Playing host to a major global sporting event can have an Olympic-sized impact on inward investment, if handled properly.
Whether they’re competing for the glory of playing host to the FIFA World Cup or the triumph of being the venue for the Olympic Games, cities and regions around the world all want a piece of the action. The stakes are high as authorities around the globe compete to host these key international sporting events. But other than the prestige, what’s in it for them?
For the hosts, these major tournaments are an unbeatable opportunity to entice investment capital, boost their economies and put their names on the map. Even though it is difficult to quantify the precise economic impact of the events and pinpoint investment projects that have come as a direct result, anecdotal evidence from past and forthcoming host locations and views from global companies suggest strong linkages. fDi Magazine canvassed corporate executives for their opinions on the topic in conjunction with Invest Thames Gateway, the agency charged with attracting investment to east London, where the 2012 Olympics will take place. One of the most immediate and tangible boosts a host economy can receive is in its tourism and hospitality sector. “Major events drive increased demand for corporaterelated travel as our clients and suppliers host events,” says Louise Miller, executive vice-president, global solutions, sales and marketing of BCD Travel. Nick Fox, director of financial communications for Virgin Group, agrees: “The world’s attention is on the country with all the media coverage. After such an event, one usually sees a pick-up in travel and tourism to the country and its main cities.”
Message to the world
When Moscow hosted the 2008 UEFA Champion’s League Final, it highlighted the power of being centre stage. MasterCard – one of the tournament’s sponsors – was involved in the Champion’s Village on Red Square. “This wouldn’t have been possible 10 to 15 years ago and shows that these big sporting activities provide an economic impact to the cities,” says Paul Meulendijk, vice-president and head of sponsorship at MasterCard Europe. “It showed Moscow and Russia were open for business.”
The country has similar expectations for 2014, when Sochi in Russia hosts the Winter Olympics. “There’s been a significant investment in terms of road and train infrastructure, and there’s been a major infrastructure spend for a light railway,” says Jonathan Cocke, senior vice-president at IMG, the lead management agency for the city. “It opens the door to creating a top-quality international vacation destination in Russia which it hasn’t had to date.”
Gianni van Daalen, European president for Germany-based Kempinski Hotels, agrees: “Large-scale events benefit existing hotels and encourage investment in new projects – a long-term advantage for the tourist sector.” He says that the company is planning to manage hotels in Sochi.
Indeed, the economic and FDI ripple effects can be wide-ranging, as many host locations would attest. Luke Mills, general manager, South Africa, at outsourcing firm TeleTech, says: “Since we are a 24/7 business, the ongoing investment in Cape Town’s Bus Rapid Transit [after the 2012 FIFA World Cup] will leave a lasting legacy that will reduce the costs of doing business for us by reducing the costs of transporting employees to and from work.”
Having hosted the 1996 Olympics, Atlanta in the US is now bidding to be the venue for the 2018 FIFA World Cup. “The Olympics netted $5bn in economic impact and jump-started Atlanta as a sports town,” says Gary Stokan, president of the Atlanta Sports Council. “Since then, the economic impact of sporting events in metropolitan Atlanta between 1999 and 2009 has totalled more than $1.8bn.” It was already home to major names such as Delta Airlines, CNN, Coca-Cola and Home Depot when it took on the Olympics and since then has attracted Sun Trust and UPS.
Economic developers in the UK city of Manchester, host of the 2002 Commonwealth Games, claim the event gave the city a shot in the arm for its investment promotion efforts and was followed by the arrival of sizeable investments from such international and domestic organisations as the Bank of New York and the BBC.
But a more important and lasting benefit to capturing the world’s imagination for a certain time – beyond the quick wins of infrastructure improvements, leisure sector investments and tourism inflows – is the ability to show off business attributes through the means of organising and preparing for a large-scale event.
“If you can show you can organise a successful event and meet the deadlines of building stadiums and the right infrastructure, that builds business confidence,” says John Campbell, finance director of Brandhouse.
“Delhi’s hosting of this year’s Commonwealth Games showed it could meet deadlines and parameters,” Vicky Chandhok, chairman of 4w racing and president of the Federation of Motor Sports Clubs of India, offers.
The chance that the city may also become part of the Formula 1 circuit next year is also causing excitement. “It’s a real fillip for the economy,” says Sanjay Sharma, head of motor sports for tyre manufacturer JK Tyre.
India already has a thriving motoring industry, but the benefits of an association with Formula 1 go beyond vehicle manufacture, creating opportunities in the leisure, retail and hospitality sectors as well. Technology firms also stand to prosper from its influence. “India is projecting itself as a technology-driven country and Formula 1 is a tech-driven sport. So this is an ideal marketing opportunity to use a high-tech sporting event to attract investors,” says Mr Chandhok.
With the FIFA World Cup arriving in Brazil in 2014 and the Olympic torch being handed to Rio de Janeiro in 2016 after London’s stint, Coca-Cola has already announced the opening of its first green plant in Latin America and has pledged to invest $5.8bn in Brazil over the next five years.
But being the focus of world attention can be a double-edged sword, as Francisco Itzaina, regional director for South America at Rolls Royce International, points out: “If the image projected is negative – such as poor organisation and logistic upsets – the result could be negative, and the cost of building the facilities to host two events could be overwhelming.”
Tim Caiger, vice-president, real estate and facilities for the EMEA region at software company Oracle, also argues that a major tournament can only make a host city a more attractive investment destination if it already has a mix of other factors such as security and a stable community in place.
All eyes on London
As the London 2012 Olympics draw closer, the host city is working to capitalise on its position in the spotlight. “London is pushing forward some much-needed infrastructure projects,” says Chris Daniels, head of London 2012 Activation at Lloyds TSB Wholesale. “At this stage it appears pragmatic governance is in place.” The banking giant reckons businesses could benefit from at least £1bn ($1.56bn) in direct contracts from the London games as well as an additional ripple effect.
Technology initiatives for 2012 are well underway. “The opening ceremonies and 100 metres finals will be big TV moments, so the opportunity for set suppliers and technology around HD is colossal,” says Roger Mosey, the BBC’s director for London 2012. “Content will also be delivered on mobile and online platforms, promoting the image of digital Britain.”
The Olympics certainly could be a catalyst for investment in the Thames Gateway region. “A lot of the potential gains over the next five to 10 years will be around improved infrastructure and logistics operations,” says Gareth John, managing director of Invest Thames Gateway.
“There’s a lot going on with green logistics. The Thames Gateway could take a lot of the container traffic off the main roads by bringing goods in and processing them on site here rather than shipping them to distribution depots in the Midlands.
”Invest Thames Gateway will be highlighting these opportunities at the upcoming Mipim international property investment forum in Cannes in March, and continuing in the months leading up to the Games, fully intent upon making the most of the big event. Mr John adds: “The opportunity is now… once the Olympics goes, you have a legacy in terms of improved environment and better public infrastructure. But the reality is the excitement also goes. We need to bring things on stream constantly to keep the momentum going.”
The cost of this report was underwritten by Invest Thames Gateway (www.investthamesgateway.com). Writing and editing were carried out independently by fDi Magazine. Invest Thames Gateway will be launching an in-depth report on the topic of sporting events as a driver for investment this summer.