Benefits for host cities overstated: economists
It’s still eight years away, but the City of Montreal is already touting the economic benefits of hosting a handful of World Cup games.
On Wednesday, city councillor Rosannie Filato said the games would bring $200 million in economic benefits to Montreal.
But economists say that’s unlikely.
“The World Cup, generally, doesn’t make money, it’s not a profitable endeavour,” said Moshe Lander, a Concordia University economics professor who studies the economics of sports.
Previous hosts, including Brazil, lost money hosting the World Cup, he said.
As for the estimated economic benefits, Lander said those types of calculations tend not to look at the full picture.
“They are always overstated,” he said.
That’s because economic impact calculations rarely consider how people would have spent their money if the event wasn’t taking place, he said. Much of the economic activity “generated” by events is money that would have been spent elsewhere.
When Montrealers buy world World Cup tickets, he said, they’re not using new income, instead people will spend money they would have otherwise spent at restaurants, movies or other events.
Part of the problem, said Vincent Geloso, an associate researcher at the Montreal Economic Institute, is the way economic impact studies use the idea of a multiplier effect — that’s the idea that every dollar spent by someone attending an event will then be re-spent in the economy, generating further activity.
“The multipliers never account for what consumers would have done otherwise and that’s really important, you’re just looking at half the ledger,” he said.
When that’s done with government-subsidized events, he said, it’s assuming that if taxpayers still had that money, any spending they did with it would have had a smaller effect in the economy.
Already, Quebec taxpayers will put up between $200 million and $300 million to repair the roof of the Olympic Stadium, where the three to six games Montreal is expected to host will probably take place.
The City of Montreal will also put up $69 million.
But those costs could rise. Vancouver was initially part of the North American World Cup but, but British Columbia’s provincial government pulled out, due to an out a clause in the agreement to host the event that would have allowed FIFA, the organizer of the World Cup, to unilaterally demand changes to the provincially-owned stadium where the event would have taken place.
The costs of those changes would have been borne entirely by taxpayers.
“We are effectively taking on a risk with no guarantee of success, with no guarantee of economic benefit, at least that justifies the cost, for what?” Lander said.
Geloso said studies show that major events often don’t have the tourism draw they ’re purported to.
The number of international visitors to the United Kingdom fell during the 2012 London Olympics, when compared to the previous year. During the 2008 Olympics in Beijing, the number of international visitors fell 30 per cent from the previous year and hotel occupancy was down 39 per cent, according to a 2016 article published in the Journal of Economic Perspectives.
In that article, which found that every Olympic Games between 1968 and 2012 cost more than was originally estimated, authors Robert A. Baade and Victor A. Matheson write that “if one wishes to know the true economic impact of an event, take whatever numbers the promoters are touting and move the decimal point one place to the left.”
The city of Montreal said the $200 million figure cited by Filato comes from a study conducted by the bid committee.