Economic Impact of Sports Tourism- A

case of FIFA World Cup 2018 in Russia

Master Thesis

By,

Rupesh Negi- Student ID -Q1000495

Supervised By- Dr. Simone Eishenhauer

[April 08, 2020]

Table of Contents

1
 Abstract 4
Acknowledgement 5
1. Introduction 6
1.1 Industry Overview 7
1.2 Rationale 8
1.3 Research Problem 9
1.4 Research Aim 9
1.5 Research Question 10
1.6 Overview of the thesis 10
2. Literature Review 11
2.1 Sports Tourism and its growth under tourism 11
2.2 Mega-sports tourism and its increasing relevance in the industry 12
2.3 Positive impact on the economy of Mega Sports Tourism 13
2.4 Negative impact on the economy of Mega Sports Tourism 16
2.5 Hosting experiences of FIFA in previous countries 18
2.6 Russia and tourism 19
3. Methodology 21
3.1 Introduction to research methodology 21
3.2 Research Purpose and Objective 21
3.3 Research Approach 21
3.4 Sample and Sample Characteristics 22
3.5 Data Collection tools and methodology 22
3.6 Validity and Reliability 23
3.7 Limitation of methodology 24
3.8 Ethical Consideration 24
4. Results, Data analysis and Findings 25
4.1 FIFA World Cup 2018 Russia – Overview 27
4.2 FIFA World Cup 2018 – Effect on GDP 27
4.3 FIFA World Cup 2018 – Effect on Employment 28
4.4 FIFA World Cup 2018 – Effect on Import and Export 29
5. Discussions 31
5.1 Based on comparative analysis of the economic variables 31
5.2 Role of external Factors in determining the economic benefits 32
5.3 The opportunity cost for FIFA World Cup 2018 33
6. Conclusion and Recommendation 35
6.1 Conclusion 35
6.2 Recommendation 36
6.3 Limitations and Future research 37
7. References 38
Appendices 47

Table of Tables

2
Economic Indicators of Russia (2014-2019) 23,25
Year on Year Comparative Analysis for the economic indicators of Russia 25
% Analysis 26
Economic Contributions of FIFA World Cup 2018 in Russia (2013-2019) 26

Abstract

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Sports Tourism is one of the fastest developing sectors in the tourism industry. Mega-sports tourism is
one of the most prominent forms of sports tourism. Mega-sports events such as the World Cups and the
Olympics act as a catalyst for the development of tourism if successfully utilized in terms of
infrastructure development, destination branding, and other social and economic benefits. However,
mega-sports tourism requires a huge investment from the government or other organizing committees
(International and Local). This makes it essential to understand the economic impact arising from mega-
sports events or mega-sports tourism. This study aims to evaluate the economic impact of sports tourism
through a case of FIFA World Cup 2018 in Russia. The author conducts a quantitative study by
performing comparative year on year analysis to observe the change on selected economic variables
(GDP per capita, annual real GDP growth rate, unemployment rate, and imports and exports) every year
between the year 2014 to 2019. This is followed by a critical analysis of the existing reports that have
information regarding the economic outcomes of the FIFA World Cup 2018 in Russia. These
contributions are compared and matched with the derived change trend of the economic variables from
the comparative year on year analysis to understand the significance of these economic contributions to
the economic variables of the country. The findings suggest that the FIFA World Cup 2018 did have a
positive contribution to Russia’s economy. However, it is difficult to conclusively establish the long-term
significance of the economic benefits as it would require one to patiently observe and analyze as time
unfolds in the coming years and when the data for the same would be available. The study indicates that
sports tourism does have the potential to positively impact a country’s economy directly and indirectly.
Still, the significance of the economic impact would differ based on several other external variables, as
well as the thoroughness with which each of these projects is planned. Moreover, the study also indicates
that the absence of consideration for prior planning, such as lack of cost-benefit analysis, analysis of the
different opportunity costs, or lack of awareness regarding the external factors such as the political
situation of a country, can negatively impact the economy. Based on these findings, the author suggests
the relevant recommendations and opportunities for future research.

Key Words: Tourism, Sports Tourism, Mega-sports events, Mega-Sports Tourism, Opportunity cost,
Economic Impact, Gross Domestic Product, White Elephant

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Acknowledgment
Firstly, I would like to acknowledge my immense gratitude and heartily thanks to my research supervisor,
Dr. Simone Eisenhauer, whose invaluable guidance and encouragement contributed to the completion of
this research thesis. Her professional expertise and friendly support are highly appreciated.
Secondly, I would like to thank the MA in International Tourism, Hospitality, and Event Management
department of Berlin School of Business and Innovation, Berlin, to provide me with an opportunity to
conduct a research project as a student of this institution.
Finally, I would also like to thank every individual whose advice and critiques regarding the topic and the
project added value to the study.

