Billions and billions of euros

Over at the day job, this writer/editor-depending-on-which-week-you-catch-me was tasked with doing up a piece on the economics of Euro 2008. Lotsa stats for numbers junkies ensue.

Which games will have the individual greatest impact on Europe in general? What knockout-round games are moneymakers from all countries secretly hoping for? See below.

In Austria, 2008 is all about football: Specifically, Euro 2008 and its looming presence over the country’s entire economy. How much effect does a major sporting event have on local- and macroeconomics? This is the question that cities worldwide perpetually seek to answer in bidding hundreds of millions to billions of euros to host such events. According to a overview study undertaken by MasterCard regarding the macroeconomic effects of UEFA’s Euro 2008 tournament (more on this below), “suggests [a] positive impact will be felt at a local, national and international level, and include a rise in ticket sales, travel, food and beverage sales, merchandising, sponsorship revenue, advertising and use of telecommunications and new media services.”

Amid a squall of forecasts and predictions regarding the economic boost awaited by Austrians and Swiss are a few numbers from the most recent comparable such event, the 2006 World Cup held in Germany.

Before the tournament began, Germany invested some €4.6 billion in infrastructural development to set the table for tourists. Adidas-Salomon predicted a whopping €1.2 billion in soccer gear sales for the year. A much publicized study based on German Chamber of Commerce and Deutsche Postbank research forecasted a bump to the German economy of €10 billion (approximately US $12.5 billion), a number representing 0.5% of the economy’s total domestic performance. The study also said that World Cup 2006 could help create 10,000 to 20,000 permanent jobs.

However, the end result was, in the short-term, not so rosy. The most damning economic statistic from World Cup 2006? Despite visits from an incredible 2 million tourists (double the expected number) spending €600 million, data from the country’s Institute for Economic Research showed that German economic growth would be approximately 0.25%, half the expected amount. Since Germany had based economic growth at 1.6% for 2006, the overestimation of income from the tournament still has lingering effects today.

Essentially apologizing for poor immediate short-term results German Minister of the Economy Michael Glos was forced to admit that 50,000 jobs had been created and only half were temporary, slightly more than planned. However, the best results he saw were that World Cup 2006 “[marked] an enormous gain in Germany’s image.”

This intangible benefit is often touted to cities hosting major sports events, and successful hosting can build a reputation for years; witness tourist-happy Sydney after its Olympic Games. German hospitality got high marks from all media corners and a massive 90% of foreign visitors polled by official sponsor MasterCard said they would recommend Germany as a holiday destination.

In the microeconomic sphere, the big winner was official sponsor Adidas. Adidas-Salomon had doled out approximately US $56.5 million for exclusive marketing rights from Fifa. Going into World Cup 2006, Adidas reported a 37% rise in sales in first quarter 2006. The firm ultimately reported sales of US $1.5 billion during World Cup 2006, an increase of 30%. The firm reported sales of 15 million replica footballs, dead on with their pre-tournament estimate, and way way up from the six million sold during World Cup 2002.

Adidas’ success belied other problems, however. While Adidas reportedly sold 1.7 million Team Germany football shirts alone, the German clothing industry still showed remarkable decline.

The retail sector was a winner in general, with early official figures showing shopkeepers seeing some €2 billion (approximately US $2.5 billion) during World Cup 2006. German Railways bore their significant increase in customers to 15 million, and Lufthansa reported 200,000 extra passengers carried during the tournament. Flag sales saw mind-boggling sales during the tourney, with one department store reporting a 1000% increase in sales. Durex Condoms spokesman André Schmincke was happy to report to German news outlet tagesschau.de that his firm reported a 30% rise (so to speak) in sales during World Cup 2006.

Interestingly enough, the world’s oldest profession itself was among the biggest losers at World Cup 2006. Munich chief of police Wilhem Schmidbauer was oft-quoted as calling World Cup 2006 a “bust” (so to speak) for brothels and private operators. “The fans were more interested in hanging out … and drinking beer than going to prostitutes,” he claimed.

Onto the forecasts, then! According to a study commissioned by MasterCard, official sponsors of the UEFA tournament since 1992, the games are expected to generate upwards of €1.4 billion for the European economy on the whole.

Released with the EURO 2008 draw in Lucerne, Switzerland, the study was overseen by Simon Chadwick, founder/director of the Birkbeck Sport Business Centre and Coventry University’s professor of sports business strategy and marketing; reportedly, Chadwick is first professor in such a discipline ever.

The study goes on to calculate that each match played at EURO 2008 could be worth an average €42 million, and the most lucrative games €49-56 million. Distribution of income, figures the data, will be roughly equal between host nations Austria and Switzerland, along with a concomitant “halo effect” on the wider European economy.

Based on the EURO 2008 draw, Chadwick reckons the games with the single greatest economic impact will be Group C matches France vs Italy in Zurich; the Netherlands vs France in Bern; and Italy vs the Netherlands in Bern. Those three pool games combined could be worth up a whopping €168 million to the greater European economy.

Also figuring to be valuable in the early stage are Switzerland vs Portugal in Basel; Austria vs Germany in Vienna; and Spain vs Russia in Innsbruck. Though naturally making no predictions about games in the knockout stages, Chadwick predicted that the “ultimate games to deliver the greatest economic impact” would all involve Germany: matchups of Germany vs Italy, Germany vs France or Germany vs the Netherlands would surpass the €56 million mark easily.

The qualification of Russia at the expense of England creates an interesting dimension to EURO 2008, according to Professor Chadwick; this will mark only the second time in the past ten years Russia has played in a major international tournament. Chadwick writes that “it is difficult to predict what the economic impact of the country’s participation in EURO 2008 will be.”

Chadwick does consider EURO 2008 to be “too soon for the real impact of Russian growth starting to take hold” and expects “EURO 2012 in Poland and Ukraine, with greater proximity to Russia, to be where the Russian Bear awakes.”

And if you truly can’t get enough of the voodoo of economics, here’s an extensive study on the effect this tourney’ll have on Switzerland, too.