cba of the 2022 fifa world cup
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Cost benefit analysis of the
2022 FIFA World Cup
November 2010
Report by Access Economics Pty Limited for
Department of Resources, Energy and Tourism
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While every effort has been made to ensure the accuracy of this document and any attachments, the uncertain nature of economic data, forecasting
and analysis means that Access Economics Pty Limited is unable to make any warranties in relation to the information contained herein.
Access Economics Pty Limited, its employees and agents disclaim liability for any loss or damage which may arise as a consequence of any person
relying on the information contained in this document and any attachments.
Contents
Key messages ..................................................................................................................................i
Executive summary ........................................................................................................................ ii
1 Background ......................................................................................................................... 1
2 The FIFA World Cup ............................................................................................................ 4
3 Framework of the analysis .................................................................................................. 8
3.1 Some key preliminaries ........................................................ .................................................. 9
4 Costs of the World Cup ..................................................................................................... 10
4.1 Infrastructure ............................................................ ........................................................... 12
4.2 Bidding costs ........................................................................................................................ 13
4.3 Security ................................................................................................................................ 13
4.4 Transport.............................................................................................................................. 14
4.5 Costs to Government ................................................................................................... ........ 14
4.6 LOC Budget .......................................................................................................................... 14
4.7 Impacts on other sporting codes ........................................ ................................................. 16
4.8 Broader impacts .............................................................................................................. ..... 17
4.9 Summary of the costs of staging the World Cup ................................................................. 18
5 Benefits of the World Cup ................................................................................................ 19
5.1 Tourism ................................................................................................................................ 20
5.2 Tourism and sporting infrastructure legacy benefits ........................................................... 23
5.3 FFA friendly matches............................................................................................................ 24
5.4 Other benefits ........................................................... ........................................................... 255.5 Ticket revenue ..................................................................................................................... 25
5.6 Economic welfare impacts of staging the World Cup .......................................................... 26
5.7 Broader impacts .............................................................................................................. ..... 28
5.8 Economic welfare and labour market assumptions............................................................. 29
5.9 Summary of the benefits of staging the World Cup ............................................................ 32
6 Weighing up the impacts of the World Cup ..................................................................... 33
6.1 Quantification of costs ......................................................... ................................................ 33
6.2 Quantification of benefits .................................................................................................... 37
6.3 Results summary ................................................................. ................................................. 38
6.4 Key uncertainties ................................................................................................................. 39
7 Risk analysis ...................................................................................................................... 40
8 Concluding comments ...................................................................................................... 46
Appendix A: Key analytical assumptions ..................................................................................... 47
Appendix B: Key results ............................................................................................................... 49
Appendix C: Net tourism impact of the World Cup .................................................................... 51
Appendix D: Principles for assessing major events ..................................................................... 54
Appendix E: The Access Economics CGE model .......................................................................... 57
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Charts
Chart 6.1 : Costs and benefits of hosting the World Cup Scenario 1: All stadia ..................... 34
Chart 6.2 : Costs of hosting the World Cup Scenario 1: Full stadia ........................................ 34
Chart 6.3 : Costs and benefits of hosting the World Cup Scenario 1: All stadia ..................... 35
Chart 6.4 : Costs of hosting the World Cup Scenario 2: Partial stadia.................................... 35
Chart 6.5 : Costs and benefits of hosting the World Cup Scenario 3: Overlay costs .............. 36
Chart 6.6 : Costs of hosting the World Cup Scenario 3: Overlay costs ................................... 36
Chart 6.7 : Benefits of hosting the World Cup ............................................................................ 37
Chart 6.8 : Costs and benefits of hosting the 2022 World Cup ................................................... 38
TablesTable 2.1 : Government guaranteesError! Bookmark not defined.Error! Bookmark not defined.
Table 4.1 : FIFA World Cup scenarios .......................................................................................... 10
Table 4.2 : Costs of the 2022 World Cup ..................................................................................... 11
Table 4.3 : Estimated stadium infrastructure costs .................................................................... 12
Table 4.4 : Budgeted expenditure of the 2006 World Cup Organising Committee .................... 15
Table 4.5 : Quantified costs of the World Cup and Confederations Cup .................................... 18
Table 5.1 : Benefits of the 2022 World Cup ................................................................................ 19
Table 5.2 : Fixture allocation ....................................................................................................... 20
Table 5.3 : Net tourism effect ..................................................................................................... 21
Table 5.4 : World Cup ticket allocation ....................................................................................... 25
Table 5.5 : Economic welfare benefits of staging the 2022 World Cup ...................................... 30
Table 5.6 : Sensitivity of economic welfare benefits to labour market assumptions ................. 31
Table 5.7 : Quantified benefits of the World Cup and Confederations Cup ............................... 32
Table 6.1 : World Cup costs ......................................................................................................... 33
Table 6.2 : World Cup benefits .................................................................................................... 37Table 6.3 : Net benefits of hosting the 2022 World Cup............................................................. 39
Table 7.1 : Key risks of hosting a World Cup ............................................................................... 41
Table 7.2 : Sensitivity analysis of key inputs ............................................................................... 44
Table 7.3 : Impact of additional labour market capacity ............................................................ 45
Table A.1 : World Cup CBA key assumptions .............................................................................. 47
Table C.2 : Net tourism effect ..................................................................................................... 53
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Figures
Figure 4.1 : Stadia development scenarios ................................................................................. 11
Figure 4.2 : FIFA financial platform ............................................................................................. 15
Figure 5.1 : Macroeconomic expansionary effects ..................................................................... 30
Figure 7.1 : Risk analysis framework ........................................................................................... 40
Figure 7.2 : NPV of costs and benefits of the World Cup ............................................................ 43
Figure C.1 : Host nation net tourism effect ................................................................................. 51
Figure E.1 : Key components of AE-RGEM .................................................................................. 57
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Acronyms
AFL Australian Football League
ARU Australian Rugby Union
BCA Business Club Australia
CA Cricket Australia
CBA Cost benefit analysis
CGE Computable general equilibrium
DRET Department of Resources, Energy and Tourism
FIFA Fdration Internationale de Football Association
FFA Football Federation Australia
GDP Gross Domestic Product
GNP Gross National Product
GST Goods and Services Tax
LOC Local Organising Committee
NPV Net present value
NRL National Rugby League
PwC PricewaterhouseCoopers
RWC Rugby World Cup
TRA Tourism Research Australia
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Key messages
This analysis examined the economic benefits and costs of Australia hosting the 2022 FIFA WorldCup, with a focus on the direct financial aspects of the tournament. The study is intended to help
governments better understand the nature and scale of the impacts of Australia hosting theevent.
Three distinct cost scenarios were examined, based on a different allocation of stadiuminfrastructure costs.
These stadium cost scenarios reflect underlying uncertainty regarding the nature andextent of stadium infrastructure commitments currently in the development pipeline,
and therefore which stadium costs can be attributed to the tournament. In moving from
scenarios 1 to 3, an increasing level of stadium development is not contingent on the
tournament, therefore reducing the costs of the event.
The headline estimates for staging the 2022 World Cup under the three scenarios are presentedbelow.
Scenario Net benefit Stadia costs
Scenario 1 Full stadia costs -$1,477 million $2,748 million
Scenario 2 Partial stadia costs -$305 million $1,137 million
Scenario 3 Overlay costs $266 million $346 million
Note: Net benefit estimates expressed in net present value terms. Stadia costs are in real dollars
(2010 prices).
By far, the major cost factor for the tournament relates to the development of stadiuminfrastructure. (Under Scenario 2, for example, stadium related costs comprise around 55% of all
costs.) The financial benefits of the tournament arise predominantly through internationaltourism. Accordingly, the main uncertainties relate to these two dominant cost and benefit
drivers.