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1. Introduction

Mega events or Sports events have turned out to be one of the highly integral parts of the tourism industry
(Deery, Fredline, and Jago 2004). This form of tourism has gained a high amount of interest and
popularity amongst the people as well as the scholars due to its future estimation of considerable
economic impacts (Bruun and Funk, 2007; Wong, 2011; Barajas, 2012). There has been a significant
increase in the number of studies conducted in the field of sports tourism. Researchers have been trying to
understand various aspects related to sports tourism, such as planning, organizing and hosting mega-
sports events, assessing the impact of the mega-sports tourism/sports tourism on the society and observing
the advantages and disadvantages associated with sports tourism (Barajas, 2012; Thomson, 2018).

Before this thesis starts, it is essential to understand these few key terms.

Tourism and Sports tourism

According to the United Nations World Tourism Organisation,1991, tourism refers to a collection of
activities of people traveling to or deciding to stay in places other than their natural living environment
for a year or less with the purpose of business or leisure.

Sports tourism

According to Gibson, 1998, Sports tourism can be described as a form of tourism that a perosn undertakes
with the intent to engage in physical activity of sports or participate or witness a major sports event.

The tourism industry has started acknowledging the importance of sports tourism as an essential part of
the tourism industry. The industry has three different types of activities, namely Active Sports Tourism,
Sports Events Tourism, and Nostalgia Sports Tourism.

Active Sports Tourism - It refers to the form of sports tourism where people travel intending to participate
in sporting events such as tennis, fishing, or surfing. Mega-Sports Event Tourism - It refers to the tourism
generated due to some major or minor sporting events such as the Olympics, FIFA world cup, the
Commonwealth Games, or any inter-school championships for any sporting events.

Nostalgia Sport Tourism - This form of tourism involves traveling to visit famous sites related to sports
such as the Manchester United Stadium or the NASCAR museum in the USA (Ross, 2019).

This research paper would be focusing on mega-sports event tourism

because mega-sports events play a very prominent role in the field of sports tourism. These sports events
attract different tourists as participants or spectators and provide the hosting destination with the chance

6
to give a taste of the authentic local experience of distinguishing themselves in the mind of the tourist.
Mega-sports events act as a catalyst for development in tourism in terms of infrastructure development,
destination branding, and other social and economic benefits (Sports Tourism | UNWTO, 2020).

1.1 Industry Overview

As of August 2019, the global Sports tourism industry was worth $640 Billion, which represents a
significant proportion of the total estimated value of the worldwide tourism industry, which is $4.5 trillion
(Tsolis, 2019). This industry has become a viable source for promoting a destination's outlying district
and local attraction and generating increased visitor spending (Tsolis, 2019). Germany, the United
Kingdom, Spain, Italy, Denmark, Finland, and Sweden are central countries of origin for Sport tourists.

1.1.1 History

Traveling to participate in a sports event as an audience or a player is an ancient concept. Historically,

there are several shreds of evidence of going to play a game of football or to Ski (Matley, 1981). In a
study conducted on an American, Burton Holmes, who was an audience member at the first modernized
Olympic game in the year 1896 in Athens, it was noted that Holmes considered this event to be a touristic
avenue more than a sports event (McFee, 1990).

Sports tourism is a steadily growing part of the economy, but it's quite a new concept of the 21st Century.
Sports tourism in Russia has historically been a developing concept as Russia held only 5% of the tourism
market globally, which accounts for a very small share of the total tourism market, given the natural,
cultural, and historical potential of the country. The Society for Proletarian Tourism and excursion in
Russia was founded in 1927 (Gozalova, Shchikanov, Vernigor, and Bagdasarian, 2014). The mass
phenomenon of sightseeing and sports tourism was visible in Russia in the 1930s as then the Soviet Union
started observing the political benefits of capitalist sports (Keys, 2003). In 1936 this society was
liquidated. Tourist and excursion control was established. By the year 1948, this organization was
established in several regions of Russia with the potential for sports tourism (winter and summer games)
such as the Kalinin region and Krasnodar (Gozalova, Shchikanov, Vernigor and Bagdasarian, 2014).
However, the political situation of Russia under the communist rule till the year 1991 restricted the
growth of the tourism industry as then the governing bodies of the country was not delighted to the idea
of foreigner tourist visiting the country. Also, the region-specific visa system and the time-consuming
application system had restricted the growth in tourism in Russia, historically (Spinks, 2019).

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1.1.2 Current Scenario

The sports tourism industry has evolved into a large international business that attracts political interest,
investment in different sectors and supporting industries, thousands of spectators and participants and,
very high media attention. The estimated value spend on sports tourism is $800 billion. This accounts for
10% of the total earning related to tourism (Sports tourism - World Sport Tourism Show, 2020).

