Effect of hosting a major world
sporting event on countries
with infrastructures
SAMUEL YOHANNES
UNIV 200 RESEARCH ILLUSTRATION
VIRGINIA COMMONWEALTH UNIVERSITY
Subtopics
• Financial Contexts
• Was the financial impact on the nation’s economy further toward the positive side of improvement or
the negative side of decline?
• Social Contexts
• Did the nation’s social living standard for lower class or middle class citizens improve, as well did their
social standing within the world improve?
• Governmental/Political Contexts
• Did government officials or other higher executives/shot callers in charge of the construction of
structures use the event in any way for their own personal gain, whether political or financial,
negatively effecting the life of the regular citizens?
SYNTHESIS - Was the financial impact on the nation’s
economy further toward the positive side of improvement or
the negative side of decline?
“Advantages of hosting a major event” by Tejvan Pettinger is an article that separates the advantages and
disadvantages of hosting a major world sporting event into two sections. While the Advanatages shows benefits in
different types of contexts, the entire disadvantages section is filled with financial info. It states that negative
financial effects range from the cost of building stadiums, to short term uses, to even the cost of security. Next, “Is
it worth it?” by Andrew Zimbalist is a piece of writing that answers this question by splitting into positives and
negatives of wining the event bid. It breaks into detail on how planning can make the difference in whether or not
the inflow of money can be of benefit or can lead to an increase in long term debt. It then shows examples of how
this happens with five different Olympics. Lastly, “The Announcement Impact of Hosting the FIFA World Cup on
Host Country Stock Markets” by Bijen Ramdas and Reinette gives more insight into the question by speaking about
the effects of the winning bid on the stock markets of those countries. Like the previous article, it uses five
examples to showcase the differences in stock price changes between the different countries and how the previous
social and economic standings contribute to those changes. These three articles are beneficial in my argument that
the effects of the events on the host countries are usually more detrimental than positive, due to a lack of proper
planning. While outlining the financial positives, each article specifically articulates that the negatives usually
outweigh them, regardless of the positive or negative state of the country.
“ADVANTAGES OF HOSTING A MAJOR EVENT” CONT.
“Advantages of hosting a major event” was written by Tejvan Pettinger. He lives in Oxford where he works as an
Economics teacher (A Level students) at Greenes College and formerly with Cherwell College, Oxford. Pettinger studied
PPE at Lady Margaret Hall, Oxford University, gaining a 2:1. This article is split into a positives of hosting the event and
the negatives of hosting the event. While the positive side is spilt between social positives and financial positives, the
negative side is filled completely with the negative financial effects. Those mentioned were the cost of building stadiums,
the short term use of those stadiums, the potential for negative publicity, the cost of higher security, and lastly, the
higher taxes required to be able to pay the cost. The first negative financial effect I want to talk about is the higher tax
rate on the citizens. This stems from all the programs that the government needs to initiate in order to be able to
accommodate the incoming travelers. That includes housing improvements, transportation improvements, structural and
security improvements, and as a segway, the cost of the newly stadiums. The cost of building those new stadiums in the
present time, varies depending on the its location and features, but usually always has a price tag of a couple hundred
million dollars. After those expensive stadiums have been built, they are used for the month long event, and not all, but
most are not used again. Most notably, the Johannesburg stadium in south Africa is known now for being a vacant,
unused stadium. Another cost mentioned was the cost of security. With the worlds jump to globalization and the internet
being a sort of eagle eye, the government officials are forced to invest much more money into new ways of keeping
everyone involved in the event safe and out of harms way as best they can. And finally, the possibility of negative
publicity can be an indirect effect of low funding for the event. If the government cannot gather the money to support
any one of the needed programs, it could be found as cutting corners, and lead to negative publicity. Or worse, because
they aren’t able to support those programs, the well being of those taking part in this massive event, could be effected,
whether physically or mentally.
“IS IT WORTH IT?” CONT.