In particular, a key risk of staging the tournament concerns cost overruns for majorinfrastructure works (irrespective of the different stadium scenarios). For example, a 10%
increase in infrastructure costs will lower the net benefit by $81 million for Scenario 2.
While the 12-year tournament lead time adds considerable uncertainty to all benefit and costelements, it also provides some important practical advantages. It potentially allows greater
time and scope to put in place smarter, more integrated and cost effective solutions for
tournament related developments, including in response to changing economic and market
conditions.
Hosting the World Cup will involve operational disruptions and financial costs to certainprofessional sports (the AFL, ARU, NRL and Cricket Australia) which use various stadia and
facilities allocated for the event. The memorandum of understanding between the FFA and
relevant sports will help frame ongoing discussions. These impacts are not expected to be large
relative to other event costs but are potentially sensitive. The tournaments long lead time will
also provide greater opportunities to manage these commercial issues.
Many cost estimates and development schedules adopted in the analysis are based onpreliminary assessments chiefly because of FIFAs 12-year bidding timetable. Over time, more
information regarding event costs and other key policy parameters will help provide greater
surety to the estimates.
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Executive summary
The FIFA World Cup is the biggest sporting event in the world, attracting a wider audience and
following than the Olympics. The 2006 World Cup in Germany had a total cumulative
television audience of over 26 billion, and, while official estimates from the 2010 tournamentin South Africa are yet to be released, FIFA has anticipated a similar television audience.
The FFA is currently bidding for Australia to host the 2022 FIFA World Cup and the Australian
Government has committed $45.6 million in financial support (an earlier bid to host the 2018
tournament has been formally withdrawn). If Australia is successful, the event has the
potential to deliver considerable benefits to the community. But it will also involve a range of
significant costs and risks, many of which will be directly borne by government.
The FFA submitted its bid book to FIFA for consideration on 14 May 2010. The proposal
includes 12 stadia across 10 host cities nationwide, and would see World Cup matches played
across six states and territories. A successful Australian bid would see the World Cup held inan Asian Football Confederation member nation for only the second time in the tournaments
80 year history.
This report, which was commissioned by the Department of Resources, Energy and Tourism,
examines the economic benefits and costs of Australia hosting the 2022 World Cup. The
analysis aims to inform ongoing policy decisions regarding the Commonwealths involvement
in staging the tournament and accordingly takes a national whole-of-economy focus.
Framework of the analysis
Mega events such as the FIFA World Cup typically confer a range of important economicbenefits. These include additional tourism activity and improved infrastructure and transport
systems. More indirect benefits are also potentially available through showcasing a city or
country as a business and tourism destination and building a sense of community pride and
cohesiveness.
But there are also major costs and risks involved in hosting large events. These principally
involve the actual costs of constructing necessary infrastructure and providing security, the
real risks of significant cost overruns and underutilisation of facilities following the event.
Further, costs can arise through displacement of non-event visitors and added inconvenience
for residents during the period of the tournament.
The analysis focuses on the direct financial aspects of the 2022 World Cup. Many important
social costs and benefits have not been quantified. There are a range of practical and technical
challenges to quantifying such impacts and, under agreed framework principles (see
Appendix D), Access Economics considers these are best treated in a qualitative sense. Among
other things, this approach avoids the potential overestimation of non-financial benefits a
common issue with event related analysis. It is also consistent with a conservative framework
which allows relevant decision-makers to gauge the veracity of broader social impacts within
the overall context and dimensions of market-based costs and benefits.
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Impacts of the tournament
Revenue and cost arrangements for the tournament
Under the commercial arrangements of the tournament, most of the key revenues from the
World Cup flow to FIFA. The arrangements guarantee FIFA exclusive rights to media,
broadcasting, ticketing and relevant merchandise revenues.
However, FIFA provide significant funding to the World Cup host nation as part of a financial
platform. Under this platform, the primary source of funds is generated through ticket sales,
which initially flow through to FIFA. Much of this revenue is then returned to fund the
operations of the Local Organising Committee (LOC), which is established as a FIFA subsidiary.
In previous tournaments, the LOC budget has been primarily funded by FIFA using this system
of financial support. The analysis in this report assumes this arrangement will continue.
LOC organisational and administrative expenditure in Australia in the lead up to the World Cup
provides a considerable welfare gain for the Australian economy. However, expenditure byinternational visitors attending the event is the most tangible financial return from the
tournament. The welfare gains for Australia through tourism are primarily accrued in the
tournament year (2022) and far outweigh other benefits potentially generated from hosting
the World Cup.
Like other mega events, the costs of hosting the World Cup are considerable. A requirement
of the World Cup bidding process is for bidding nations to sign various guarantees to FIFA that
cover a range of commercial, legal and operational arrangements. These guarantees commit
governments to substantial costs, such as providing necessary infrastructure, security and
transport requirements.
In particular, the host nation is required to provide 12 stadia to FIFA standards. These facilities
are underwritten by a comprehensive suite of guarantees and transfer significant development
risk onto government, especially as stadium infrastructure represents a significant share of
overall tournament costs.
Stadia development scenarios
The Department has provided three scenarios in which to analyse costs associated with
stadium construction (see Table i).
Stadia development costs are separated into construction and overlay costs. Overlay costsrefer to more temporary costs of preparing stadia to ensure they meet FIFA requirements
for example changing seating arrangements for a rectangular pitch and are assumed to
occur in the tournament year. All other (non-stadium) costs of staging the tournament are
consistent across all three scenarios.
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Table i: FIFA World Cup scenarios
Scenario Details
Scenario 1 Full stadia costs All stadium construction, upgrade and overlay costs associated
with the 12 stadia in the bid book allocated to the World Cup.
Scenario 2 Partial stadia costs Stadia costs incurred directly as a result of Australia hosting the
World Cup, specifically upgrades to stadia in Townsville and
Newcastle, and new stadia in Blacktown and Canberra. Includes
all overlay and temporary costs for other stadia required to
become FIFA compliant.
Scenario 3 Overlay costs Overlay costs for the 12 stadia nominated in the bid book.
The three scenarios considered in the analysis reflect current uncertainty regarding how
infrastructure costs can be attributed to the tournament. Under the FFAs bid, a suite of
12 stadia has been proposed: some of these are yet to be built, others will require substantialupgrade and refurbishment and all will require a level of overlay for the tournament. Almost
all the major greenfield stadia contained in the bid are under some degree of active
development consideration independent to the World Cup process (for example, Perth and
Adelaide Oval).
The three scenarios considered reflect the likelihood of those stadium works being developed
irrespective of Australia staging the World Cup in 2022. Moving from scenarios 1 to 3, a
greater level of stadium development is essentially pre-committed and not contingent on the
tournament, therefore reducing the cost of the event.
Analytical findingsThe three stadia cost scenarios have a substantial bearing on the net financial impacts of
hosting the 2022 FIFA World Cup. Staging the event is expected to result in a net cost under
Scenario 1 and 2, and provide a net benefit under Scenario 3 (based on the allocation of stadia
costs outlined in Table ii above).
Scenario 1 (full stadia costs) results in a net cost of$1.5 billion.
Scenario 2 (partial stadia costs) results in a net cost of$305 million.
Scenario 3 (overlay costs) provides a net benefit of$266 million.
The significant differences between each scenario are driven by the allocation of stadia costs,
with all other aspects of the tournament common to each scenario. For example, the
significant difference between Scenario 1 and 2 (which both involve a net financial cost) is due
to around $1.6 billion of stadium construction being allocated away from the tournament.
Scenario 3 provides a net gain of $266 million from hosting the tournament. This is due to all
permanent stadium construction costs being allocated to the baseline, with only overlay costs
of $346.2 million allocated specifically to the World Cup.
