1. 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. maennig@econ.uni-hamburg.de 1 Wolfgang Maennig School Economics and Social Sciences Department of Economics Conference “The Impact of Mega Sport Events” Cape Town, March 6 th, 2008

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

3. 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. 3 Ex-post evidence of economic benefits

4. 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. 4 Ex-post evidence of economic benefits

5. 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. 5 Ex-post evidence of economic benefits

6. 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. 6 Ex-post evidence of economic benefits

7. 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) The paradoxical econometric evidence

8. Attempts to explain the „paradox“ Auction character of WC allocation Compensating differentials Inefficient allocation of public budgets and /or tax increases Diversion decreases productivity Harmful redistribution Quality of data Methodological problems and data (in)variance Over-supply of sport facilites, decreasing productivity „wrong“ architecture and urban planning The paradoxical econometric evidence

9. 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 Evidence for auction character

10. 10 Feelgood effect as major impact

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

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

13. 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? 13 Additional challenges for South Africa

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

15. 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 15 Additional chances of the South African WC 2010

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

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

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

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

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

21. 1 2B 2A 3 4 5A 5 8 7 6 11 10 9 12 13/14/15 11 16 17A 17B 18 19 KINGS PARK SPORTS AND RECREATION DEVELOPMENT PLAN CONCEPT SPATIAL PLAN 1. Cricket2. Hotel/sports fields3. Baseball/Softball 4. Hotel/sports accommodation5/5A. Multi-model transport hub6. Football/athletics 7. Proposed railway station8. Aquatics9. Rugby 10.Athletics11. Archery12. Cycling 13. High performance centre14. Indoor sports centre15. Tennis 16. Equestrian17A/B. Golf/trails18. Canoeing 19. A1 Racing Iconic (stadia) constructions

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

23. Conclusions General experience from former World Cups etc: – No positive effects on income and employment (crowding-out, time-switching, carnival-effects; compensting differentials and auction character of allocation process…) – positive effects on feelgood and international perception South Africa 2010 with additional challenges… – Construction industry at full employment – Post tournament usage of stadia? … and additional chances – High potential for novelty effect – No „couch potato effect“? – No crowding-out of normal tourism? – High potential for image effects – SA plans for landmark stadia and 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 (ama soccer solutions 2010) Klaus Meinel (IAKS) Hamburg University Stellenbosch University

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

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

27. 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. 27 Ex-post evidence of economic benefits

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

29. Tourism receipts in Germany, 2004-2006 Data origin: Deutsche Bundesbank: Zeitreihen Datenbank: Dienstleistungsverkehr mit dem Ausland, retrieved from on 14 December 2007. 29 Ex-post evidence of economic benefits

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

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

32. 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. 32 Ex-post evidence of economic benefits

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

34. Attempts to explain the „paradox“ Auction character of WC allocation Compensating differentials Inefficient allocation of public budgets and /or tax increases Diversion decreases productivity Harmful redistribution Quality of data Methodological problems and data (in)variance Over-supply of sport facilites, decreasing productivity „wrong“ architecture and urban planning The paradoxical econometric evidence

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