The FIFA World Cup is well underway and the 211 teams that were eligible to qualify have become 32 teams. These 32 teams are split into 8 groups of 4 and play a round robin of three matches before the top 2 teams from each group advance to the round of 16. They then compete in the knockout stages until only one team is remaining and crowned world champions!
This year marks the 21st FIFA World Cup tournament; it has taken place every 4 years since 1930, excluding 1942 and 1946 due to the Second World War. It is an international event that attracts more viewers than the Olympic Games and the final match often attracts roughly 700 million viewers; nearly one tenth of the world’s population!
In light of this, it’s no surprise that the 2018 World Cup is predicted to generate around $6.4 billion of revenue.
How will the costs stack up against this huge revenue figure?
Russia has budgeted to spend up to $13.2 billion on preparing to host the World Cup, making it the most expensive world cup in terms of cash spent. However, after adjusting for inflation, we can see that Brazil 2014 remains the most expensive World Cup in history!
It seems pretty obvious then that Russia will be making a huge loss of $6.8bn from hosting the World Cup. So why would they fight so hard to host the World Cup in the first place?
Well, as with the 2014 World Cup in Brazil, much of the money will have been spent on improving Russia’s transport and communications infrastructure and upgrading or building stadiums for the tournament. In fact, Russia has spent nearly $4.2 billion on upgrading or building stadiums in preparation for the tournament. A breakdown of this spending can be seen below:
Therefore, some of these costs can be seen as more of an investment rather than an expense. In fact, if ticket revenue of $782 million is expected and the investment in stadiums is around $4.2 billion, then the Return on Investment (ROI) of these stadiums is roughly 20% over the duration of the World Cup. This is a significant return considering that the stadiums could have useful lives of up to 50 years!
The most cost-effective stadium is the Luzhniki Stadium as it has the lowest cost per seat. It also has the largest capacity and will therefore play host to the tournament’s most high-profile matches.
The Luzhniki Stadium also provides the highest Return on Investment (ROI) at 23% over the period of 1 month and is likely to generate more revenue long after the World Cup has finished due to the fact that it often hosts a variety of large events.
However, there is some concern that many of these stadiums will fail to generate enough revenue after the World Cup has concluded; especially since many of them will be used by 2nd or even 3rd tier Russian teams. To help combat this potential problem, Russia have spent a further $200 million on ensuring that the stadiums will have a life after the tournament has finished. The hope is that this massive investment will help to revive the Russian football league and increase the average match attendance, which is currently at roughly 14,000 per match and remains one of the more poorly attended leagues in Europe.
The World Cup will also likely provide the surrounding businesses with increased income over the next month with the food, hotel, telecoms and transport industries being the main beneficiaries. For example, Russia have built 11 new hotels in Moscow especially for the world cup; increasing the hotel room count from 60,000 to 63,000. This is significant if you consider that Moscow is just one of 11 cities hosting World Cup matches. In fact, Russia have spent around $680 million on new hotels throughout these cities to help accommodate around 1 million international world cup fans.
Only time will tell how successful the Russian World Cup will be. It is unsure whether it will be a financial success, but it’s quite possible that it could be successful in other ways. For example, Russia has been perceived as a controversial nation lately, however the World Cup could alter the general public’s perception of Russia if the World Cup runs smoothly. In fact, Experts predict that the majority of the 1 million travelling football fans are likely to visit Russia again within 2-3 years after the World Cup has concluded, providing a huge boost to Russian economy long after the event has concluded.