Stadium infrastructure and security costs account for the majority of costs under each
scenario, with security being the major cost component under Scenario 3. Stadium costs vary
from $2.7 billion under Scenario 1 to $346.2 million under Scenario 3.
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The benefits of the tournament arise predominantly through international tourism. The event
is expected to attract large numbers of overseas spectators, as well as officials and the teams
themselves. The welfare gain from the direct expenditures from these arrivals is projected to
be $726 million in net present value terms (estimation of the welfare gain from direct
expenditures from overseas parties is discussed below).
The next largest benefit is generated from the LOC, which is largely funded by FIFA. LOC
expenditures in Australia for the 2022 World Cup are estimated to have a total welfare gain of
around $173 million.
Table ii below details the key costs and benefits of staging the World Cup. On a per capita
basis, hosting the 2022 World Cup would involve a financial cost of around $66 per person
under Scenario 1 and provide a benefit of around $12 under Scenario 3.
Table ii: Net benefits of hosting the 2022 World Cup
Benefit / Cost Scenario 1Full stadia
Scenario 2Partial stadia
Scenario 3Overlay costs
Comments
NPV NPV NPV
Benefits $ million $ million $ million
Tourism
(incl. legacy)
726.1 726.1 726.1 Major benefit but uncertaintyregarding number of tourists,
expenditure and length of stay
LOC expenditure 172.7 172.7 172.7 LOC budget estimate provided byFFA
Television
broadcasting
45.9 45.9 45.9 FIFA broadcast partner expenditurein Australia
Other World Cup
related
113.9 113.9 113.9 Consumer surplus, GST revenuefrom international ticket sales and
LOC operating surplus
Total Benefits 1,058.7 1,058.7 1,058.7
Costs
Bidding 45.6 45.6 45.6 Australian Government contribution
Infrastructure 1,947.8 775.8 204.1 Based on FFAs InfrastructureConsortium estimates
Transport 49.8 49.8 49.8 Based on transport assessmentreport by Arup
Security 333.2 333.2 333.2 Estimates provided by AttorneyGenerals Department
Cost to Government 97.1 97.1 97.1 Host city agreements andgovernment guarantees
Other 62.5 62.5 62.5 Training facilities and costs incurredby other sports
Total Costs 2,535.9 1,364.0 792.3
Net Benefit -1,477.2 -305.3 266.4
Benefit per person ($) -66.0 -13.6 11.9
Note: Per capita estimates based on a population of 22.38 million as at July 2010, Australian Bureau of Statistics.
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Other potential impacts
Hosting a major event also generates important benefits that are difficult to quantify and
therefore need to be considered in a more qualitative sense.
Major events are generally seen to confer a positive halo effect on the residents of the city
and/or nation in which the event is held. These effects are generally attributed to several
factors, including national pride and general public enthusiasm and can be usefully
categorised as feelings of wellbeing. Importantly, such effects can be experienced broadly
across the community and do not necessarily depend on individuals attending the event.
Further benefits potentially generated by a major event involve a greater likelihood to winning
other events and demonstrating the advantages of conducting business and trade in a
particular locality. While these effects can represent legitimate positive spillovers from events,
it is important to recognise that their magnitude can be overstated and any effects are
extremely difficult to verify after the event.
For example, benefits from trade gains rely on assumptions as to whether any benefit is truly
incremental due to the World Cup being held in Australia versus another country, or whether it
is a benefit that is merely brought forward.
While these effects are no less important than the other quantifiable benefits discussed above,
they are certainly less tangible. Including them in a cost benefit analysis (CBA) would require
explicit quantification of the community wellbeing generated. Given the difficulty in assigning
an economic value to these benefits, they have not been included in the analysis and would
need to be considered alongside the market based costs and benefits.
Uncertainties and risks
Given the scale of the tournament, its national footprint and the costs involved, the decision to
bid for the World Cup and the extent of government involvement are major policy issues.
Importantly, these decisions should be made on the basis of robust up-to-date information.
As part of preparing the bid, the FFA commissioned a number of specialist studies into the
major infrastructure and operational requirements to stage the tournament in 2022. Many of
these cost estimates have been adopted as part of this analysis. While these are based on
recent specialised assessments, and represent the best available information at the time of
writing, they are still greatly reliant on a range of assumptions and limitations. This
uncertainty most heavily concerns the costs associated with stadium infrastructure, securityand transport.
In particular, security and stadium infrastructure costs are expected to have the greatest
potential to increase the net cost of hosting the tournament. While the security costs were
developed based on the current environment, how security is viewed and enforced over the
next decade or so is dependent on many international factors and may change substantially.
The cost of stadium construction is highly likely to change over time and cost estimates should
be updated to reflect changes. There is also the possibility that stadium configurations may
change or that there are changes to the actual suite of stadia proposed for the tournament.
Such changes will have both cost and revenue implications.
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At a higher level, the Australian economy will look very different in 2022 (just as it looked
different 12 years ago in 1998). This adds to the uncertainty regarding the likely costs of
hosting the tournament and the benefits which would potentially accrue across the economy
as it is very difficult to project prevailing macroeconomic and labour market conditions this far
ahead.
However, the long lead time, which is a result of FIFAs joint bid process, does have some
advantages in that it can potentially allow greater time and scope to put in place smarter and
more integrated solutions to be developed. Where possible, information should be updated
over time by reflecting the current economic and social environment.
Sensitivity analysis
As noted, the main uncertainties of the analysis concern the largest benefit and cost drivers of
the event namely, the level of expected tourism revenues and overall stadium development
costs. Table iii shows the sensitivity of these estimates to the overall analysis.
For the 2022 World Cup, a 10% increase in the cost of stadium construction would lead to a
$198 million decrease in the overall net result to negative $1,675 million under Scenario 1.
The variance from the same percentage cost increase is less pronounced under Scenarios 2
and 3 due to a smaller construction cost component, with the net benefit lowered by
$81 million and $24 million respectively.
Should tourism revenue be 10% greater than projected, this would increase the overall
outcome by around $72.6 million across all scenarios, resulting in a net cost of$1,405 million
under Scenario 1 to a net gain of $339 million under Scenario 3.
Table iii: Sensitivity analysis of hosting the 2022 World Cup
Expenditure / Benefit
item
Scenario 1
Full stadia
Scenario 2
Partial stadia
Scenario 3
Overlay costs
NPV Variance NPV Variance NPV Variance
$million $million $million $million $million $million
Base Case -1,477.2 -305.3 266.4
+10% construction costs -1,675.3 -198.1 -386.2 -80.9 242.7 -23.7
-10% construction costs -1,279.2 198.1 -224.4 80.9 290.1 23.7
+10% tourism revenue -1,404.6 72.6 -232.7 72.6 339.0 72.6
-10% tourism revenue -1,549.9 -72.6 -377.9 -72.6 193.8 -72.6
+10% transport & security -1,514.5 -37.3 -377.9 -37.3 193.8 -37.3-10% transport & security -1,440.0 37.3 -268.0 37.3 303.7 37.3
Long run labour supply -797.2 680.0 374.7 680.0 946.4 680.0
Note: NPV estimates use a real discount rate of 4.5%. The long run labour supply sensitivity test relaxes the full
employment assumption and shows the economic impact in which spare capacity in the labour market can respond
to increased demand generated by the tournament.
Another important analytical parameter is the full employment assumption adopted in the
GE modelling. The labour supply condition has a large bearing on the economys ability to
respond to increased demand from the World Cup through increased employment, and
therefore the extent to which economic welfare can increase. Department of Finance and
Deregulation guidelines state a full employment condition is to be taken when examining the
general equilibrium impacts of policy proposals. Such a condition, which is consistent with the
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conservative approach adopted in the analysis, ensures that any expansionary impacts are
more constrained than if there was excess capacity in labour and other factor markets.
