With the 2015 Rugby World Cup set to begin in England on the 18th September, over 2.19 million spectators from around the world are waiting in anticipation of which country will be crowned the next rugby champions. However the economic success of a tournament of such stature is often taken for granted, as the reality of the costs of such a tournament are often underpinned by the social demands for the tournament to take place.
The 2014 football world cup, held in Brazil, is the ideal example of a fantastic sporting event that was an economic disaster for the host country. Brazil spent $3.6 billion (£2.3 billion) on new stadiums for the World Cup, as well as an additional $3 billion (£1.92 billion) on improvements in infrastructure for the tournament. Overall, the host nation reportedly spent an astounding $11.6 billion (£7.42 billion) on financing the World Cup, whilst only $4 billion (£2.56 billion) were received in revenues. Despite FIFA covering the $2 billion (£1.28 billion) of operational costs for the tournament, it is clear that the hosting of the event critically backfired on the host nation, as a loss of around $5.6 billion (£3.58 billion) was incurred by Brazil.
However, it seemed that these costs were overlooked by Brazilian officials, as the Brazilian Institute of Tourism projected revenues of over 20 times greater than that of the previous World Cup. It is therefore essential that a hosting country must assess the costs of such a tournament in great detail and create realistic projections for their costs and revenues for the tournament, as otherwise large amounts of debt can be accumulated as a result of losses from the tournament.
Why is rugby different?
English rugby is rather popular and well promoted throughout the UK. Although football in Brazil is arguably more popular than rugby is in the UK, there are many reasons why the 2015 Rugby World Cup will not deliver the same economic failure that the 2014 football World Cup did.
Due to the fact that the percentages of seats filled at the Rugby World Cup in 2015 are projected to be around 95%, it is possible to argue that initial revenues, as a result of the actual match days, are likely to be extremely high. This, coupled with the fact that the Rugby World Cup expects up to 466,000 foreign visitors implies that minimal losses will be made throughout this tournament. The level of support for the Rugby World Cup is epitomised by the extremely heavy support that rugby experiences in the UK alone.
This has meant that existing infrastructure in rugby is of a very high standard. The training pitches and stadiums in the UK that are to be used by the 41 countries travelling to the UK were of such a high standard previously, that minimal investment has occurred into the improvement of infrastructure for the tournament. It is projected that around £85 million will be spent on improvements and regeneration of infrastructure which, when compared to the vast sums of revenues that are projected for the tournament, is relatively minimal.
In spite of these very positive aspects, it is imperative to take into account the perhaps more subtle, yet unavoidable, costs that will be faced. The English Rugby Union will have to generate around £300 million to pay the International Rugby Board (IRB) in accordance with the bid that was made to ensure that the 2015 Rugby World Cup was held in England.
Although this seems like a more-than-possible task due to the aforementioned projected revenues, the English Rugby Union will have to pay £80 million as an outright tournament fee, and £220 million from broadcasting fees. It is also essential to note that the revenues cited are merely projected revenues: the actual revenues received as a result of the tournament will only be realised in the months following the Rugby World Cup.
What are the economic benefits?
The fact that the Rugby World Cup will be situated all over the country, will allow for greater investment into economically deprived areas in the UK. As the financial crisis of 2008 highlighted, many cities in the UK outside of London struggle to attract the investment into their businesses that they need in order to survive and produce the area with jobs.
Although, as a result of the 2015 Rugby World Cup, areas such as Exeter, Leicester and Newcastle will host a combined 9 matches, selling an estimated 260,000 tickets. This inflow of money into these areas will undoubtedly increase the business profiling of these areas, potentially increasing investment into these areas after the world cup has been and gone. In addition, the services that will be demanded by visitors in these areas will stimulate each individual economy, creating greater prosperity for each individual area.
The effect that the spending of foreign money brought into the UK by visitors coming to watch the tournament, coupled with the injections of investment into infrastructure will mean that the economy continues to grow and flourish. As more people are employed as a direct result of money that would be invested in the improvement of infrastructure, the multiplier effect could take place in the local and regional economies which could be a major benefit when assessing the long-term effects of the 2015 Rugby World Cup.
Will the tournament meet expectations?
There is no doubt that the kick-off at Twickenham stadium will stimulate a number of mouth-watering moments for rugby fans across the globe. It can be seen that the 2015 Rugby World Cup has a stronger ground with which it can succeed and benefit the UK economy. This is the case due to the fact that the UK has a stronger financial basis with which it can support the funding of the tournament than Brazil did for the football World Cup in 2014, while the support that will be attracted to the UK for the Rugby World Cup is significant enough to turn a huge profit, it is believed.
It looks as though the tournament is set to be an economic success, with the 2015 Rugby World Cup set to generate over £400 million in net revenue. Despite this, the host Rugby Union will only keep the revenues from gate receipts, resulting in the English Rugby Union receiving a net revenue of £160 million, with the rest of the revenues going to the International Rugby Board. Nevertheless, it is vital to take into account that the record revenues that are expected to be received as a result of the 2015 tournament are only projected; whether or not the Rugby World Cup will be an economic will soon become clear.
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