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Daphne Bramham: Is paying the high price for mega-events worth it?

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As Vancouver waits to find out how many 2026 World Cup matches it will host, a new study puts the cost of mega-events into perspective.

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There is no doubt that hosting some of the men’s World Cup soccer games in 2026 will provide Vancouver with a spectacle unlike most others we get to experience.

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Soccer fans — especially at matches at this level — are a show unto themselves. They will be wearing outrageous costumes, singing songs, waving flags — hopefully without the hooliganism that has attended some other international matches, and without a similar ticketing debacle that recently resulted in fans being pepper-sprayed by Paris police.

Next Thursday, the Fédération Internationale de Football Association will announce whether Vancouver will get three or five of the 60 matches, and which teams will be playing.

But as people breathlessly await the announcement, a study published recently by three University of Lausanne researchers puts into perspective not only B.C.’s $250-million share of the spectacle, but Vancouver’s potential bid for the 2030 Winter Olympics.

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Canadian players celebrate after qualifying for the World Cup 2022 in Qatar after beating Jamaica 4-0 in March.
Canadian players celebrate after qualifying for the World Cup 2022 in Qatar after beating Jamaica 4-0 in March. Photo by CARLOS OSORIO /REUTERS

Lead author Martin Mueller and his colleagues looked at the costs and revenues from 14 Summer Olympic Games, 15 Winter Olympics and 14 World Cups held between 1964 and 2018.

With combined costs of more than $120 billion US and combined revenue from broadcast rights, tickets and sponsorships of nearly $70 billion US, the average return on investments was a loss of 38 per cent.

“Are the Olympics and the football World Cup profitable for the IOC and FIFA (who own the rights to these events)? Yes, very much so,” they write.

“Are they profitable for the organizing committees that need to put them on? Sometimes, but not very often. For the host city and government? Hardly ever.”

Here’s how it works:

For World Cup events, all of the revenue goes to FIFA, with the organizing committee bearing most of the operational costs. For the Olympics, revenue goes to both the IOC and the organizing committee (although not necessarily equally), with the costs paid by the organizing committee and the host government.

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In economic terms, these events have a structural deficit. That means they are not financial viable without external subsidies. And it means that the problem is systemic, rather than the result of poor decision-making by the hosts.

But the study’s structural deficit figures likely fall far short of the real losses because security expenses and other “indirect costs” were not included in the calculation, even though the study notes that indirect costs typically range from $1 million to $1 billion.

The study defines indirect costs as Olympic villages, media centres, and other “event-induced costs” such as new public transportation, highways, improved power supplies, and so on.

But indirect costs for the Vancouver’s 2010 Winter Games were far higher: the $2.1-billion Canada Line to the airport, the $883-million Convention Centre built for use as the media centre, and the $883-million expedited improvements to Sea-to-Sky Highway.

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Based on their findings, the authors urge citizens and politicians to think differently about the “opportunity” being offered to host mega-events.

“They are not offering the rights to a profit-making business deal, but asking for subsidies for a loss-making venture.”

Citing other studies, the Swiss authors note that mega-event proponents often fall prey to “optimism bias”. Others engage in “strategic misrepresentation”.

That misrepresentation is possible because of “a principal-agent situation and information asymmetry, in which the agent (for example the city bidding for a mega-event) knows more about the real costs of a mega-event than the principal (the taxpayers), but communicates a lower cost estimate to make hosting the event more palatable to the public.”

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Canadian alpine skier Brodie Seger during training prior to the start of the 2022 Winter Olympics in Beijing. REUTERS/Wolfgang Rattay
Canadian alpine skier Brodie Seger during training prior to the start of the 2022 Winter Olympics in Beijing. REUTERS/Wolfgang Rattay Photo by WOLFGANG RATTAY /REUTERS

Studies such as these, along with more media attention paid to the skyrocketing costs of recent mega-events and a growing number of venues that are never used after the events, have caused taxpayers to be less enthusiastic about being hosts, even if politicians aren’t.

In the past eight years, votes in plebiscites and referenda have quashed Olympic bids in Calgary (2018), Rome (2017), Hamburg (2015), and Oslo (2014).

And it is why the IOC has recently been urging frugality by potential host cities. It has also flattened its lengthy and expensive bidding process, with the (perhaps) unintended consequence that the new system is both shorter and less transparent.

As for the 2026 World Cup, Premier John Horgan withdrew Vancouver’s name in 2018 citing FIFA’s demand that the province “write a blank cheque.”

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Chicago, Minneapolis and Glendale, Calif. also dropped out that year because of cost concerns and what were described as FIFA’s “heavy-handed demands” that included visa-free entry to FIFA representatives and exemptions from taxes and labour laws.

But three months ago, Vancouver was back in, with Horgan telling reporters that FIFA was no longer “looking for the sea and the sky in their ask from host cities.”

However, turfing the fake grass at B.C. Place — literally putting real stuff over top of the fake — was one of FIFA’s non-negotiable demands, even though the Crown-owned B.C. Pavilion Corp. spent $3.1 million completing the installation of artificial grass earlier this year.

So, good luck snagging a World Cup ticket. But even if you don’t, enjoy the party because you’re going to be paying for it.

Twitter: @bramham_daphne

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