Relaxing the long run labour supply assumption improves the net result by around $680 million
across all three scenarios. It results in a net tournament cost of $797 million under Scenario 1,and a net positive result of $374.7 million and $946.4 million for Scenarios 2 and 3
respectively.
Professional sporting codes
Hosting the World Cup will affect other professional sports in Australia, predominantly the AFL,
NRL, ARU and Cricket Australia (CA), due to restricted access to major sporting venues and
changes to normal operating schedules. While these impacts are not large relative to other
cost components, they are potentially sensitive.
To an extent, the nature of discussions between other professional sports and the FFA seen to
date has some positive dimensions. Firstly, it is a direct expression of the dynamic and viable
state of professional sport in Australia. Secondly, the keen interest shown by codes in securing
key stadium access as a result of the tournament suggests future utilisation of stadium
infrastructure will be healthy.
The affected professional sports have entered into a memorandum of understanding (MOU)
with the FFA that will be used as a basis for ongoing commercial discussions, including any
compensation, should Australia succeed in winning the right to host the 2022 World Cup. A
fundamental principle of the MOU is that the respective codes will not be any worse off as a
result of Australia hosting the World Cup and Confederations Cup.
It is important to note that no final decision or compensation has been agreed to between theFFA and any of the four affected sports and, as such, there is considerable uncertainty
surrounding the respective costs. Following limited discussions with relevant bodies, an
estimate of $50 million has been adopted in the analysis.
Concluding comments
Hosting a tournament the scale of the FIFA World Cup requires a significant commitment from
government to meet the requirements set out by the governing body.
Given the World Cup will not be held for 12 years, there is considerable uncertainty
surrounding not only the overall costs of the tournament but which costs will be borne byState or Commonwealth governments. Once a host nation for the World Cup is selected,
government (and thus taxpayers) would bear significant risk of either tournament cost
overruns or that benefits are lower than expectations. It should be noted that upside potential
also exists (that is, costs are lower and revenues higher than expected) but this is less likely
and indeed has not been the general experience with staging mega sporting events.
The fundamental conclusion drawn from this analysis is that, except under the most
favourable cost conditions, the expected financial benefits from tourism, team and media
spending are not sufficient to outweigh the significant costs of stadium construction and
operational services required to host the event. These financial estimates would need to be
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considered in conjunction with the broader social and cultural benefits which the tournament
is likely to yield.
An important procedural aspect given high levels of uncertainty is to clearly establish
responsibility for all costs of staging the event. This would include costs to be borne by theLOC and especially between States and the Commonwealth. Host city agreements are entered
into by the States involved, but may present considerable risks for the Commonwealth for
instance, to meet any funding shortfall from the States or LOC.
Should Australias bid succeed, the general environment and relationship with FIFA will change
as the bilateral engagement will no longer occur in the context of a competitive bid process. It
is understood that a more inclusive process between FIFA and the host country will emerge in
which there is likely to be some scope to modify or refine aspects of tournament commitments
according to changing circumstances. Indeed, there is greater potential for such revisions
given the long lead time for the tournament. Where this occurs, there may well be material
cost and risk implications for government and any such proposals should be carefully
scrutinised.
Access Economics
November 2010
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1 Background
Access Economics was engaged by the Department of Resources, Energy and Tourism to
examine the costs and benefits of Australia hosting the 2022 FIFA World Cup. The Australian
Government previously committed $45.6 million to the Football Federation of Australia (FFA)
to proceed with a bid to host either the 2018 or 2022 FIFA World Cup. In June 2010, the FFA
formally withdrew its bid to host the 2018 tournament and is only progressing its bid for the
right to host the 2022 FIFA World Cup.
This report is based on a broad framework and methodology for assessing the costs and
benefits of hosting major events which is the subject of a separate companion report. An
outline of this approach is provided in Appendix D.
Policy context
Australian governments have helped facilitate a range of high-profile sports and cultural
events. The potential for events to generate considerable economic and social flow-on
benefits across the community provides a legitimate basis for government support. This
facilitation typically comes in a variety of forms from direct financial support for bid
preparation, marketing campaigns and infrastructure to the provision of security, public
transport requirements and improvements to civic amenities.
Given this range of involvement, and as a matter of good public policy, it is important that
major events are subject to a rigorous assessment of their overall costs and benefits.
It should be recognised that bidding for the World Cup is not strictly a decision for theAustralian Government but for the FFA. In practice, however, given the scale of the event,
high levels of government sponsorship are necessary. Indeed, FIFA require a comprehensive
range of formal guarantees be provided by national governments to support bids by respective
football associations. The decision to bid can therefore be best considered a joint decision
between the FFA and government.
This raises a series of complex issues concerning how the costs and risks associated with
managing the bid and potentially staging the tournament are allocated between private
parties like the FFA and different levels of government. The broad costs and benefits
associated with hosting the World Cup are outlined in Box 1.
While a decision to bid is ultimately a yes or no proposition, various options are possible for
structuring a (compliant) bid. These can have material implications for costs and revenues.
For example, there is an array of options regarding host cities and venues, including whether
to develop new facilities or upgrade existing arenas. Essentially, a bid could be prepared to be
relatively cheaper or more expensive and these options will each have different community
welfare outcomes. Importantly, they may also affect the probability of a successful bid.
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Box 1: Costs and benefits of hosting the World Cup
Benefits Costs
Quantitative impacts
Tourism
Around 700,000 tourists expected to travel to
Australia for the tournament
Bidding
$45.6 million committed by the
Commonwealth Government
LOC spending
Funding used to organise the event which
provides a welfare gain for Australia
Stadia
Construction and overlay cost of new and
redeveloped stadia
Other World Cup related expenditure
Broadcasting and communications for the
tournament funded by FIFA partners
Transport and security
Additional transport facilities and security
measures to meet increased demand from
international tourists and domestic
spectatorsInfrastructure legacy
Improved stadium and training facilities
Government guarantees
Costs to ensure efficient administration of
the tournament borne by Government
Tourism legacy
A successful tournament and positive image of
Australia is expected to increase tourism in the
years following the event
Impact on professional sports
Other sporting codes which currently use
World Cup stadia will be required to use
alternative venues
Qualitative impacts
National pride
An increase in community spirit and national
pride
Reputation enhancing
A successful tournament would enhance
Australias reputation for hosting major events
and may lead to other events big awarded to
Australia in the future
PricewaterhouseCoopers World Cup Business Case
To assist its bid, the FFA appointed PricewaterhouseCoopers (PwC) to undertake an economicassessment of staging the World Cup and to develop a preliminary business case analysis to
assist governments consider their involvement in the bid. This analysis was based on various
specialist assessments also commissioned by the FFA to examine the major infrastructure and
operational requirements for the event.
The PwC analysis, together with its related specialist assessments, represents the most up-to-
date information on many of the core aspects of staging the World Cup. Accordingly, it has
been a large source of information for this study.
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Structure of the report
Chapter 2 provides a brief description of the FIFA World Cup bidding process and operational
characteristics. The framework of analysis, including the principles adopted for the study and
methodology, are set out in Chapter 3.
Chapters 4 and 5 detail the costs and benefits involved in staging the World Cup. Chapter 6
contains the overall outcomes of the study, including an analysis of key uncertainties.
Chapter 7 includes a discussion on key risks faced in hosting the World Cup and a sensitivity
analysis of key assumptions. Some general conclusions are drawn in Chapter 8.
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2 The FIFA World Cup
Outline of the World Cup eventThe first World Cup was held in Uruguay in 1930, and has been held every four years since,
with the exceptions of 1942 and 1946, due to World War II. The tournament is now
considered to be the largest sporting event in the world, attracting a larger audience than the
Olympics.
