World Cup 2022 PR Boon for Qatar but Little Economic Benefit

With its successful bid to host the 2022 World Cup, Qatar is likely to boost its public image worldwide, but at best negligible economic gains will come of it.

The tournament’s public relations value is a no-brainer.

Hundreds of thousands of visiting fans and millions of television viewers will put Qatar in the global spotlight for an entire month.

The energy-rich Gulf state will be able to showcase its shiny, state-of-the art infrastructure and facilities.

In doing so, Qatar will become the face of an Arab world that projects itself as rich, bold and futuristic—a dramatic contrast with current perceptions of a world wracked by conflict, repression, violence and conservatism.

Investors anticipate that Qatar’s elevated status will translate into significant economic gains. As a result, the Qatar stock exchange has increased by more than seven percent since FIFA's announcement of the country's winning bid Dec. 2.

But investors may find that their projections were overly optimistic. 

Experience teaches that the actual benefits of hosting a World Cup never match expectations.

More often than not, the monetary cost of hosting the event outweighs its benefits.

Investment in productive infrastructure that yields a return long after the tournament is over and opportunities for local companies in developing infrastructure are often less than hoped for. 

Neither is there a boost to tourism and related industries such as hospitality and air transport or job creation and increased wealth for the local population, as a result of secondary expenditures in the economy.

“Numerous studies exist on the economic impact that a country or city can expect for hosting international sporting events, and the results are generally not very encouraging for Qatar,” said Citibank’s chief economist for the Middle East, Farouk Soussa, in a recent research note.

Despite reports that Qatar expects to invest a whopping $50 billion into creating the infrastructure for the Cup, Soussa concludes that actual investment exclusively related to the tournament is likely to be at most $10 billion and probably closer to $4 to 5 billion.

That money is primarily for the stadia and accommodation of visiting fans. It is a drop in the bucket compared to the $250 billion in ongoing projects in Qatar.

Qatar was already developing much of its infrastructure.

A $15 billion upgrade of its airport, a light railway, new roads, a bridge linking Doha to Bahrain and increased hotel capacity was already in place prior to and independent of its winning the right to hold the World Cup.

Of the $250 billion, $94.5 billion is for infrastructure, $70 billion for oil and gas, $53 billion for real estate, $19.5 billion for power and water, $11 billion for petrochemicals and $6.7 billion for industry.

Put differently, World Cup-related investment will increase Qatar’s overall investment over the next decade by at most four percent.

From an investor’s point view, that’s not much to get excited about.

By Qatar’s own admission, the stadia that will be used for the World Cup will be taken apart after the tournament and donated to underdeveloped countries that would benefit from them.

That makes perfect sense, given the experience of the current Asian Cup games in Qatar, in which the stadium is at best half full.

Similarly, the World Cup is likely to leave Qatar with a significant surplus in unused hotel beds.

Assuming that Qatar attracts 310,000 visiting fans as did South Africa did last year, Soussa calculated that based on an average stay of 18 nights with two people to a room, the Gulf state will need to have 90,000 hotel rooms.

That is three times more than Qatar had planned when it won the World Cup and ten times the number of rooms currently available.

Average room occupancy in 2009 with 8,500 rooms available was, according to the Qatar Tourism Authority, 50 percent. In other words, Soussa argues, Qatar will have to increase hotel occupancy 15 fold to achieve a 70 percent average occupancy rate once the 2022 World Cup is over.

That could prove to be a tall order.

Finally, the World Cup will primarily create jobs for transient foreign workers rather than Qataris and produce contracts for foreign contractors who will be importing their building materials.

Already, foreigners fill nine out of ten jobs in Qatar. As a tax haven, Qatar will moreover reap no benefit from the increased economic activity.

As a result, the multiplier effect that normally is expected to increase the wealth of a local population is not applicable in Qatar.

The bottom line is that the upside for Qatar of hosting the 2022 World Cup is likely to be less tangible than is immediately recognized.

In many ways, hosting the World Cup is, in PR terms, similar to Qatar’s launch in 1996 of the Al Jazeera television network. The network radically changed the Arab media landscape and put the Gulf state on the map in a way public relations never could have.