Andrew Zimbalist, the author of “Is it worth it?”, is a Robert A. Woods Professor of Economics at Smith
College in north Hampton Massachusetts. Hosting a large sporting event potentially offers both direct
and indirect economic benefits. With proper planning, hosting a large event can serve as a catalyst for
the construction of modern transportation, communications, and sports infrastructure, which generally
benefits less developed areas more. However, this article is split into a positives section and a negatives
section. In which, it helps to argue heavily on the twice as long negatives section, that proper planning is
rarely used during the games. This means that the average revenue of 4-5 billion dollars, is usually over
shadowed and not handled properly, because the money used for the games is not allocated properly to
help out its respected areas. This is usually where the gaps begin, from the beginning where the plan
doesn’t fit properly. The article provides information, based on the results from different Olympic
games. The Barcelona Olympics left the central Spanish government $4 billion in debt, the Japanese
government were left with an $11 billion debt, during the 2009 Athens games public investment
exceeded $10 billion, and in Beijing, it exceeded more than $40 billion.
THE ANNOUNCEMENT IMPACT OF HOSTING THE FIFA
WORLD CUP ON HOST COUNTRY STOCK MARKETS
Bijen Ramdas and Reinette van Gaalen are professors at the University of Johannesburg in South
Africa. This study is an investigation of the impact of hosting the FIFA World Cup soccer tournament
on the stock market of the host country when the tournament is announced. The sample under
examination for this study consists of the 6 FIFA World Cups. They were the Japan world cup, the
Germany world cup, the USA world cup, the South Africa world cup, the France world cup, and the
South Korea world cup. It is found that country stock markets react differently to the announcement
of the tournament. One finding that seemed to outline the entire case studies experiment was that
South Africa appeared to show a positive trend in stock returns at the tournament announcement
date, while Japan showed a decline in daily stock returns a day after the announcement of the
tournament, even though the higher GDP economy was Japan. Regardless though, it is found that for
the tournament announcement, most countries show insignificant, negative cumulative abnormal
stock returns for different event windows, between the period 1994 and 2010. Findings like this
helped to craft a conclusion that the positive economic effects identified with the FIFA World Cup, do
not necessarily translate into a positive reaction on stock market returns, for both shorter and longer
time horizons.
SYNTHESIS - Did the nation’s social living standard for lower
class or middle class citizens improve, as well did their social
standing within the world improve?
“Along came a mega-event: prospects of competitiveness for a 2010 FIFA World Cup host city” by Elizabeth Ann
Kruger∗ and Ernest Thomas Heath focuses on how countries can (if possible) use the one event to bring a major
increase to their tourism, leading to an increase in social living standards as well as how they are perceived by the
world. An increase in tourism leads to an increase in money inflow, which in most cases translates to the opportunity
and obligation to increase living standards for the current citizens as well as the tourist. Next, the article “Psychic
income and social capital among host nation residents: A pre–post analysis of the 2010 FIFA World Cup in South
Africa” by Willie Coetzee, Sue Geldenhuys, Kyriaki Kaplanidou, Brijesh Thapa, Matthew Walker, and Heather J. Gibson
spoke on the difference in social change from pre the event to a couple months post the event and the social change
in the longer term (year after the event). Factors of this study included government spending, tourism effects, as well
as the feel-good or euphoric feeling factor from the people of that country. It ties together to show if social change is
really relevant after the end of the games. Lastly, the piece “The 2010 FIFA World Cup and South Africa: A study of
longer-term effects and moderators of country reputation” by Jami Fullerton and Derina Holtzhausen explains the
survey conducted by the two writers on 1200 ameiricans who had been to the 2010 South African World Cup. They
documented their previous junctions and ideals about south Africa and then compared those to there post world cup
thoughts. The focus of the survey was to see how long increases in affection towards South Africa lasted. Overall,
these three pieces vocalize how the increase of tourism is never substantial enough to change a country’s overall
world social capital, and how the social living standard within the country doesn’t see as much change as people
believe it does.
“ALONG CAME A MEGA-EVENT: PROSPECTS OF
COMPETITIVENESS FOR A 2010 FIFA WORLD CUP
HOST CITY” CONT.