The 2010 World Cup was recently hosted by South Africa. A total of 200 nations entered
qualifying events for the tournament, with 31 qualification places available (the host nation for
each tournament is guaranteed a place in the finals). Australia qualified for the tournament
and was one of 19 countries that also qualified to compete in the 2006 World Cup.
The broad structure of the tournament is shown in Box 2.
Box 2: World Cup tournament
The tournament involves 64 matches over 4 weeks.
There are 32 national teams that contest the tournament, split into 8 groups of4 teams in the early stage Group Matches. This stage comprises 48 matches, with
the final matches in each group played simultaneously.
Following the group stage, 16 teams (the two top teams in each group) proceed to the
knock-out stage of the tournament. This stage is an elimination tournament where
teams play each other in one-off matches. The subsequent rounds of the tournamentinclude:
Round of 16 winners of each group play the runner-up of another group
Quarter-finals
Semi-finals
Third-place match (contested by the losing semi-finalists)
World Cup final
Confederations Cup tournament
Host countries will also stage the FIFA Confederations Cup a year before the respective
World Cup. A principal aim of staging this much smaller event is to test the required
infrastructure before the World Cup. The tournament is contested between the host country, the winner of the previous
World Cup and winners of the six FIFA confederation championships.
The tournament involves 16 matches over 2 weeks.
The 8 competing nations are split into 2 groups of 4 teams for the Group Matches.This stage comprises 12 matches, with the final matches in the group played
simultaneously.
Following the group stage, the two top teams in each group proceed to the semi-finals
of the tournament. The winners proceed to the Confederations Cup final and a
third-place playoff is contested between the losing semi-finalists.
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The bidding process
The bidding process is being held simultaneously for both the 2018 and 2022 tournaments. At
the deadline for registration in March 2009, Australias bid was one of nine preliminary bids for
the 2018 tournament, with an additional two nations entering bids for just the 2022tournament. Australia initially bid for both tournaments, however, the FFA formally withdrew
its bid to host the 2018 World Cup in order to focus its efforts on the bid for 2022.
In an attempt to ensure tournaments are shared amongst the continents, the last two host
confederations are ineligible to host each tournament. Given South Africa hosted the event in
2010 and Brazil will be the host nation in 2014, this makes African nations ineligible for 2018,
and South American nations ineligible for both.
Of the bidders, four are from the Asian confederation, one from North America, and four from
Europe (two of the European bids are joint bids by two nations). The North American and
European countries have submitted bids for both tournaments, with the Asian confederationcountries bidding to host the 2022 tournament. Only one bidder from any confederation may
host either tournament for example, if a European bid is selected for 2018 then only the
Asian and North American nations are eligible for 2022. All bidders were required to submit
full details of their bids to FIFA by 14 May 2010.
The broad structure of the tournament and key dates are shown in Box 3.
Staging the event
The host country of the World Cup hosts two football tournaments the FIFA World Cup and
the Confederations Cup. The FIFA Confederations Cup takes place the year before the World
Cup. For the 2006 World Cup, Germany became the first host nation to host both events in
their amalgamated form. This was continued in South Africa and future host nations will
follow this structure.
The FIFA Confederations Cup is a tournament involving the host nation, the champion team
from the previous FIFA World Cup, and the champion team from each of FIFAs six continental
membership confederation tournaments.
With the tie-in to the host country of the World Cup, the Confederations Cup provides
opportunity for a smaller-scale testing of venues, transport and other infrastructure.
For the World Cup itself, the Local Organising Committee (LOC) is responsible for delivering allinfrastructure required for the event, including stadiums and training venues, hotels, media
centres, ticketing and transportation. Sponsorship is not an LOC responsibility, and is arranged
by FIFA.
Because of the intensive nature of the tournament and a need to hold more than one match
per day in the earlier stages of the tournament, host nations are required to use multiple cities
for matches. The 2006 World Cup in Germany used 12 stadiums, while the 2010 World Cup in
South Africa used 10 stadiums in nine cities.
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3 Framework of the analysis
Cost benefit analysis (CBA) is a tool used to determine whether or not the full economic costs
of a policy change are outweighed by its full economic benefits that is, whether the policyhas a net benefit for society. Ideally, a CBA examines all the monetary and non-monetary (or
intangible) costs and benefits of a policy or project to society. This includes its economic,
social and environmental impacts.
The broad stages of a cost benefit analysis generally comprise:
1. Defining the scope and objectives
The first stage of the CBA requires an investigation of the project and its context
including an outline of key objectives and beneficiaries.
2. Defining the baseline scenario and counterfactual cases
A CBA only measures the incremental benefits and costs of the policy change scenario
which occur over and above the business as usual scenario. Thus, to review the
potential benefits and costs of a project, in this case the World Cup, it is necessary to
specify the counterfactual case, that is, Australia not hosting the World Cup. This
examines what could be expected to occur in the absence of the project and compares
this to the potential incremental impacts of the project itself.
3. Specifying the various costs and benefits of different scenarios
Understanding of the chain of causation of the project is necessary. The benefits
expected to flow from the project, its costs and viable project options should all be
examined. As noted, only costs and benefits additional to the business-as-usual case
should be included in the analysis.
Given the high level of uncertainty surrounding stadium redevelopments over the next
12 years and the allocation of costs to the World Cup or the business as usual scenario,
the Department has provided three scenarios with which to analyse costs associated
with stadium construction.
The three scenarios considered reflect the likelihood of stadium works being developed
irrespective of Australia staging the World Cup in 2022. The scenarios are discussed
further in Chapter 4.
4. Quantifying the various costs and benefits, where possible
This is arguably the most fundamental and challenging part of a CBA. Monetary values
need to be assigned to costs and benefits where they exist in the year in which the
revenue or cost will be borne.
5. Discounting past and future costs and benefits to net present values
The costs and benefits of projects often accrue over a number of years. Thus, the
valuation of costs and benefits should take into account the time in which they occur. A
net present value approach is utilised to discount future benefits and costs to a present
value. Choosing an appropriate discount rate can be challenging and must often
account for the specifics of a project.
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6. Conducting sensitivity tests for uncertainties
Future costs and benefits are typically subject to uncertainty. For estimates with a high
degree of uncertainty, information relating to the margin for error should be provided
and a sensitivity analysis conducted. A sensitivity analysis generally substitutes different
estimates for key variables (including the discount rate and major benefit and costfactors) and calculates the impact of these on the overall outcome. Decision-makers are
thus provided with information on the impact of key parameters, which can highlight
risks and the main areas of uncertainty.
3.1 Some key preliminaries
Access Economics has developed a range of principles for conducting cost benefit assessments
of major events. These principles cover various procedural and analytical aspects of major
event evaluations. The Access Economics companion report A framework for cost benefit
analysis of major events (2009) contains a detailed discussion of the principles adopted in this
report. A summary of this approach is provided in Appendix D.
A major challenge in undertaking cost benefit analysis involves the quantification of all
relevant costs and benefits. Unlike a more narrow financial evaluation, cost benefit studies
cover a much wider range of impacts. Quantification of some of those impacts can be difficult,
especially where they relate to indirect, non-market, environmental and social impacts such as
increases in community wellbeing, where the data required to undertake a comprehensive
quantification exercise may not exist or be readily obtainable. The quantified impacts have
been limited to those where a reasonable level of confidence in the data and the valuation
techniques can be demonstrated.
The analysis conducted for this report focuses on the financial costs and benefits associatedwith the World Cup. Where it was not feasible to robustly quantify costs, including social and
intangible aspects, these have been explored in a qualitative sense.
Uncertainty regarding the benefits and costs necessarily involves a high degree of judgement
in conducting an event analysis. A common analytical flaw is that inherent optimism bias
systemically underestimates costs and overstates benefits. Therefore, where tournament
related assumptions were required, Access Economics has adopted a more conservative
approach to the analysis.