The sports tourism industry is estimated to increase at a compound annual growth rate (CAGR) of 35%
globally. Several countries across the world spend millions to host mega sporting events such as the
Olympics and the World Cup in the hope of economic development through the profits earned from
sponsorships, visitors, and developers (ESP Properties, 2017).

Commercialization is an increasing trend in the industry, which means that commercialized sports
providers, sports article industry and media have been supportive of the growing market of sports tourism
as it has indirectly increased the profitability of the companies in these industries as well. Sports tourism
has led to the creation and capitalization of an innovative type of sporting event, and these events are
tested in the market as and when opportunities arise, such as summer windsurfing or winter
snowboarding. One of the current trends involves the creation of Hyper-Reality in the sports tourism
industry was excellent to create an artificial experience of sporting events and monetize on the same,
which has the first production of a range of activities such as Tubing or Zorbing. An increase in demand
for the qualitative offering of Sports experience is another trend that currently exists in the industry of
Sports Tourism (Schwark, 2004).

With Mega-sports tourism being at the forefront of sports tourism, there are several new trends for in
facility planning and development where the next generation of sports infrastructure is being designed
with a hybrid perspective of sporting and non-sporting events (The Future of Sports Tourism - Sports
Planning Guide, 2020). Such a plan makes the facility multi-purpose and would, therefore, ensure its
long-term usage for different types of events while making the facility a profitable avenue.

Russia has also started focusing on the importance of mega-sports tourism. The country hosted two
prominent mega-sports events in recent years. In essence, the 2014 Sochi Winter Olympics and the 2018
FIFA World Cup By hosting these mega-sports events, Russia has been tried to leverage the multiple
benefits arising from sports tourism (Spinks, 2019).

1.2 Rationale

Lately, several scholars have started acknowledging the significance of sports tourism. As per Kapur
(2018), sports tourism influences socio-cultural, economic, and technological factors in a country. Studies

8
suggest that local authorities should leverage sports tourism to derive further benefits for their
communities (O'Brien and Chalip, 2008; Nyikana and Tichaawa, 2018).

As per Roche (2000), mega-sports events tend to have international significance and mass popular appeal.
Activities such as FIFA World Cup and Olympic Games is not just limited to attracting global audience at
an increasing rate but also helps in the shaping the tourism pattern globally by providing information
regarding new destination for tourism and creating legacies for the host countries and cities (Horne and
Manzenreiter, 2004). Several researchers have suggested that sports tourism have several economic
benefits such as increased investment in infrastructure, increase in employment, positive contribution
towards the balance or a positive cumulative economic impact in a country (Chen, 2008; Balogu et al.,
2010; Preuss, 2004; Halkias, Robinson-Jacobs and Case, 2011). However, several critiques of mega-
sports tourism have suggested that returns generated from the mega-sports tourism do not justify the high
costs related to the investment and generally tends to have a tremendous opportunity cost associated with
it (Finer, 2002; Manzenreiter, 2008; Matheson & Baade, 2004; Matheson, 2006)

Russia has hosted several mega-sports events such as the 2014 Winter Paralympics Games and XXII
Winter Olympics in Sochi. In 2018, Russia hosted the FIFA World Cup (Golubchikov and Slepukhina
2014). There are similar arguments regarding the positive and negative impacts regarding the impact of
the FIFA World Cup 2018 on Russia (Sorokin, 2018; Mohammadi, 2018; Hurley, 2018)

Therefore, this thesis would try to understand the economic contribution of sports tourism in a country by
analyzing the financial contribution of the FIFA World Cup 2018 in Russia because the event was only
recently conducted. As per the critical analysis of the literature undertaken in this thesis in the next
chapter, there has not been any specific study undertaken to estimate the economic contribution of FIFA
World Cup 2018 in Russia.

1.3 Research Problem Statement

The study is trying to explore the economic contribution of sports tourism in a country. This research is
focused on observing the economic contribution of the FIFA World Cup 2018 towards different economic
variables in Russia's economy. This study would help us get a better understanding of the positive and
negative economic impacts in Russia resulted from hosting FIFA World Cup 2018 based on which we
can derive general opinion regarding the economic effects of sports tourism.

1.4 Research Aim

The research aims to evaluate the economic impact of sports tourism through a case of FIFA World Cup
2018 in Russia

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1.5 Research Question

The proposed research question for this study is:

RQ: What is the economic contribution of sport tourism in a country?

The question mentioned above would be studied in this research using the case of FIFA World Cup 2018
hosted by Russia.