Elizabeth Ann Kruger and Ernest Thomas Heath are part of the Department of Tourism Management
at the University of Pretoria in Pretoria, South Africa. This article’s main focus is on how a major
event effects the tourism on a host country, which in this case is South Africa. Within this, it aimed to
determine whether a mega-event would make a greater or lesser contribution to the long-term
competitiveness of the host destination given the extent to which it was being. Existing literature on
destination competitiveness and mega-events was sited to identify relevant issues that would have to
be addressed at this level such as previous tourism and social standing reports of the country, as well
as reports based on surrounding countries. Qualitative and quantitative data were collected from the
host city on the eve of the 2010 World Cup to place these issues into perspective. The experimental
findings indicate how a mega-event can contribute to the competitiveness of a destination if it is
formed within a broader event strategy. This means that the necessary leadership must be in place to
facilitate this. Ultimately, this article helps to argue that no tourism destination is guaranteed longterm competitiveness by being offered the once-off opportunity to host a major international event.
Instead, the competitiveness is determined by the history of the government and the decisions it has
made.
“PSYCHIC INCOME AND SOCIAL CAPITAL AMONG
HOST NATION RESIDENTS: A PRE–POST ANALYSIS OF
THE 2010 FIFA WORLD CUP IN SOUTH AFRICA” CONT.
“Psychic income and social capital among host nation residents: A pre–post analysis of the 2010 FIFA
World Cup in South Africa” is an article written by Willie Coetzee, Sue Geldenhuys, Kyriaki Kaplanidou,
Brijesh Thapa, Matthew Walker, Heather J. Gibson who are instructors and professors at the
university of Florida, Texas A&M University, and Tshwane University of Technology. This study
examined perceptions of psychic income and social capital among South African residents prior to,
and following, the 2010 FIFA World Cup. Psychic income is “a measure of event-related
pride/euphoria and social capital is a proxy for social cohesion”. The results of this study suggest that
the event did increase the ‘feel good factor’ but the long-term contribution of the event to an
improved social fabric appears negligible at this stage. The euphoric feeling with hosting world cup
seemed to wear off after a couple months subsequent to the event. The government programs
initiated to improve social issues in their society, seemed to also fall behind, resulting in an addition
to the wear off the feel-good factor. Also mentioned was how the lack of contact with the locals who
these programs directly effect, contributed to the lack of planning and thus the downfall of the
possibility of a long term increase in social capital.
“THE 2010 FIFA WORLD CUP AND SOUTH AFRICA: A
STUDY OF LONGER-TERM EFFECTS AND MODERATORS
OF COUNTRY REPUTATION”
“The 2010 FIFA World Cup and South Africa: A study of longer-term effects and moderators of country
reputation” was written by Dr. Jami Fullerton and Dr. Derina Holtzhausen. Dr. Jami Fullerton is a professor
in the School of Media and Strategic Communications and holds the Peggy Layman Welch Endowed Chair
in Strategic Communications at Oklahoma State University. Dr. Derina Holtzhausen is a professor and
director of the School of Media and Strategic Communications at Oklahoma State University. The authors
did a study on 1200 US adults who went to South Africa for the world cup and their perceptions of south
Africa after the world cup. In addition, moderating variables including travel behavior, knowledge,
information processing and information seeking were examined between the people involved in the study.
It showed that “increases in affection toward south Africa were achieved after the world cup deteriorated
over the one-year span after the event”. Also determined was that a countries’ reputation is determined by
years of control by the government and cannot really be changed through one event. Additionally noticed
was, dimensions of leadership increased only slightly after the World Cup and maintained that level in the
longer term, while aspects of culture remained stable throughout. Ultimately, this article list that
researchers in the past warned about reputation decay after hosting a mega-event and argues that if there
is no follow-up communication or marketing strategy (plan), that a host country will be very susceptible to
it. And with no proper plan South African leaders cannot address issues of poverty, disease and violence in
the country itself or distance themselves from actions that portray poor leadership, no mega-event will
improve the country's reputation.
