an economic success?
Now would be a good time to start that debate, and the early signs are not encouraging. Depending who you believe, the cost of hosting the 2022 event will reach $130bn. Even the most conservative estimate, by Bank of America Merrill Lynch last week, puts the figure at $95bn. Around $4bn of that is on stadiums, but the figure rockets once you add in all the new facilities including upgrading the airport, building a new metro and masses of hotels in the middle of the desert. Qatar itself has told FIFA it will spend $100bn, which is the equivalent of 87 percent of its GDP.
Of course, no country in the history of World Cups has managed to stage the event without massively overrunning on costs. Brazil is now looking at spending $13.28bn on the 2014 World Cup, a 15 percent rise. Russia, which is hosting the 2018 World Cup, now estimates it will cost $40bn, double the estimate. What about South Africa? It spent close to $5bn, nearly four times what it first estimated.
There are two big warning signs here: the first is that Qatar’s tournament is already going to be the most expensive ever staged, largely because it is building almost everything from scratch. So already the risk is far higher. More worryingly, all the studies done of past events make grim reading. In 1994, the US predicted it would make a profit of $4bn. It ended up losing $9bn. South Africa lost money, though it’s not clear how much, while Germany in 2006 (where very little new investment was required on building stadiums or hotels) just about broke even.
How is Qatar going to recoup its $100bn? There are many flowery arguments about building a legacy, but that doesn’t translate into hard cash. Sure there will be a temporary construction boom and thousands of new jobs created. But as everyone knows, this comes to an end the day the World Cup ends. Yes there will be a retail boom, but again, it’s worth noting that in South Africa the total retail benefit was just 10 percent of what it expected.
The only people guaranteed to make money out of Qatar 2022 are Sepp Blatter and his gang, who will sell the media rights to the tournament for billions of dollars long before the first ball is kicked. FIFA controls its World Cups in a similar way that Bernie Ecclestone runs F1. Nobody in a 2km radius of any stadium can sell anything, unless the money goes to FIFA. The many thousands of private entrepreneurs looking forward to an oasis of opportunities had better think again.
So what is the solution? On current projections, I just don’t see how Qatar (or any World Cup host) can make a profit. The only way is to completely renegotiate the way all World Cup commercial, retail and broadcast rights are distributed, with host nations taking the lion’s share.
Otherwise, once again, the only winner will be FIFA.
Anil Bhoyrul is the Editorial Director of Arabian Business.
well I don't think Qatar is looking for profits on this one.
Fifa is so discredited it will actually have a negative effect on Qatar's reputation, and the fact that nobody apart from Blatter and Fifa make money from this event should be remembered. South Africa never got the windfall all the bribes portended, and now there are stadiums in places such as Cape Town which make the white elephant appear pale by comparison. Qatar is making a life-changing mistake with this joyride.
Obviously Qatar will make no money. Nobody has with anything similar. OK, Barcelona and Atlanta could be argued as having a positive financial outcome but only if you squint your eyes very hard and accept a large number of cross-subsidies
At least Qatar has spared us the usual pie-in-the-sky business case that western politicians tell every time they are bidding for the events. "This will cost nothing to taxpayers" is a favorite
In that sense the Qataris are most honest and straightforward: this is a big party and they want to enjoy it. And as all big parties it has a big tap
Regarding the FIFA crowd, and their slightly less corrupt IOC colleagues, the best solution would be to go for a straight auction of the games. Yes this would prevent poor countries from organizing, but poor countries have no business with these expensive events
But you are not even mentioning the biggest issues. FIFA does not own nor control the players and Qatar has not been able to complete their airport
At last, reality strikes.
An interesting - if TOTALLY spurious - discussion.
The concept that a Games has to "make money" misses the point entirely. Most host countries try and put a brave face (read: lie) on the revenue side of things because they deliberately under-project the initial costs, and then worry about the PR of this mess they create once they have won.
Qatar, on the other hand, is a new country with a mass of infrastructure that needs to be installed - with or without the World Cup. The metro, new airport, train system etc etc will be installed irrespective of the World Cup, however the WC is only expediting this spend.
There is no mystery here - you don't "make money" from running a major international games operation, be it Olympics, FIFA or otherwise. The economics simply don't stack up. I know this as I work on the "inside" in the Major Games industry.
Qatar's vision was - and remains - a much more expansive motivation for the country rather than just wanting to make a small profit.
"We all pretty much knew 2022 would go to either Australia or the US."
I am sure the writer flatters himself with his own self-confidence, having written an article before the actual result was announced shows how much opinion are in his articles vs facts. More worrisome is that those opinions are not even based on facts, but rather based on expected outcomes based on opinion.
I am glad he had the self-control to not press "send" prior to the announcement of the results.
The question that he fails to ask himself, is how much Qatar will be spending on infrastructure if it were not hosting the World Cup. (hint: the total less the $4-5bil for the stadiums)
Qatar did not intend to host the world cup to make money, nor it ever alluded to that. No one is oblivious to the fact that major sporting tournaments rarely, if ever, turn a profit. Qatar wants it for the prestige, to showcase the country and prove that they can do it. All this soft power projection and limelight will only serve Qatar (and the region) well in their effort to be viewed in good light and gain the respect of its peers.
This $100B includes all infrastructure projects (airport, roads, metro..ect) that was planned regardless of the tournament. It is comparable to other infrastructure budgets in the region in these booming times and cannot be attributed to the WC. The drawbacks are the large number of hotels room built and stadia. For hotels its the private sector that would bet on it as in any business venture, whilst the stadia although not needed they are a small price to pay to host this world carnavale.. as well as cascading benefits to poor countries.
For Qatar, it's certainly for glory, not profits.
Qatar won't make profit by hosting 2022 World Cup like those who have hosted a sporting event before. Hosting the world cup is a PR stunt for Qatar, that's all they're aiming for. Qatar wanted to host a world cup to promote, showcase its country and to become a well-known country because they used to lack of exposure and recognition. They're making money by buying hotels, retails, in Europe and in the US and acquiring stakes
More important costs relate to Cultural incompatibility of the event with the Qatari culture. I believe the Qatari nationals will decide if they will accept drunken Brit hooligans on their streets.