Ireland’s 2023 Rugby World Cup bid took another step forward recently when the list of venues were revealed by those behind the bid. From the event a number of new pieces of information emerged. Two I had heard already. The first is the suggestion that this tournament could be worth more than €800m to the economy. The second, more than 445,000 visitors are expected to travel to the island.
There are many reasons to host the 2023 Rugby World Cup. The belief that this island can make money from the event should not be one of them.
Mega-sporting events like this should not be viewed as investments. They are primarily consumption products. I am in favour of Ireland’s bid because of the consumption benefits. Our bid should be framed in this context.
One has to go back to the Summer Olympics in 1984 to find a mega-sporting event that turned a profit. Due to riots, terrorism, budget overruns and boycotts in the sixteen years leading up to 1984, Los Angeles was the only city prepared to host the Summer Olympic Games. As a result, the bargaining power lay with the city. Favourable terms were negotiated with the IOC, including a commitment to cover any losses incurred by the city from hosting the event. Los Angeles made a $215 million profit, the first since 1932, and the only profit since.
Many cities have promised to be a “Los Angeles” since. None have succeeded. The power has shifted to the organisers. In Ireland’s case, the IRFU is battling with France and South Africa. Advantage World Rugby.
We are told that an Irish 2023 Rugby World Cup would be a commercial success. It will be. But for who? The answer is primarily World Rugby. The organisation follow a similar approach to FIFA’s Football World Cup and collect most of the revenue from the tournament. While the football equivalent is bigger, the comparisons are useful.
FIFA’s expenses at the most recent tournament in Brazil were in excess of $2.2 billion. This included a payment of $453 million to the local organizing committee and a $100 million "legacy" payment to Brazil after the tournament. Broadcasting revenue alone was worth $2.4 billion. Including merchandising, sponsorship and licensing, FIFA made a profit of $2.6 billion on the tournament.
Brazil spent just under $15 billion on the World Cup. It’s likely the loss to the taxpayer was in excess of $10 billion.
Maybe the taxpayer is happy to do this. The likely cost of the rugby equivalent is much lower. I for one am more than happy to pay for the Rugby World Cup. It will be the largest sporting event ever to be held on this island.
Research has shown the positive externalities associated with hosting. For example the jump in happiness from playing the 48 matches on this island, if monetised, could run into billions of euros. This is especially true of a developed economy like Ireland.
But what about the estimated €800 million in economic activity and 445,000 tourist arrivals? Won’t they pay for the party?
The problem with these figures is they only tell one side of the story. We are repeatedly told what the tournament is worth, not what it will cost. If Ireland’s bid is successful the country will owe World Rugby somewhere in the region of £120 million for the privilege of hosting. This is before any capital works or temporary overlay are addressed.
Ex ante estimations measuring “economic activity” and “tourists” often do not take into account crowding out and substitution effects.
The most recent Rugby World Cups are worth considering. In September and October 2011 Statistics New Zealand collected data on World Cup arrivals. Visitors were asked to fill out an 'arrival card'. One such category was “RWC visitor”. Just over 242,500 visitors arrived in total. Of these, 127,600 arrived for the World Cup. Does this mean the tournament attracted an additional 127,600 to New Zealand? No. What is important is the net increase in arrivals.
Fast-forward to September and October 2012. 197,524 international visitors travelled to New Zealand when no tournament was being held. While the tournament did increase tourist arrivals, it was somewhere in the region of 45,000 extra.
An ex post study of the 2015 tournament England, still only provides an “estimate” of international tourist arrivals. A figure of 406,000 is offered. A number well below pre-tournament forecasts. I suspect the net increase in tourist arrivals to England is far lower.
Given the nature of Ireland’s data on tourist arrivals, it’s hard to know exactly how many visitors arrive per month. A moving average since 2014 of 700,000 per month probably isn’t too far off. If Ireland does manage to attract hundreds of thousands of sports tourists, how many of these will displace the 700,000 per month that would have travelled here anyway?
Data from last year’s World Cup in England tells us that those travelling from overseas bought 774,000 tickets out of almost 2.5 million. The remaining tickets were purchased by “local fans” and “domestic visitors”. This means more than seven out of ten fans at the tournament were English. They add nothing to the economy. They simply substituted their income from one purchase to another.
There are many reasons to host the Rugby World Cup. Development of the game of rugby at all levels. Increased community empowerment. Increased cooperation and goodwill between both sides of this island. The emergence of sporting role models for our young. The promotion of health benefits.
The belief that this island can make money from the event should not be one.