1.6 Overview of the thesis

This study is conducted by emphasizing a comprehensive literature review that covers essential aspects
related to our topic of economic impacts of sports tourism on a country's economy. The literature review
is conducted to analyze that available content about sports tourism and its growth under tourism industry,
mega sports tourism and its increasing relevance in the industry, positive and negative impact of mega-
sports tourism, hosting experience of FIFA in different countries and about Russia and the growing
importance of sports tourism. It is followed by the chapter of Research Methodology, which details the
research objectives and the sampling and data collection technique used for this study. This data is
analyzed and interpreted using two existing theoretical frameworks. The interpretation is then discussed
and compared with the existing studies on this topic. The study then goes on the conclude by providing
the answer to the research question that what is the economic contribution of sport's tourism in a country.
The study also lays down the limitations while surveying the future research scope.

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2. Literature review

2.1 Sports tourism and its growth under tourism

Sports tourism is considered one of the factors with high effectiveness for influencing national revenue
and growth for the 21st century (Brown and Nagel, 2002). Sports tourism under the umbrella of the
tourism industry focuses on the target planning of the developing countries, and it tries to restructure the
urban and rural communities from the perspective of the economy and society. It contributes to the
improvement of an individual's quality of life by generating more tourist attractions resulting in the
economic welfare of several local communities (Bob and Swart, 2007). It was observed that between the
years 1997 and 2005, sports tourism helped increase the gross domestic growth by 1.3% annually and
contributed to reducing the unemployment level by 1.9% annually, using the economic activities related
to conducting popular sports competitions globally (Dawson and Kasimati, 2009). One of the studies
conducted in the field of sports tourism indicates that this form is of tourism is one of the most developed
parts of the tourism industry (Chalip and Kim, 2004), as it has a multi-billion dollar trading element in it
and already contributes $800 billion to a $4.5 trillion tourism industry, globally (Tsolis, 2019). It is
observed here that this accounts for 10% of the total earning related to tourism and hence justifies its
prominence in the tourism industry.

(Masa'deh et al., 2017) wrote a paper on the effect of Sports Tourism Management on Support for
Tourism Development. The purpose of this paper was to understand and estimate the influence of sport
tourism on developing the tourism industry through its support by utilizing the variable factors such as its
effect on society, environment, and economy. The sample comprised 480 residents from the city of Aqaba
who were selected through the method of random sampling. The results consist of several significant
findings. It could be understood from the test conducted that sports tourism has had a substantial impact
on the environmental factor and the economic aspects for the support and development of the tourism
industry. In contrast, it has no significant social implications. Based on the Annova test conducted, the
author stated that a remarkable difference could be noticed in the attitudes of the residents for the concept
of development in the tourism industry sustainably, once personal income got involved as a factor rather
than attributes like their age and educational background. The result of this study indicates that potential
personal economic gains arising from sports tourism have a significant influence on individual perception
and attitude towards sports tourism.

By contributing to the development of the tourism industry, Sports tourism also contributes to the
development of the economy. As per Homafar et al., (2011) article on the topic - the role of sport tourism
in employment, income, and economic development, Despite being a relatively new concept in our

11
society, sports tourism has manifested in tourism industry profitability. Several countries have capitalized
on the profitable business avenue of sports tourism, which has directly been beneficial to their country's
economy. The objective of his study was to get varieties of ideas and perspectives related to the creation
of employment and generating income through creating more opportunities related to sports tourism,
management in tourism and interest management, and conduct a relevant comparison between them. The
sample methodology used is random sampling, but positive samples have been chosen merely based on
their availability. The geographical region of the sample was restricted to Mazandaran province in Iran,
and the sample consists of 31 tourists, 12 interest managers, and 12 tourism-cultural heritage organization
managers. The results of the study conducted indicated that the emergence of sport tourism in the tourism
industry has led to the creation of several jobs temporarily and the generation of income in the region the
test was conducted. The study concludes that countries with developed infrastructure for sports tourism
could lead to producing more jobs and pay in the future (Homafar et al., 2011).

Therefore, it can be inferred from this study that the mere creation of sports infrastructure does not
guarantee long-term job opportunities in a community or a host city. The operation of these facilities
needs to have a long-term economic plan to start generating long-term employee benefits. This
phenomenon of temporary impact on employment is also noticed during the Atlanta Olympics Games.
Those facilities started created stable employment opportunities after being economically geared in the
later years (Kasimatia and Dawson, 2008).