SYNTHESIS - Did regional and civil elites or other higher
executives/shot callers in charge of the construction use the
event in any way for their own personal gain, whether political or
financial, negatively effecting the life of the regular citizens?
The first article mentioned, “Why should you pay to host a party? An economic analysis of hosting sports megaevents” by Heather Mitchell and Mark Fergusson Stewart gives the reader great insight into how the world cup
bidding process can be detrimental to a country and especially how politicians use it and the actual event for
political gain. Borrowing off of the previous subtopic of social improvements, the feel-good factor or euphoric
feeling created from an event comes into play here, with its influences being used by the politicians for their
political gains. Next, the writing “The Global Politics of Sports Mega-Events: Underestimated costs and
overestimated benefits? Comparing the outcomes of sports mega-events in Canada and Japan” by David Whitson
& John Horne provides by mapping out how civil and regional elites make decisions that they believe will help
their community, but instead, are blinded by the opportunity to show off that community, ultimately worsening
that same very community or area. As the article provides insight into other consequences of the games, it hones
in on the governmental context. Between the two articles listed for this context, this particular one seems to
directly answer the question in play. Combined however, these pieces help me to show that yes, those in power
and control over the events, did in fact use the games for their own personal gain, negatively effecting the life of
the regular citizens.
“WHAT SHOULD YOU PAY TO HOST A PARTY? AN
ECONOMIC ANALYSIS OF HOSTING SPORTS MEGA-EVENTS”
CONT.
Heather Mitchell and Mark Fergusson Stewart are professors in Finance and Marketing at the School of
Economics, at RMIT University in Melbourne, Australia. This article give me the first glimpse into the
governmental/political context in that it spoke on how politicians capitalize on the major sporting
events. If a politician wins the bid, then they bring to the table on election day, “I won the bid for the
people”. It then presents evidence that shows that these sports contests make people happy, and
argues that politicians capitalize on this feel-good factor created from the event; harnessing the hubris
associated with these events for political gain. The article then contends that the best way to reduce
the politics associated with bidding for mega-events is to allocate them via an auction, rather than the
wasteful rent-seeking methods that are currently used. Because the people of the country don’t know
the true cost of games or even the money involved in the bidding process, they blindly follow the
politician into thinking about how amazing the games in their own country would be. This is the roots
of the financial issues created by these games. Countries that aren’t adequately equipped for handling
the games, end up with the rights.
“THE GLOBAL POLITICS OF SPORTS MEGA-EVENTS:
UNDERESTIMATED COSTS AND OVERESTIMATED BENEFITS?
COMPARING THE OUTCOMES OF SPORTS MEGA-EVENTS IN
CANADA AND JAPAN” CONT.
This article states that urban and regional governments compete with one another to offer incentives to private
developers of sports and entertainment complexes, and even entire downtown entertainment districts, in the belief
that this is the best way to bring investment, shopping, and vitality back to decaying downtowns. As a result,
developers of professional sports venues and other upscale entertainment facilities have been able to extract public
subsidies and tax holidays from governments anxious for their business, even while the same governments have
been cutting back spending on social services. Because the government officials think that this will increase the
positive energy and outlook on the community, they continue to invest in it, not knowing that the opportunity cost
on the community is higher than the possible return. The example that this piece uses to best portray this finding, is
the 1976 Montreal Games. This was an event that was plagued highly with officials trying to lure major construction
and architectural players to their area in order to increase positive outlook on the designated area. In conclusion, the
writing later speaks on the unsuccessful bid of Toronto for the 1996 Olympic games. A core of social democratic
Toronto Councilors worked with city officials to develop what came to be called the ‘Toronto Olympic Commitment’,
a document that committed Toronto to fulfilling a number of social objectives, in the event that the city was
awarded the Games. This was subject to much contrevsery due to the fact the major world sporting events require
exponential amounts of investment from the host country. Ultimately, the group, made up of major retail heads as
well as real estate and construction players, who designed the plan, did not have their way, leading to the benefit of
the community.