|HOW HOST COUNTRIES BENEFIT FROM SPORTING EVENTS|
Aruba, Decmber 9, 2013 - There is nothing like the buzz of a major sporting event to spark the feel-good factor in a host location. But is it possible to capitalise on this positive mood and turn it into something more sustainable that can encourage inward investment?
Leading international sporting events such as the Olympic Games and football's World Cup have the potential to capture the world’s imagination. With events televised around the globe, the host gets a leading role on an international stage, with the potential to shine as a friendly, welcoming world-class location that is open for business.
But the eye-watering investment needed to develop infrastructure and modernise creaking legacy facilities means there are serious risks involved. If a host gets it wrong, all the weaknesses of its economy are exposed for the world – and major investors – to see.
As all eyes turn to the world’s emerging markets for the next series of major sporting events, the stakes have never been higher. In 2014, Brazil will be welcoming fans from around the globe to the football World Cup.
And, in 2016, the events continue, when the Olympic torch is handed to the city of Rio de Janeiro. Russia is also set for its fair share of action, with the 2014 Winter Olympics being held in the south-western city of Sochi, plus the country is hosting the 2018 World Cup. Looking further ahead, Qatar is already making major strides to get the infrastructure in place for its hosting of the World Cup in 2022.
As Brazil prepares to welcome millions of visitors to its shores, it is working hard to deliver two of the world’s greatest events in the space of just two years. Alessandro Teixeira, the country’s deputy minister for development, industry and foreign trade, tells fDi: “It is very rare that you have the two largest single sports events in the same decade in the same country.”
Rio de Janeiro really does have it all when it comes to visually stunning locations. Visitors to the Olympics can expect fantastic terrain and amazing views, plus superb settings for the sailing events. And what is more fitting than beach volleyball at Copacabana Beach?
But, natural beauty aside, some commentators suggest the city is not geared up for international visitors and needs to upgrade its hotels and airports substantially. Others point out that although it may be a great place to live, Rio de Janeiro is not one of the best to work.
“Most of its existing office space was built several decades ago and is lacking air-conditioning, parking space, fast internet access and most other attributes of a modern office building,” says Stefan Ivanov, chief executive of property investment firms Trump Towers Rio and MRP International for Brazil. He argues that to attract more interest from corporate investors, Rio de Janeiro needs more world-class office space, as well as new residential buildings, as its housing stock is outdated.
However, Mr Teixeira relishes this challenge. “When you have large events, you make the whole country work faster," he says. "These events are also about increasing the world’s awareness of the country – what’s going on and how it is doing. And for Rio that’s a big thing. We’ve had problems with crime, but if you’re in Copacabana nowadays, you can walk around it at night and there’s no problem. Having a big event makes you pay attention to problems and deal with them immediately.”
Catalyst for growth?
Although there are significant developments taking place across Brazil to ensure that everything is ready and in place for it to play host to the two biggest parties on earth, these events have also sparked plenty of other infrastructure-related activities. One of these is the creation of Trump Towers Rio, which will provide new offices for more than 30,000 people.
Mr Ivanov says: “Those events were a catalyst for our decision to undertake the construction of Trump Towers Rio – the largest urban office complex in the BRIC [Brazil, Russia, India and China] countries. The time pressure to build the new and modern face of Rio de Janeiro ahead of those events is helping the city to develop Porto Maravilha – the new central business district – over the course of several years, rather than several decades. Additionally, the Brazilian authorities have introduced the necessary laws, provided funding in excess of $5bn and undertaken the infrastructure work to develop Porto Maravilha.”
Work is taking place to address Rio de Janeiro’s lack of high-quality hotels. According to Rio Negócios, the city’s investment promotion agency, in March 2011 Rio had 20,332 hotel rooms. In March 2013, this had increased by 5% to 21,363. It forecasts that by 2014, available accommodation will have climbed by a further 24%, to 26,508 hotel rooms. By 2016, hotel space is expected to increase by 36% to 35,980 rooms. About $1.5bn is being put into this expansion, with hotel chains Accor, Eurostar, Ramada, Marriott, BHG, Windsor, Hyatt, Hilton and Emiliano among those to have confirmed investment in new ventures.
Marcelo Haddad, executive director of Rio Negócios, the city's investment promotion agency, says all the investments that are currently being made will ensure Rio retains a legacy from the two events. This will also have an impact on investor trust. Legacies include investments of $8bn on transportation, $1.9bn on the environment, $3.5bn on security, $7.3bn on housing, $2bn on health, $4.5bn on infrastructure in Porto Maravilha, $2.2bn on education and $113bn on jobs.
Russia is also busy preparing, with work continuing in earnest for the 2014 Winter Olympics in Sochi and 2018’s World Cup. No expense has been spared in a series of multi-billion-dollar investment projects that have seen the creation of sporting venues and the upgrade of infrastructure across the country.
There has being increased spending on both retail and residential schemes. A spokesperson for JSC Russian Railways says as part of its preparation for the Winter Olympics in 2014, it is upgrading the area’s transport infrastructure. “Already built and up and running is the Adler-Sochi airport line. Plus, we are carrying out a large-scale modernisation of the coastal railway infrastructure and constructing a new railway station in Adler. Good transport infrastructure, of course, is necessary for attracting corporate investors,” he says.
Although Russia, and Sochi’s, infrastructure development has been criticised, with some even predicting that it will expose the country’s shortcomings, there is no doubt about its commitment. “The 2014 Winter Olympics in Sochi, followed by the 2018 FIFA World Cup, will both be great events with magnificent facilities,” says Richard Tibbott, chairman of advisory services at real-estate brokers Cushman & Wakefield. “The sports infrastructure and resort development, and the follow-through investment in a convention centre, airport, rail and road links and other leisure facilities, such as theme parks as the legacy to the Olympic Park, are all in place.
“Vnesheconombank, Gazprom Invest and other major Russian developers Sberbank, Renova, Basel and Interros are all playing their part. Most of the funding is based on federal sources with an eye on the long-term legacy and economy.
"But at the moment, the underpowered parts of the legacy and FDI strategy appear to be the marketing strategy, airline route development and a destination management organisation that can coordinate destination marketing budgets to make sure that Sochi can compete with existing successful destinations in Europe, the Middle East and Africa. Now, in 2013, almost every world-class visitor destination is targeting mid and upper Russian tourism markets, especially in places where visa rules are relaxed.”
As Qatar prepares to make history as the first Arab country to host football's World Cup tournament, its infrastructure development projects are well under way. “Qatar’s success in its bid to host the 2022 World Cup has put it firmly on the map,” says Terry Tommason, head of property and social infrastructure for the Middle East at building group EC Harris.
“The scale of investment required to deliver both the requirements of this prestigious event, as well as the wider aspirations of Qatar’s 2030 vision [for long-term growth], will be attractive to FDI, so the tournament acts as an opportunity to put the nation firmly on investors’ radars as an investment opportunity,” he adds.
The raft of projects include Airport City, a 10-square-kilometre development where 200,000 people will live and work, and that will link the new Hamad International Airport with the city of Doha. According to OMA, the development’s architect, phase one of the 30-year scheme, which links airside and landside developments for business, logistics, retail, hotels and residences, will be virtually complete in time for the World Cup.
As with Russia and Brazil, Qatar’s investment in infrastructure projects is key to its long-term plans. As Mr Tommason says: “These projects are also fundamental to Qatar’s 2030 vision to develop a knowledge-based economy. The return on the investment may therefore be judged not on the financial returns of the schemes themselves or the extent to which they attract corporate investment, but the extent to which they act as enablers for Qatar’s wider ambitions which themselves may attract significant corporate investment.”