2.2 Mega-sports tourism and its increasing relevance in the industry

The increase in the growth of the tourism industry could be partially credited to the increased economic
growth of mega-sports events and its role in shaping local and national tourism products (Yuen, 2008).
Mega-events are hosted by a country with an intent to renew or increase investment in the countries or the
cities where the event is being undertaken (Greene, 2003). Countries tend to compete to host these mega-
events due to the socio-economic benefits associated with it, which are enjoyed by successfully hosting
these events such as the Olympics, the FIFA World Cup, or the Cricket World Cup (Fourie and Santana-
Gallego, 2011). As per Getz (1997), these mega-events lead to a vast amount of media coverage from the
perspective of tourism and have a significant economic impact. It acts as a catalyst for urban renewal and
facilitates the development of infrastructural facilities. It has been observed that mostly, these prestigious
mega-events, had been hosted by developed countries, historically (Bohlmann and Van Heerden, 2005).
In recent times, there have been several arguments that these hosting opportunities for the mega-events
should be provided to the developing nations as these countries are more in need of the economic
stimulus gained from hosting such events compared to the developed nations (Humphreys and
Prokopowicz, 2007). Several developing nations argue that hosting mega-events creates a more accessible

12
platform for a higher level of global recognition, which has already been attained by the developed
countries. For example, the joint bid by Poland and Ukraine to host UEFA Championship in 2012
reflects this trend. There bid suggested that hosting this event produces several non-monetary as well as
monetary benefits such as an increase in global visibility due to worldwide media coverage of the mega-
event and infrastructural improvement in transportation and housing and other real-estates sectors.
However, critics of this bid also suggested that spending or cost-related to such projects in transitional
economies tends to have a higher opportunity cost compared to other developed nations (Humphreys and
Prokopowicz, 2007).

Events such as the FIFA World Cup and the Olympic Games are considered the Hallmark tourism events.
These events have significant potential to facilitate growth in international tourism for the host country
(Giampiccoli, Hall, 2004; Lee and Nauright, 2015). The characteristics of these hallmark events are
features like tradition, quality, high grade of advertising that leads to establishing a link between the
event, destination, and tourism resulting from it. It increases the attraction level of the place where the
event is being hosted, which leads to the creation of national place branding (Getz, 2008). Scholars and
researchers have realized the capacity of mega-events or mega-sports tourism for the development of
tourism infrastructure. In the article - 'The Sports Tourism Impacts - the Case Study of Olympics Event
(Han et al., 2011), the research mainly concentrates on the Olympics and different advantages and effects
experience by the host country. The author discusses the impact of hosting Olympics in a country and
what was its impact on the image of the country at the national and international levels. While the
authors can gather both positive and negative impacts, he also argues that the positive effects outweigh
the negative impacts on the country and its economy.

However, it is essential to acknowledge the fact that there has been empirical evidence stating both
positive and negative impacts of sports tourism (Preuss and Solberg, 2007; Giampiccoli, Lee, and
Nauright, 2015).

2.3. Positive impact on the economy of Mega Sports Tourism

The high number of visitors, spectators, players, and media personalities are generally involved in the
mega-sports tourism. As a result, these large number of tourist inflow in the host countries leads to
significant positive impact in the economy (Balogu et al. 2010).

2.3.1 Cumulative economic impact

It is effortless to find out information related to the economic impact of these mega-sports events through
the various industry reports, data available in media, and academic studies. Phoenix hosted the 2008

13
Super Bowl went on to generate $500.6 million in indirect and direct spending by the organization and
the fans (KnowWPC, 2008). As per the Arizona State University's W.P. Carey School of Business, this
event leads to rejuvenation for the Arizona marketplace, which was suffering due to the recession during
that duration, from half a billion-dollar investment in its economy. During Super Bowl XLV 2009, the
spending on the game day in the Cowboy Stadium, the food and beverage sale alone reached $9million
(Case, Halkias and Robinson-Jacobs, 2011).

As per a study conducted by Preuss (2004) on Olympics Games that took place between 1972 and 2008, it
was observed that all these sports events generated enough revenues to overcome the cost associated with
conducting these events. For instance, the Olympics events that took place in 1992 Barcelona, witnessed a
40% increase in revenue growth. Also, as per the study undertaken by Dentsu Institute of Human Studies,
Japan, for the World Cup 2002, an estimated $24.8 billion positive economic impact was observed for
Japan, and an $8.9 billion positive economic impact was seen in South Korea (Finer, 2002). According to
an economic impact study, The National Collegiate Athletic Association (NCAA) - basketball tournament
(Women) Final was expected to produce an up to $100 million positive economic impact (Baade and
Marheson 2004).

Therefore, this indicates that sports tourism does have a certain positive economic contribution to the
hosting countries (Balogu et al., 2010; Chen, 2008; Preuss, 2004).

