Did Losing the World Cup Hurt the U.S. Economy?

November 30th, 2010 Joel Beattie Leave a comment Go to comments

The economic and cultural impact of hosting a FIFA World Cup is significant for any nation, even one as developed as the United States. Aside from creating new jobs and generating billions of dollars in revenue for the lucky cities, hosting the quadrennial event also propels the metropolitan destinations into the global spotlight, making them a prime location for tourism and industry.

So when the U.S. was passed over for the 2018 and 2022 World Cup bids–which went to Russia and Qatar, respectively–it certainly stung. Given that Chicago was passed over not too long ago as a potential host for the 2016 Olympics, the U.S. has now scored nil on three tries as a suitor for major international sporting events. But despite the ego check, what exactly is the U.S. losing out on in terms of economic impact?

Monetary Impact of World Cup

The U.S. hosted the tournament in 1994, which is still considered relatively recent for an event that’s held only once every four years. In that tournament, Los Angeles, New York, Boston and San Francisco served as the hosting cities and reached combined revenue of around $2 billion. However, that was over a decade and a half ago and the world of sports entertainment has evolved exponentially since then.

On the surface, the World Cup features the highest level of spirited competition for the sport and serves as a forum for national pride, but underneath, the tournament operates as a huge business not unlike any other major international corporation. FIFA generates about $2 billion in profits from the tournament, mainly because it receives enormous revenue from selling the television rights and having the host country subsidize a majority of the costs.

World Cup bids consist of candidate countries presenting proposals such as new stadiums and generous public funding to subsidize costs. The bidding process itself can cost millions for each country alone and developing the infrastructure for the hosting country can run up costs into the billions.

According to a report from CNN, the cost of hosting the tournament can balloon to over $5 billion for a country, but the economic impact can justify that hefty investment.

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For example, the most recent host of the World Cup was South Africa, which is estimated to have experienced a gross economic impact of $12 billion and saw over 150,000 part-time, full-time, permanent and temporary jobs created. With a rising unemployment rate, hosting the event could have been just the jolt our job market needed

World Cup Economic Stimulus

There’s an undeniable financial impact of hosting the FIFA tournament, but the sustainability of that windfall isn’t necessarily permanent. Most hosting cities need to make significant investments into public works such as new stadiums, improved roads and transportation systems, renovating local establishments and costs associated with handling the volume of visitors.

In return, the economy sees a spike from ticket sales, tourist spending, media attention and huge marketing dollars from brands and corporations like Nike, Coca Cola, McDonald’s and many others. However, once the month-long tournament is over and the attention fades, so goes the revenue.

While hosting a major international event like the World Cup or Olympics does have an economic impact, it is mostly short-lived. It is up to the country and the hosting cities to find ways to handle the legacy infrastructure like stadiums, buildings and roads after the event. There is definitely a hangover effect once the festivities are done.

U.S. and the World Cup

Unlike the rest of the world, soccer has never truly been a relevant sport in the United States and hosting a World Cup would have had a huge lasting impact in promoting the sport here. Though its popularity has grown in recent years, most fans prefer the superior products of leagues overseas than that of the struggling Major League Soccer at home.

FIFA, the governing body of the World Cup, has said that it wants to bring the tournament to new lands and backed it up by bringing the event for the first time to Russia and the Middle East.

One of the advantages that the U.S. had then and that it has now is the fact that it already has the infrastructure needed to host the World Cup or Olympic Games, limiting the additional investment and public funding needed to handle the tournaments. Alas, none of that matters until 2026 as far as soccer fans are concerned.

Does the U.S. losing the World Cup bid affect you?

Henry Truc is an experienced business writer and personal finance enthusiast. He cut his teeth learning about balance sheets and income statements for publicly traded stocks and hopes to use those same principles to help readers in need with their own personal budgets. His work has appeared on Yahoo! Finance, Nasdaq.com, and many other publications. He has interviewed CEOs and Wall Street analysts, as well as investment fund managers and economists. If you have a problem; if no one else can help, and if you can find him… maybe you can ask him a question relating to personal finance.Follow him on Twitter.

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