A list of key assumptions adopted in the analysis is provided in Appendix A, with further detail
provided in Chapters 4 and 5.
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4 Costs of the World Cup
This chapter focuses on the costs of Australia hosting the World Cup in 2022.
The main costs associated with hosting the World Cup relate to the upgrade of current stadia
to FIFA standards and the construction of new stadia. Given that the CBA only includes costs
over and above the business as usual scenario, ie Australia not hosting the World Cup, the
allocation of infrastructure costs between the baseline and the World Cup is a key assumption.
Stadia development costs are separated into construction and overlay costs. Overlay costs
refer to more temporary costs of preparing stadia to ensure they meet FIFA requirements
for example changing seating arrangements for a rectangular pitch and are assumed to
occur in the tournament year. All other (non-stadium) costs of staging the tournament are
consistent across all three scenarios.
Given the high level of uncertainty surrounding stadium redevelopments over the next
12 years, the Department has provided three scenarios with which to analyse costs associated
with stadium construction (see Table 4.1).
Table 4.1: FIFA World Cup scenarios
Scenario Details
Scenario 1 Full stadia costs All stadium construction, upgrade and overlay costs associated with
the 12 stadia in the bid book allocated to the World Cup.
Scenario 2 Partial stadia costs Stadia costs incurred directly as a result of Australia hosting theWorld Cup, specifically upgrades to stadia in Townsville and
Newcastle, and new stadia in Blacktown and Canberra. Includes all
overlay and temporary costs for other stadia required to become
FIFA compliant.
Scenario 3 Overlay costs Overlay costs for the 12 stadia nominated in the bid book.
The three scenarios considered in the analysis reflect current uncertainty regarding how
infrastructure costs can be attributed to the tournament. Under the FFAs bid, a suite of
12 stadia has been proposed: some of these are yet to be built, others will require substantial
upgrade and refurbishment and all will require a level of overlay for the tournament. Almostall the major greenfield stadia contained in the bid are under some degree of active
development consideration independent to the World Cup process (for example, Perth and
Adelaide Oval).
The three scenarios considered reflect the likelihood of those stadium works being developed
irrespective of Australia staging the World Cup in 2022. Moving from scenarios 1 to 3, a
greater level of stadium development is essentially pre-committed and not contingent on the
tournament, therefore reducing the cost of the event.
A conceptual representation of the analytical baseline for each of the three stadia scenarios is
set out in Figure 4.1, with the key cost components of Australia hosting the World Cup
summarised in Table 4.2 below.
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Figure 4.1: Stadia development scenarios
Overlay
Contingent
stadia
Pre-committed
stadia
Overlay
Contingent
stadia
Pre-committed
stadia
Overlay
Contingent
stadia
Pre-committed
stadia
Scenario 1Full stadia costs
Scenario 2Partial stadia
costs
Analytical
baseline
Scenario 3Overlay costs
Non
tournament
related costs
Temporary construction costs
associated with stadia
preparation for the event
Permanent construction works
including new stadia and stadia
upgrades due specifically to
the World Cup
Permanent stadia
construction works completed
independently of the
World Cup
Table 4.2: Costs of the 2022 World Cup
Expenditure
itemScenario 1
Full stadia
Scenario 2
Partial stadia
Scenario 3
Overlay costs
Comments
$ million $ million $ million
Bidding 45.6 45.6 45.6 Bidding cost budget allocated to
2010 (sunk cost)Infrastructure 2,748.2 1,136.6 346.2 Based on FFA Infrastructure
Consortium estimates
Transport 82.9 82.9 82.9 Based on FFA commissioned
transport assessment report by
Arup
Security 560.0 560.0 560.0 Based on Department of
Attorney Generals estimate for
State and Commonwealth
government security costs
incurred during the World Cup
and Confederations Cup
Other 53.5 53.5 53.5 Cost of upgrading and buildingnew training facilities
Cost to
Government
150.9 150.9 150.9 Cost incurred by State and
Commonwealth governments in
meeting the government
guarantees and host city
agreements
Impact on other
sporting codes
50.0 50.0 50.0 Total operational cost based on
PwC scenario estimates
Total Costs 3,691.2 2,079.5 1,289.1
Note: Costs are in real dollars (2010 prices).
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4.1 Infrastructure
4.1.1 Stadiums
A FIFA requirement for hosting the World Cup is for at least 12 stadiums with a minimumcapacity of 40,000 for the group stage and increased capacities as the tournament progresses.
Infrastructure costs range from $2.7 billion under the full stadia scenario to $346 million
under the overlay cost scenario, based on estimates provided by the FFAs Infrastructure
Consortium. The costs of individual stadium upgrades are listed in Table 4.3 below. The costs
are based on upgrades to meet FIFAs technical requirements to host a World Cup match, or
full construction costs if the stadium is built specifically for the World Cup.
Table 4.3: Estimated stadium infrastructure costs
Stadium
Scenario 1
Full stadia
Scenario 2
Partial stadia
Scenario 3
Overlay costs
$ million $ million $ million
New Perth Stadium 766.4 31.8 31.8
Adelaide Oval 412.1 36.1 36.1
Melbourne Cricket Ground 36.9 36.0 36.0
Stadium Australia 41.6 26.7 26.7
Sydney Football Stadium 44.6 17.5 17.5
New Western Sydney Stadium 279.3 279.3 25.3
Redeveloped Energy Australia Stadium 127.9 127.9 30.9
Suncorp Stadium 35.7 33.5 33.5
Redeveloped Gold Coast Stadium 127.6 21.7 21.7
Redeveloped Dairy Farmers Stadium 209.8 209.8 24.4New Canberra Stadium (CS4 Option) 279.3 279.3 25.3
Redeveloped Geelong Stadium 387.0 37.0 37.0
Total of 12 selected stadiums 2,748.2 1,136.6 346.2
Source: FFA estimates
Given the significant costs of providing stadium infrastructure, these have been considered in
the sensitivity analysis (see Section 7.1.2).
4.1.2 Training facilities and base camps
Each team competing in the World Cup is allocated a training venue, which is located close to
their accommodation and match venues. Strict requirements concerning exclusivity of use,
clean venues and other FIFA rules apply. Upgrades to venues include, where required,
resurfacing of pitches, change rooms, seating capacity, lighting, insurance and media
requirements. The FFA and PwC have conducted a review of training venues and Access
Economics has adopted the cost estimates made as part of this study.
Hosting the World Cup will require an upgrade of approximately 69 training venues. The
estimated cost of upgrading training venues is determined by the current quality of each
training site: low, medium and high. The cost per site based on this rating is $1.5 million (low),
$0.8 million (medium) and $0.1 million (high). The estimated total cost of the new training
venues is around $54 million.
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4.2 Bidding costs
There are up-front costs associated with bidding for the World Cup. These are incurred
whether or not Australia is successful in its bid to host the tournament.
The Australian Government has committed $45.6 million to the FFA, which will be provided
over three years. This grant provides financial support for Australias bid for the World Cup
only. Any other financial assistance will be subject to future consideration.
4.3 Security
During both the World Cup and Confederations Cup, the provision of security for athletes,
officials and spectators will involve substantial costs. Some costs will be incurred in the lead
up to these events for example, through risk assessment and training. However, the
significant security resource deployment during the event will be the largest cost component.
Security costs are aggregated into three tiers:
Tier 1 security within stadiums.
Tier 2 security within state borders excluding Tier 1 costs.
Tier 3 Commonwealth Government security costs which include airports, sea ports,
Australian Federal Police, ASIO and the Attorney Generals Department.
Security costs are allocated by tier to the FFA (Tier 1), state governments (Tier 2) and the
Commonwealth Government (Tier 3). Total security costs for the World Cup and
Confederations Cup are estimated at $560 million for State and Commonwealth governments
with Tier 1 costs considered as part of the LOC budget. The security cost estimate has been
provided by the Attorney Generals Department.