2.3.2 Increased spending on accommodation

In the study conducted in Balogu et al., (2010), it was observed that the number of out of town tourists
tends to increase during the significant mega-sport events. In the case of the Sydney Olympics, 2008, a
93% increase was noticed in the average occupancy of the hotels resulting due to 94,700 visitors from
outside the country and 368,000 visitors domestically (ETOA, 2010). As per Julian Dugas, the director of
sports and events in Las Vegas Convention and Visitors Authority these mega-sports events leads to the
generation of more revenue from higher hotel rooms booking as the attendees are ready to pay a higher
charge for the room, as observed in the case of NASCAR attendees between the year 2008 to 2010
(Balogu et al., 2010). However, it is also essential to mention that hotels also claim that room shortages
and inflated prices are a few of the reasons due to which business tourists tend to avoid the areas where
the mega-sports events are conducted (Henderson et al., 2010).

2.3.3 Opportunity of Funding

The mega event gives a platform via mass media to gain public and investors' attention. Many
cooperation gets attracted to it because for them it's an opportunity to promote themselves worldwide in

14
terms of advertisement, sponsorship, etc. The trend of sponsorship is increasing, and full use of this
opportunity can increase the fund of an event for the hosting community. One of the essential resources is
public, people belonging to the locality and national government. In the Beijing Olympics, it was 80%
and more than 60% in Barcelona, Sydney, and London Olympic (Chen, 2008; Preuss, 2004). In 2012, it
was estimated that the London Olympic Distributor had funded approximately £1.8 billion towards the
infrastructure development and facilities for the Olympics throughout the United Kingdom and London
Organising Committee of the Olympics and Paralympics received funding of approximately £66 million
(Olympic Lottery Distributor, 2012).

The primary source of funding includes the revenues from broadcasting sponsorships and licensing. The
investors have a strong appeal from the high exposure received from mega-sporting events to promote
their products across the globe. The 2006 FIFA world cup held in Korea and Japan attracted a TV
audience of 26.4 billion in-home viewers (FIFA). Receiving such large-scale international exposure is
very difficult for other events. Therefore, this amount of exposure results in higher sponsorship as
witnessed in the case of the Beijing Olympics, where they received $1 billion sponsorship revenue
collectively from domestic and worldwide sponsorship (International Olympic Committee, 2012).

The exposure received from these events also results in higher revenue from advertisements. These
revenues help to understand the extent of the economic impact of mega-sporting events. For instance, the
advertising revenue generated by NBC, the broadcasting company, through Super Bowl in 2012 was $250
million (Rosenberg, 2012).

2.3.4 Employment

The job positions and the employment opportunities generated as a result of the mega-sporting events are
mostly services oriented in nature, such as personal care, sales, and maintenance, and the salary ranges
falling between $15000 to $40000 (Danielsa, Henry and Norman, 2002). As per a study conducted by
Chen (2008), it was observed that there was a significant increase in the job opportunities for the
countries hosting mega-sporting as witnessed in the Los Angeles Olympics games 1984 which created
210,000 new job opportunities and the South Africa World Cup which created 300,000 job positions. The
Winter Olympics, conducted in Vancouver in 2010, created 99000 job opportunities, which lead to a total
GDP contribution of $4.1billion (InterVISTAS Consulting, 2002). However, as previously stated in this
chapter, the mere creation of sports infrastructure does not guarantee long-term job opportunities in a
community or a host city. The operation of these facilities needs to have a long-term economic plan to
start generating long-term employee benefits. This phenomenon of temporary impact on employment is

15
also noticed during the Atlanta Olympics Games. Those facilities started generating stable employment
opportunities after being economically geared in the later years (Kasimatia and Dawson, 2008).

2.3.5 Infrastructure Development and Urban Growth

To win the hosting rights for mega-sporting events such as FIFA World Cup and Olympics Games,
countries need to develop their sporting facilities and public infrastructure to organizing such events
successfully. For instance, a country needs to construct a minimum of 8 modern stadiums with a seating
capacity of 40,000 to 60,000 people, to host the FIFA World Cup (Manzenreiter, 2008). In a study
conducted by Howard and Crompton, (2004), the concept of new facility honeymoon effect is discussed
which outlines the when the major league teams use new venues, it results in approximately a 22%
increase in the attendance of the event by the spectators initially and resulted in many job opportunities
due the construction and maintenance of the new facilities.

Hosting of such events helps in Urban development and growth through the investment in social well-
being facilities such as environmental improvement and public transportation, as seen in several
instances, such as the $4 billion invested during the 2002 World Cup in Japan for building new
infrastructure, gave a boost of the development of sports infrastructure in the country for over ten years
(Lakshman, 2008). The Wembley stadium in 2008 provided $150 million for the development of general
infrastructures, such as renovation for the underground station and building new roads (Matheson, 2008).

