With the FIFA World Cup in Brazil around the corner, lessons have been learned about making stadiums viable post-event. Vanessa Muscara explains
With less than a year to the 2014 FIFA World Cup, looming issues of new stadium costs, burdens on the public purse and potential legacy are predictable topics of discussion.
While expenditure on this type of social infrastructure can increase a country’s international profile and accelerate further infrastructure improvements, often long-term running costs dig deep into public finances. Host countries regularly learn that attention must be paid to legacy and to how the new-build facilities will be used after the event.
Operators that have inherited stadiums from FIFA World Cups and Olympic Games have to learn from one another how to make best commercial use of the purpose-built venues.
For example, this objective is more easily achieved when a stadium inherits an anchor tenant, such as a football club. The operator should also be prepared to diversify revenue streams by favouring year-round events that appeal to locals, rather than focusing on seasonal sports tournaments.
Moses Mabhida Stadium (MMS) in Durban is a case in point. The 56,000-seat stadium was purpose-built for the 2010 FIFA World Cup in South Africa and is well under way to become a commercially viable multi-purpose venue.
In the short term, big events typically create an opportunity to attract interest in sport and generate record attendee levels. Research shows that countries that are considered established sports destinations, such as the US, UK, France, Australia and Spain, attract a higher number of football fans for the FIFA World Cup than countries that have to build facilities especially for the event. For example, France attracted 900,000 international football fans in 1998, while South Africa attracted 310,000, according to the ministry of tourism. This is largely because the established destinations lie closer to the main football markets.
The 1994 World Cup is the most successful event in FIFA history in terms of attendance, reaching 3.6 million spectators during the four-week tournament. However, it should also rank among the most successful in terms of legacy since the nine venues that hosted the tournament already existed before the event. For example, the 94,000-seat Rose Bowl arena that hosted the final was built in 1922 and today is a major venue for American football.
Success stories related to purpose-built stadiums also include the Stade de France which, since the 1998 FIFA World Cup, has hosted regular French national football and rugby matches, as well as international music concerts. It is therefore worrying to learn that a 43,000-seat stadium is being built on the remote island city of Manaus in Brazil for the 2014 World Cup. The construction of the BRL550m (€180m) Amazonia Arena is running over time and budget. Matches in the Amazonas league attract an average of 588 supporters. It will therefore be interesting to learn how the stadium’s commercial operations will perform once its four scheduled World Cup matches are over.
Clearly, there is a growing appreciation within the public sector that stadiums are expensive to own and operate, and that a degree of entrepreneurial spirit is required to make them pay their way. The extent of the commercial approach is no doubt related to the ownership profile of the stadium. Research by Sport+Markt AG in 2012 illustrates that the majority of stadiums surveyed are owned by the public sector, although this is changing gradually as an emphasis is being placed on making stadiums more commercial.
Given that stadiums have a high maintenance and utility cost burden, and that they require massive capital expenditure to develop, owners and operators are under pressure to make these venues work as hard as possible. Indeed, it is the ambition of nearly every stadium manager to have some form of event take place every day. As mentioned, having a principal tenant, such as a football club, is extremely helpful, but that still leaves plenty of other days in the calendar to fill.
Table 2 summarises the revenue sources for stadiums surveyed by Sport+Market AG in 2012. Across the sample of 70 venues, around half are derived by ‘primary usage’, while the remainder are generated from ‘secondary’ sources, such as non-club events, concerts, catering and venue hires.
As media coverage of football, concerts and other events improves, it is getting harder to pull people away from the comfort of their living rooms to watch an event live at a stadium. Drawing people to live events, the Sport+Markt AG survey concludes, requires maximising the visitor experience. One crucial aspect of future stadium design will be the integration of technology – for example, cashless E-payment points, large screens and WiFi for VIP and public areas, as well as non-match day communication with visitors via social media.
As discussed, MMS in Durban was unable to attract a major sports tenant after the 2010 FIFA World Cup. South Africa’s soccer league is small, with an average 500 spectators per match in Durban. And Durban rugby team, the Sharks, chose to stay in its existing stadium, which is located across the road from MMS. The stadium’s sources of revenue therefore include very limited traditional ‘primary usage’ category. Around 50% of revenues are instead represented by both bowl and non-bowl events, as illustrated in figure 3. The most popular bowl event is the Top Gear Festival, which is an annual event run over two days and attracting around 70,000 visitors, mostly from outside the city.
While sponsorship sources of revenue (6%) are broadly in line with stadiums with an anchor tenant (8%), there are still extensive opportunities to expand revenue. Included in the stadium’s plan were the Skycar funicular and the purpose-designed steps along the 220m stadium arch above the pitch (Adventure Walk). These two attractions have contributed not only to the stadium’s revenue streams but also to its marketing appeal, as the Skycar attracts around 15,000 visitors per month.
Following the 2010 FIFA World Cup, MMS has enjoyed revenue growth year-on-year and has recently reduced its expected annual deficit by more than 50% by exploiting revenue streams outside the traditional ‘football on the pitch’.
The stadium could potentially break even within the next two to three years, according to management. This has always been the ambition of the stadium, although the owners are also sensitive to balancing commercial objectives with the ambition of providing a facility that serves the community.
The most notorious example of a stadium’s commercial performance post-event is Beijing’s National Stadium, which was built for the 2008 Olympics. The 90,000-seat venue represented the physical embodiment of China’s economic ascendance. Today, however, besides exhibition matches, concerts and a winter theme park, the Bird’s Nest is barely used for anything other than tourism. The stadium, which cost $480m to build has no regular tenant and costs around $11m each year to maintain.
That stadiums such as MMS in Durban have been able to develop a busy events schedule and evolve a range of revenue streams in addition to ‘on-pitch action’ is encouraging. What is clear, however, is that more thought and hard-nose decision-making needs to take place at the planning stage. A venue that is designed and equipped to accommodate a diverse range of match and other events is the ultimate goal for any legacy operation.
Vanessa Muscara is a senior consultant at AECOM