The business of sport

Bahrain’s economy is claimed to have gained over $1-billion from Grands Prix so far.

Besides the economic value, the races definitely have put the kingdom on the sporting map.
The current Formula One is projected to pump a record $450-million into the economy, a creditable achievement considering the earlier three grands prix could garner only $658.7 million.
Questions have been raised in parliament about the need and viability of holding such races. It was pointed out that the creation of the international circuit has caused a loss to the country and that there was lack of credible data on the direct impact of the races.
The government held steadfast that Formula One has been profitable and that other GCC countries like the UAE and Qatar were taking the cue from Bahrain and building their own international circuits.
It contended that the main goal behind the circuit is to encourage investments that will cover the money spent on F1 and the area, which used to be a desert, will soon be turned into a huge tourist investment hub.
Last year’s Gulf Air Bahrain Grand Prix was the biggest single source of income to the country’s travel and tourism sector, according to officials from the Bahrain International Circuit (BIC).
Independent assessments showed it accounted for 2.76 per cent of Bahrain’s gross domestic product (GDP). Last year’s event contributed $394-million to the economy.
The study showed this included income generated from 2,000 travelling staff and drivers from the Formula One teams, support race teams and organisers who spent $3.9-million on accommodation, “subsistence”, logistics and transport.
Meanwhile, the expenditure of overseas visitors totalled $284-million outside the circuit, including $81-million on accommodation and “subsistence”, $21-million on travel, $109-million in retail outlets and $73-million on entertainment.
Even as these claims are being made, the moot point is whether major sport events do indeed boost the economy or is it just public money spent on luxury rather than essential services.
A peek into the impact of some major sporting events shows that sometimes games did bring revenue and economic growth, but at other times they had not.
For example, hosting the Olympics has not always brought financial reward. The 1972 Munich Olympics and 1976 Montreal Olympics made losses of $350-million and $1.36-billion. The 1984 Los Angeles Olympics and the 1992 Barcelona Olympics made surpluses of $423-million and $3.93-million. The 1996 Atlanta Olympics itself pumped a total of $5.1-billion into the Georgia economy. The 2008 Beijing Olympics will trigger a flood of investment from major international corporations in China.
The chance to use the world’s highest profile sporting event as a marketing platform in the world’s most populous nation promises investment above and beyond the up-front investment required to stage the Games. China is using its public money and its human capital to build its infrastructure.
The Beijing bid committee says in its bid material that an Olympics held in China would cost $1.625-billion to stage and reap $1.606-billion in revenues, yielding a modest $19-million profit.
But economists at investment bank Goldman Sachs estimate that the right to host the Games is lifting China’s gross domestic product by 0.3 per cent annually between 2002 and 2008.
In addition to the marketing and promotional opportunities the Games would provide, literally thousands of companies are lining up to get a slice of the money Beijing city officials plan to spend on improving their city ahead of the event.
Beijing will spend some $22-billion on improvements to its infrastructure and environment, as well as on an array of new sports facilities, leading up to the Games.
The 2012 London Olympics is expected to have an overall positive effect on the UK and London economies, with an increase in GDP over the 2005-2016 period of £1,936-million and an additional 8,164 full-time equivalent jobs created for the UK.
Closer home, let us take the case of Qatar, which hosted the Asian Games last year. The billions of dollars invested in holding the Asian Games were never meant to be offset by ticket sales, TV rights or tourism – it was done to put Doha on the map as the first Arab city to host the quadrennial games.
And the Qatar Olympic Committee already has said the event, the biggest Asian Games on record, was a test run for its loftier target for another one held every four years.
Qatar is preparing a bid for the 2016 Olympics. If that fails, it has vowed to keep bidding until it wins. When the International Olympic Committee opens its application process next year for candidates to host the 2016 Games, Qatar will be among the first cities to nominate.
Doha is expected to face strong competition from cities including Madrid, Tokyo and Rio de Janeiro. It would be better if GCC states got together and put up a united front to bid for major sport events like the Olympics rather than working at cross- purposes or each state mimicking what the other has done.
That could spur the economies region-wide and bring in investments, which would benefit all.

talking business
K S Sreekumar