However, some studies suggest that investment in stadiums tends to have a negative impact because the
construction and the maintenance cost of these stadiums are more the returns generated from them. Also,
these stadiums might remain unused for a long period (Hurley, 2018). For example, the $3 billion world
cup stadiums of brazil have remained mostly unused and are facing difficulties in meeting the cost of
building these stadiums (Manfred, 2015).

2.4 Negative impact on the economy of Mega Sports Tourism

Even though sports tourism leads to several advantages and positive economic impact for the host
countries, several studies have proven that there are quite a few negative impacts of arising from hosting
such mega sports events as well (Finer, 2002; Manzenreiter, 2008; Marheson & Baade, 2004; Matheson,
2006).

2.4.1 Impact cost

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As per Howard and Crompton (2014), impact cost consists of on-site costs and off-site costs. To be
specific, on-site costs comprise of extra equipment or supplies cost, human resource cost, and time cost
related to hosting mega-sports events. In a study conducted by Humphrey s and Prokopowicz (2007), it
was observed that the hidden costs associated with the construction and renovation of the stadium for
EURO 2012 Soccer Games conducted in Ukraine and Poland were significant.

Off-site impact cost is related to the cost arising due to a sudden increase in the number of tourists coming
to the host country. It results in disruption of the social life of the people of the local community, such as
an increase in retail prices of products due to higher demand, environmental degradation as well as traffic
problems (Cromptom and Howard, 2004). A significant number of migrants tends to move to the host
countries of mega-events in search of better job opportunities arising due to such event, thereby
increasing the level of competition in getting a job (Tilley 2006). It also increases the prices of consumer
products, transportation costs, and other public service charges (ETOA, 2010).

2.4.2 Displacement cost

Increase in the number of tourist in-country to visit the mega-sports events tends to decrease in the
number of regular travelers and tourists due to factors such as high prices in that duration, fear related to
massive crowds and disruptions as observed in Sydney, Beijing, and Athens when they hosted the
Olympics games (ETOA, 2010).

In the 2008 Beijing Olympics, overseas tourism decreased by 25 % in the duration of the Olympics, and
there was a constant drop in the number of foreign visitors to 30% in 2008 (ETOA2010). This decrease
could be attributed to the fear of terrorism, riots, and protest regarding the movement related to Tibetan
Independence, which started in March 2008, the global economic recession outbreak, and the Sichuan
earthquake (Dyer, 2009). In the London Olympics, they were worried about losing their usual visitors.
Although London and Beijing have a well-developed tourism market, a sudden mega-event can affect the
industry, and it may cause some adverse effects. According to Alcantara (2012), London Olympics
Organizing Committee booked large numbers of rooms, and the expensive room price disturbs the tour
operator business. The assumption of the high number of visitors led to an increasing room rate in
London. Furthermore, the author also has a skeptical overview of the spending pattern of a mega-sport
event tourist compared to the spending pattern of an ordinary tourist. The increase in expenses and
congestion related to accommodation and transportation facilities demotivates the tourist to visit the host
countries of mega-sports events, which are termed as crowding out costs (Humphreys and Prokopowicz,
2007).

2.4.3 Opportunity Costs

17
According to a theory in a study conducted by Cromptom and Howard (2004), while the host countries
tend to have a positive economic impact, there is a high chance for these countries to undergo opportunity
cost, which calls for great attention in determining the investment opportunities in the local communities.
In this same study, it was observed that the Union of European Football associations 2012 estimated cost
for construction and renovation of the stadium amounted to $1 billion, which also helped in the
development related to technology, education, and small business. However, it was also expressed in the
study that a more direct form of investment in these sectors would have led to a higher positive impact in
these sectors since the hosting countries in this scenario (Poland and Ukraine), lacked demand in future
needs or requirements directly related to the event industry.

There is a conflict between the researchers of tourism-related to mega-sports events. While several of the
scholars express that tourism resulting from mega-sports events leads to a positive impact on the
economy, using different methodologies, other researchers believe that it is difficult to justify the income
generated from such form of tourism when compared to the huge amount of costs and investment
associated with them (Liu and Wilson, 2014).

2.5 Hosting experiences of FIFA in previous countries

According to Brown, Assaker, and Reis (2017) study on opportunities arising to attract more tourists by
hosting FIFA world cup Brazil 2014, it is observed that there was no significant impact on the satisfaction
level of the tourist from visiting the host country. It was related to participating in the world cup event
and witnessing it.

