The financial lesson of the World Cups

By Jaime Martín-Borregón

Last July 19, Spain was crowned world champions in football at the first World Cup in history to be held simultaneously across three countries: the United States, Mexico, and Canada. Beyond the title itself, there are a number of economic issues from which we can draw some useful lessons that go beyond sport.

The three countries avoided one of the most frequent mistakes of previous editions: instead of building new stadiums, they chose to renovate existing infrastructure. The result was an approximate investment of between $1.5 and $1.6 billion to renovate 16 stadiums, plus additional investments in transportation, security, and urban surroundings, bringing the total bill to around $6.2 billion. This is therefore significantly lower than the figures for previous World Cups, such as Brazil 2014, where between $15 billion and $19.7 billion were invested, or Qatar 2022, with more than $200 million.

Despite this spending restraint, the profitability of World Cups rarely benefits the host country. As a data point, 12 of the last 14 World Cups since 1966 have ended in losses for their organizers, with only Germany 2006 and Russia 2018 managing to close their accounts in the black. Brazil 2014, for example, recorded losses of approximately $240 million. The explanation for why it is so difficult to make these types of events profitable is mainly due to the distribution of revenues: FIFA (International Federation of Association Football) keeps the television rights, sponsorships, and merchandising revenues, while the host country bears the cost of the infrastructure and must make do with ticket sales and tourism revenues.

Beyond the financial balance, the main risk associated with these investments is that stadiums built ad hoc for the event become oversized and practically unused once the tournament is over. These are known as “white elephants”:

• «Mane Garnicha»
• «Cape Town Stadium»
• «Stadium 974»

Therefore, the economic lesson from this latest World Cup is that, although renovating rather than building does not guarantee profitability, it does allow organizers to avoid the worst-case scenario: ending up with infrastructure worth hundreds of millions of dollars, but with empty stands.

This logic can be applied to any organization before embarking on a project with uncertain financial returns. The question should not only be whether the project can be financed, but who bears the cost if the expected return does not materialize.