Various security challenges with the World Cup have been raised, including the large number
of international spectators and the city-wide nature of the security footprint. It is difficult to
compare security costs between events due to the different structure of each event, and in
particular with events held pre and post 11 September 2001. Two major events held in
Australia were the Sydney 2000 Olympic Games and the 2006 Melbourne Commonwealth
Games, with the security costs for these around $1511 million and $161 million respectively.
The difficulty in basing any security costs on these events is that each was concentrated in one
major city, whereas the World Cup would be a national event taking in 10 host cities.
1Olympic Co-ordination Authority, A report on the financial contribution by the New South Wales Government to
the Sydney 2000 Games, 2002
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4.4 Transport
Transport costs are estimated at $82.9 million based on a specialist transport assessment by
Arup which was commissioned by the FFA. The report includes costs incurred by each Statebased on the number of matches held and includes the following factors:
airport parking, rental vehicle and staff costs;
road traffic management costs, in respect of key routes to be utilised during both the
World Cup and Confederations Cup;
public transport;
FIFA fan fest transport;
information and volunteers; and
vehicle fleet costs.
4.5 Costs to Government
Both the Commonwealth and State Governments will be required to assist the LOC in the
preparation and running of the World Cup through commitments in the Host City Agreements
and other guarantees.
In total, additional costs relating to the host city agreement and government guarantees is
expected to be around $150.9 million. State Governments are estimated to incur costs of
about $67 million, of which around $39 million is allocated for the cost of cleaning stadiums.
An additional $28 million is due to other host city obligations including:
communication/project management structure, LOC office facilities (rental costs), host city
staffing and costs, and the use of products and services of commercial affiliates.
A requirement of the World Cup bidding process is for bidding nations to sign various
government guarantees that cover a range of commercial, legal and operational
arrangements. These guarantees will commit governments to substantial costs, such as
providing security and telecommunication requirements. Commonwealth Government
guarantees, excluding security costs (discussed in Section 4.3), are estimated at $83.8 million.
4.6 LOC Budget
Costs other than those detailed above will be met under the FIFA and LOC budgets. The FFAhas provided an estimate of the LOC budget at $820 million, based on the budget of the 2006
World Cup held in Germany.
A specific breakdown of this overall LOC expenditure is not available and Access Economics has
adopted the cost structure of the German LOC for the 2006 World Cup as a benchmark. A
breakdown of the operating budget for the Germany 2006 World Cup is listed in Table 4.4
below.
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Table 4.4: Budgeted expenditure of the 2006 World Cup Organising Committee2
Expenditure Share of Costs
World Cup cities 3%
Field offices 3%Volunteers 5%
Miscellaneous 6%
Transport and traffic 6%
Security 6%
Budget reserve 11%
Media 13%
Personnel 14%
Stadiums 14%
Organisation costs 19%
Total 100%
As in previous World Cup tournaments, the LOC budget is primarily funded by FIFA through itsfinancial platform. The primary source of funds is generated through ticket sales to the event.
World Cup ticket revenues initially flow through to FIFA which then funds the operations of the
LOC, which is established as a FIFA subsidiary. A preliminary budget is required by each
bidding nation with a final budget and funding arrangement negotiated between the LOC and
FIFA once the host nation is selected. Figure 4.2 below shows the flow of funds between the
LOC and FIFA.
Other sources of supplementary funding for the LOC are also available. The LOC may generate
its own revenues from certain commercial activities and it is also possible that some
government contribution might be sought although this would appear to represent more of
a contingency rather than form a foundation funding.
Figure 4.2: FIFA financial platform
LOC FIFATicket revenue
Primary funding
Tournament
expenses
Other revenues
(for example, Government,
internally-generated)
2 2006 World Cup Final Report by the Federal Government (www.fifawm2006.deutschland.de)
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4.7 Impacts on other sporting codes
Hosting the World Cup will affect other professional sports in Australia, predominantly the AFL,
NRL, ARU and Cricket Australia (CA), due to restricted access to major sporting venues and
changes to normal operating schedules. While these impacts are not large relative to othercost components, they are potentially sensitive.
To an extent, the nature of discussions between sporting codes and the FFA seen to date has
some positive dimensions. Firstly, it is a direct expression of the dynamic and viable state of
professional sport in Australia. Secondly, the keen interest shown by codes in securing key
stadium access as a result of the tournament suggests future utilisation of stadium
infrastructure will be healthy.
While these operational impacts were also an issue during the 2000 Sydney Olympics, the
World Cup will likely have greater impacts. The Sydney Olympics occurred in two weeks over
September, typically the period in which both the NRL and AFL finals series are held. Toaccommodate this event, both competitions started and concluded earlier than usual.
However, the World Cup would fall in the middle of the season for all football codes, go over a
longer period and involve almost all key football stadiums. As such different operational
alternatives must be considered.
The AFL, NRL, ARU and CA have entered into a memorandum of understanding (MOU) with the
FFA that will be used as a basis for ongoing commercial discussions, including any
compensation, should Australia succeed in winning the right to host the 2022 World Cup. A
fundamental principle of the MOU is that the respective codes will not be any worse off as a
result of Australia hosting the World Cup and Confederations Cup.
A restriction imposed by FIFA on nations hosting the World Cup is that no other major sporting
events are able to take place during the tournament window. The FFA has sought and gained
agreement from FIFA that each of the sporting codes listed under the MOU does not
constitute a major sporting event, and as such, can continue with their respective
competitions during the World Cup tournament window.
It is important to note that no final decision or compensation has been agreed to between the
FFA and any of the four affected sporting codes, and, as such, there is considerable uncertainty
surrounding the respective costs. Any final decision may be sensitive given the concessions
each code will have to make in order for the World Cup to proceed. The 12-year lead time for
the tournament does however provide significant scope to negotiate and resolve issues of
stadium access and other potential impacts on sporting codes.
Based on limited consultations, Access Economics has assumed an operational cost of
$50 million based on PwCs central case estimate of the impacts on other sports. This
assessment assumes each professional sport code will, where possible, arrange fixtures to
minimise the impact of venue restrictions.
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Training venues
In addition to stadium requirements for match days, FIFA also require that teams have access
to base camps (chosen individually and separately financed by the competing nations) and
training venues in close vicinity to match day venues. It is not expected that training venues
currently used by other sporting codes will be required for the exclusive use of the World Cup
Access Economics has not quantified any costs relating to training venue availability.
4.8 Broader impacts
In addition to the costs discussed above, local communities are likely to be impacted due to
other aspects of the tournament. These impacts are largely intangible and have not been
quantified as part of this analysis, principally due to considerable uncertainty about their
nature and magnitude.
Local amenity
Hosting the World Cup will involve some costs associated with the loss of local amenity. Key
impacts are likely to comprise major and partial road closures, and changes to public transport
timetables to ensure there are sufficient train and bus services available to transport patrons
to venues. Additionally, school holidays may be moved to ensure schools are closed during
key phases of the event, which also increases the transport resources available.
Such impacts were seen during the Sydney Olympics. However, because the World Cup is
more geographically dispersed than the Olympics, these amenity costs are not likely to be as
intensive for relevant cities.
Hosting a successful tournament
There are potentially significant legacy benefits to be gained from hosting a major event.
However, these are contingent on the event being run successfully. Hosting a major event also
runs the risk that it is perceived as being poorly managed, and may in fact detract from
Australias international standing in terms of its ability to host mega events, potentially having
a negative effect for future events. However, given Australia has a proven track record in
hosting successful and safe mega events, the risk of a negative effect from hosting the World
Cup are considered low.
Security issues and tourism legacy
Security and safety is also a substantial element of risk and is a critical role for a host nation.
