CBA of the 2022 FIFA World Cup

8/3/2019 CBA of the 2022 FIFA World Cup

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Commercial-in-Confidence

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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Cost benefit analysis of the 2022 FIFA World Cup


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


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)
http://www.fifawm2006.deutschland.de/http://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


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

Documents

CBA of the 2022 FIFA World Cup