Government Spending On Sports Hosting Rights: will governments be able to justify spend on future in
Cities and countries have unique backgrounds and economic landscapes. Whether a potential venue is emerging, revitalising or simply sustaining its place on the world map, hosting major sports events can be a useful tool. In recent years there has been an increasing realisation of the significant benefits to be earned from hosting major international sports events – both tangible impacts such as additional expenditure by visitors and intangible such as the impact on national pride, sport’s profile and participation.
Event Hosts can benefit from increased business activity and potential inward investment, as well as using the event as a catalyst for major infrastructural improvements and regeneration activities. A good recent example is the 2015 Rugby World Cup (RWC), which is considered the most successful RWC to date. According to a post event study by Ernst & Young, ‘The Economic Impact of Rugby World Cup 2015’, the event generated nearly £2.3 billion in economic output, and at a regional level a total of £980 million was generated for the local economies of the eleven host cities. The RFU’s investment into legacy programmes resulted in more Rugby playing schools, an increase in coaches and volunteers and improved facilities at grassroots clubs. The nation was exposed to a global market, which aided in attracting future business investment and tourism due to an enhanced perception of England as a place to visit.
Hosting major international events usually comes with significant costs; Bermuda, for example, invested $64.1 million USD to host the 35th America’s Cup (AC35). Venues will all have differing reasons as to why they bid to host sporting events, but financial return will always be a priority to justify such a major investment. The AC35’s total economic impact on Bermuda’s GDP was US$336.4 million, delivering an impressive 525% return-on-investment (ROI). As well as the impact on Bermuda’s GDP, AC35 also left a rich collection of press coverage in its wake, with an estimate of US$76.3m of future legacy tourism spend.
What will be interesting as we start to recover from the COVID-19 pandemic, is whether public spending on major sports events will be impacted. With huge financial strain being placed on governments across the world, there will be significant scrutiny placed on all spending. Will governments be happy to be seen to be spending large sums on hosting sporting events, when there will be pressure on them to support those worst impacted by the crisis?
What we can be sure of is that there will be an even greater need for rightsholders to demonstrate a significant ROI in order to access public funding. Governments will need to be assured that what ever they invest in over the next few years helps them to achieve their long-term objectives, whilst balancing the short-term fiscal needs. We know that major sports events can increase the profile of the location (tourism, trade and investment), boost GDP and employment, as well as boosting national moral. But, competition amongst rightsholders to secure host venues is going to be fierce, so being able to quantify the expected ROI of an event will be incredibly important.
The pandemic has allowed for creativity to flow, with the sports industry seeing advancements in almost every sector. As rightsholders and partners start to understand and adjust to the new climate, negotiations are bound to be – and need to be - done in a very different way. To be able to access government funding, rightsholders need to prepare purpose-built hosting opportunities that cater to each government objective.
Now is the opportunity for promoters to offer stripped back proposals, which expel any unnecessary spend and use an innovative approach to promise high quality sports events executed in the a cost-effective manner. Making commitments to provide local businesses with opportunities to secure contracts in areas such as in the marketing, logistics, operations, and security, will go a long way to maximising the impact on the local economy.
Tourism is very important to many countries and cities around the world and this pandemic has hit tourism hard. However, it will come back and therefore it will be important for cities to be on the front foot for when restrictions do finally ease. By committing to major sports events now, event hosts can ensure that they hit the ground running when international travel recommences. Directly driving tourism at the event can increase the economic profile of a country/city, which in turn can attract inward investment to help restart the economy.
Bermuda is a great example of a host committing to continue their sports event investment through the pandemic. The Bermuda Championship on the PGA TOUR, which was first hosted in 2019, was last week the first event on the TOUR to allow spectators back. The same week, Bermuda also staged the 70th Bermuda Gold Cup and Open Match Racing World Championship. For a small island nation, a flow of tourism is crucial, so making sure these events were able to continue during this difficult period was clearly very important.
Rightsholders may wish to target locations that have historically invested in sports, such as Singapore, which can use sports to give tourism a much needed boost in the region. Speaking at the recent “All That Matters Online 2020” sports and entertainment industry conference, Lim Teck Yin, chief executive of the government authority ‘Sport Singapore’, spoke of how hosting a high-profile global event is a top priority for Singapore to showcase that the country is back and “open for business”.
While maximising the financial ROI will be a critical objective to meet, we should not forget that sport, in itself, represents a ritual and release for so many in such challenging times. Hosting major sports events can create local identity, national unity, and city pride. In a world that has been shaken, now more than ever, sports can play a vital role in bonding communities, building healthier societies and delivering happiness.
Therefore, highlighting the intangible benefits of hosting a major event will also be important to the justification for the investment of taxpayers money in professional sport. The demand for social ROI is increasing and although hard to quantify, can help swing the balance in cost-benefit appraisals. Legacy was embedded in the London 2012 Olympic Games from the very beginning. The Games offered a ‘feel good factor’ for communities, provided an opportunity to accelerate the regeneration of East London, and created lasting positive impacts for future generations. Sports facilities and public improvements aided in social development and further increased intangible legacies.
Understanding the host city’s short and long term social and environmental objectives will be crucial in presenting a hosting opportunity that progresses the region’s existing strategies for achieving its ambitions. Sports officials should get creative with different activation spaces, using side events and conferences to diversify an events portfolio. Offering an event that is different and one which intends to use its global platform to showcase social and environmental issues will be very attractive to governments.
It has been interesting to see Formula One use it’s platform to shine light on current global environmental concerns by recently announcing its commitment to having carbon-zero operations by the end of the decade. As governments and host cities reorder their own priorities, the environment and sustainability is almost always going to be high on their agenda. Today, sports events have no excuses to operate in a way that impacts negatively on the environment, so amplifying a message about environmental protection and sustainability must be a priority.
Although many sports have been able to restart, they have looked very different without the presence of fans in most parts of the world. The absence of fans will have had a significant impact on the ROI that a host is able to generate, and is something that governments will be very cognisant of as they negotiate future hosting agreements.
Force majeure clauses, have always been present in hosting agreements, but perhaps haven’t been given as much attention in the past. It is likely event hosts will be taking more time to fully understand these provisions, with disaster planning and insurance elements being considered in much more detail. It will be essential for rightsholders to think very carefully about their risk mitigation strategies and provide governments with a very clear understanding of how future situations, like COVID-19, will be dealt with.
Sport is omnipresent, and this has only been reinforced through its period of absence, with sports returning to similar, if not greater levels of demand. It would appear that governments are still very open to hosting international sporting events and maximising the significant benefits that they create. At a time when public finances are stretched further than they have been for decades, it is up to the rightsholders to effectively and clearly present hosting opportunities that will help restart economies. Presenting an opportunity that can be packaged as a legitimate part of a recovery strategy, will be key to securing the public budget.
Australia is a great example of a government backing bids for major sports events with the intent to use them as strategic investments in the country’s long-term recovery from COVID-19. The Australian government has most recently injected £4.8 million of additional funding into the country’s bid for the 2027 Rugby World Cup. The country has also won the right to stage the FIFA Women’s World Cup in 2023 along with NZ, and announced its intentions to bid for the 2032 Olympic and Paralympic Games. It is clear that Australia understands that the social and economic benefits, which come from staging global events, can flow through the entire economy. Playing host to sporting events of this size is seemingly critical for the rebound of Australia’s tourism industry, the boosting of national moral, and helping rebuild the post-pandemic economy.
When ROI can be effectively communicated and if events are shown to be able to efficiently maximise both tangible and intangible benefits, international sports events can - and should - become a significant part of the post-COVID rebuild in many countries around the world.