Should Australias bid be successful, considerable resources would be allocated to ensure all
precautions and measures were taken to provide a safe and memorable experience for visitors
to the tournament. This commitment is underscored by Australias consistent record of
hosting successful major events without incident.
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4.9 Summary of the costs of staging the World Cup
The costs of staging the World Cup are large and involve a range of components. Most direct
financial costs associated with staging the event have been quantified, although some indirect
costs have not been valued.
Table 4.5: Quantified costs of the World Cup and Confederations Cup
Cost categoryScenario 1
Full stadia
Scenario 2
Partial stadia
Scenario 3
Overlay costs
$ million $ million $ million
Direct Costs
Bid to host the World Cup $45.6 $45.6 $45.6
Security costs $560.0 $560.0 $560.0
New stadiums and stadium upgrades $2,748.2 $1,136.6 $346.2Training grounds $53.5 $53.5 $53.5
Transport $82.9 $82.9 $82.9
Costs to Government $150.9 $150.9 $150.9
Indirect Costs
Displacement of sporting codes $50.0 $50.0 $50.0
Total quantified costs $3,691.2 $2,079.5 $1,289.1
Note: Costs are in real dollars (2010 prices).
The total quantified costs of hosting the World Cup range from $3.7 billion under the full
stadia scenario to $1.3 billion under the overlay cost scenario.
This estimate is subject to a high degree of variability due to the assumptions adopted,
continuing negotiations between the FFA and other sporting codes and the uncertainty
surrounding estimates 12 years out from the World Cup tournament.
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5 Benefits of the World Cup
This chapter focuses on the benefits of Australia hosting the World Cup in 2022.
The key benefit components are summarised in Table 5.1 below. These reflect the welfare
impact of expenditure in Australia (discussed further in Section 5.6) and are common to each
of the three stadia development scenarios.
Table 5.1: Benefits of the 2022 World Cup
Benefit item $ real 2010 Comments
$ million
Tourism spending 1,237.9 Bottom-up approach from ticket allocation
number of gamesper person percentage of international spectators length of stay and the number of additional tourists
during tournaments
welfare impacts flowing from overseas tourismexpenditures modelled in a CGE framework
LOC expenditure 284.9 Based on FFA budget estimate
welfare impacts flowing from overseas expendituremodelled in a CGE framework
Television broadcasting 77.9 FFA estimate on cost of producing television
broadcast to a worldwide audience
welfare impacts flowing from overseas expendituremodelled in a CGE framework
Consumer surplus 54.7 Based on the number of Australians that would have
travelled overseas to attend the World Cup but now
stay in Australia
GST on ticket sales 56.7 Based on the expected cost per ticket and the
number of tickets that are sold to international
spectators
Operating surplus 82.0 Based on 10% of LOC budget
National pride
halo effect
Not quantified
Total benefits 1,793.8
Note: Benefits are in real dollars (2010 prices).
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5.1 Tourism
5.1.1 Visitors expected
World Cup tickets
The number of international visitors expected to attend the World Cup is based on the
saleable capacity of the 12 selected stadiums, the number of matches to be played in each
stadium and the allocation of tickets to international spectators (this was taken to be 60%
based on discussions with the FFA). The proposed stadia and the number of games that will be
played at each venue gives an overall saleable capacity of around 3.36 million tickets over 64
matches.
The saleable capacity excludes all non revenue bearing seats such as a contingency reserve
(the removal of seats in order to erect camera positions, seats blocked due to obstructedviews, security considerations and various other operational reasons) and complimentary
tickets.
There remains a high level of uncertainty surrounding match configuration should Australia s
bid succeed. The number of matches notionally allocated to each stadium for the tournament
is shown in Table 5.2 below.
Table 5.2: Fixture allocation
StadiumSaleable
capacity
Number of
matches
New Perth Stadium 60,085 6
Adelaide Oval 48,240 6
Melbourne Cricket Ground 88,048 6
Stadium Australia 82,480 6
Sydney Football Stadium 40,402 5
New Western Sydney Stadium 41,022 5
Redeveloped Energy Australia Stadium 42,138 5
Suncorp Stadium 49,150 5
Redeveloped Gold Coast Stadium 40,021 5
Redeveloped Dairy Farmers Stadium 40,068 5
New Canberra Stadium (CS4 Option) 40,150 5
Redeveloped Geelong Stadium 43,584 5
On average, it is assumed that tourists will each attend 2.9 matches during the World Cup
(during the 2006 World Cup in Germany Visitors on average had 2.9 tickets with no difference
existing between German and foreign visitors3). Under the fixture allocation in Table 5.2, the
number of international visitors who attend World Cup matches through the ticket allocation
ballot is estimated at around 694,000.
3 2006 World Cup Final Report by the Federal Government (www.fifawm2006.deutschland.de)
http://www.fifawm2006.deutschland.de/http://www.fifawm2006.deutschland.de/ -
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In developing a net tourism figure for Australia, the expected movements due to the
World Cup of various groups of both international visitors and domestic residents have been
included. In total, it is estimated that the net tourism inflow to Australia due to the World Cup
is 677,100 international visitors (see Table 5.3). Further details on the tourism flow
methodology are set out in Appendix C.
Table 5.3: Net tourism effect
Category Total
Event specific visitors (with tickets) 694,300
plus Event specific visitors (without tickets) 7,800
plus Visitors who would have come anyway (combine event in
their itinerary)17,350
*
less Visitors who postpone their visit due to the event 0
less Visitors who cancel visit due to the event 7,600
plus Residents who would have travelled to a World Cup overseasbut remain in Australia for the event
10,000#
plus Overall impact of residents who leave and those who cancel
an overseas trip and remain home due to the event0
Total net tourism effect 677,100#
Note: * Adjustment made for these visitors to extend length of stay by 7 days.#
Residents
staying in Australia for the event captured in consumer surplus.
The Department of Resources, Energy and Tourism (DRET) provided projections of the airline
capacity for 2022. On the basis of these projections and the estimated number of
international visitors, it is unlikely that airline capacity will constrain the number of tourists
able to travel to Australia for the World Cup.
Given no final decision has yet been made on the tournament configuration or FIFA ticket
allocations, the tourism estimate has a high degree of variability and its effects are considered
in the sensitivity analysis (see Section 7.1.2).
Confederations Cup visitors
The Confederations Cup has eight competing teams and attracts considerably less coverage
and interest than the World Cup. The FFA estimates that around 600,000 tickets will be
available to the tournament, giving an average of 37,500 tickets per match for 16 matches.
The average crowd in South Africa 2009 was 37,0004, with a total attendance of 585,000. The
average attendance at other recent Confederations Cup tournaments was: Germany 2005,
38,000; France 2003, 31,000;5 and Japan 2001, 35,000. No estimate of the proportion of
international visitors attending matches at these tournaments was available.
The level of tourism is very difficult to estimate for the Confederations Cup as there is no
specific ticket allocation as with the World Cup. For the South Africa 2009 tournament, tickets
were allocated on a first come, first serve basis.6 South Africa only expected 15,000
4http://www.fifa.com/mm/document/afdeveloping/technicaldevp/01/09/92/45/ffc09report.pdf
5http://www.fifa.com/tournaments/archive/tournament=101/edition=8503/index.html
6 http://www.sa2010.gov.za/confederations-cup/tickets/ticket-information
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international visitors for the Confederations Cup, predominantly through media and team
delegations.7 Assuming that tourists who attend the Confederations Cup will watch three
matches, and that international visitors comprise 10% of spectators, it is estimated that
around 20,000 tourists will attend the Confederations Cup in Australia in 2021.
5.1.2 Other tourism related assumptions
In addition to the number of tourists expected to attend the World Cup in 2022, estimates are
required for
top related