In a study conducted on mega-event leveraging, specifically in the context of development, it is noticed

that after hosting FIFA world cup in 2010, South Africa witnessed several positive impacts in terms of
sports-related infrastructure and tourism and yet, the country has undergone quite a few challenges in
implementing projects which are legacy-related developmental project and connected to FIFA World Cup
2010 which reflects the gradual reduction in the positive impact from the time the event was conducted to
the post-event time (Bob and Tichaawa, 2015). As previously discussed in this chapter, it is inferred from
this study as well that mega-sports tourism tends to have certain limitations when it comes to realizing the
long-term benefits of such events. In the study, it is mentioned that the aim of hosting the FIFA World
Cup 2010 in South Africa was not just limited to the development of sports culture in the country but to
contribute toward socio-economic development in the African Continent, which would create a lasting
legacy for the entire continent. The study that the legacy project for the development of the African
continent was not successfully implemented due to the lack of funding and financial sustainability to
conduct them (Bob and Tichaawa, 2015). It can be inferred that South Africa has faced certain negative

18
impacts from hosting FIFA World Cup 2010. It is essential to understand that South Africa is one of the
few developing nation that had the opportunity to host mega-sport. Failure to leverage the economic
benefits of such events has a higher opportunity cost for these countries because these investments could
have generated higher returns in other developmental projects.

In a study conducted to examine the economic and the social impact of FIFA World Cup 2014 in Brazil,
it has been found that the actual cost of stadium renovation and infrastructural development related to the
World Cup was much higher than the projected costs. The actual economic impact arising from the costs
were half of the projected impact (Alvarez, 2016). It's noted in the study that the contracts for the
construction and development of the stadium in Fortaleza were not given to the local vendors. The cost of
constructing the stadium exceeded by $81million from the estimated cost (Alvarez, 2016). Therefore, it
can be inferred from the study that this reflects the shortcomings of the economic impacts of mega-sports
tourism in a country. It becomes essential for developing nations like Brazil to realize the economic
benefits of mega-sports tourism to at least cover the costs, and failure to do so leads to the accumulation
of debts in the country and negatively impacts the economy.

According to Galetić (2009), after analyzing the economic impact of FIFA World Cups conducted in the
last 30 years. It's is observed that countries such as South Korea, France, Germany, Japan, Italy, the
United States of America, and South Africa had witnessed improvement in various economic indicators
such as GDP per capita and real GDP growth, around the years when the event was conducted. However,
in the case of Brazil and Mexico, there was no positive impact on the economic indicators. Furthermore,
it is also noticed that economic indicators such as real GDP growth, GDP per capita, imports and exports,
and final consumption reflect higher positive effects whereas, economic indicators such as unemployment
rate show very little improvement, and inflation rate remains unaffected in the host countries.

2.6 Russia and tourism

Russian Federation is a very interesting market for the tourism industry and global travel as it is the
largest country in the world. Domestic tourism in Russia is much stronger when compared to inbound
tourism (Elagina, 2020). This is because the political situation of Russia under the communist rule till the
year 1991 restricted the growth of the tourism industry as then the governing bodies of the country was
not delighted to the idea of foreigner tourist visiting the country. Also, the region-specific visa system and
the time-consuming and stringent visa application system had restricted the growth if international
tourism in Russia, historically (Spinks, 2019). The travel and tourism industry of Russia contributed
$16.5 billion to the Russian GDP and created 3.26 million jobs in the year 2017 (Elagina, 2020).

19
Between the years 1992 to 2002, there was not any national policy for the sector of inbound and internal
tourism or any technological or economic development in the tourism industry of Russia. In that period,
outbound tourism in Russia had increased as Russian citizens were more focused on the foreign market
due to a lack of infrastructure and reforms in the domestic market. Therefore, the Russian tourism
industry could see a reduction in the number of tourists it served in this period. Between the year 2002-
2008, the country witnessed a tourist boom due to improvement in the economy of the country and the
increase in the living standards of the citizen. The government started making investments in the tourism
sector. From the year 2009 onwards, the country saw a positive increase in inbound tourism and an
increase in domestic tourism as well (Ovcharov, 2008). This change can be attributed to the change in the
Russian government's approach towards the tourism industry. Better business climate and public-private
partnership schemes have helped develop the hospitality sector across several regions in the country.
Also, the infrastructural development in cities like Crimea and Sochi has further contributed to the
development of the tourism industry. Hosting mega-sports events such as Sochi Winter Olympic 2014
and FIFA World Cup 2018 provides the country with the opportunity to get global exposure to promote
their local destination as a potential tourist destination (Klomegah, 2019).

2.6.1 Sports tourism in Russia

According to Golubchikov and Slepukhina (2014), Russia aims to benefit from the positive impacts that
arise from hosting mega-sports events. A Russian city Krasnodar Krai has around 400,000 residents from
different countries and cultural backgrounds (USSA Foundation, n. d). This region is famous for its resort
stretch of 147 km alongside a side of the Black Sea coast with modern amenities combine with a unique
environment and developed transportation, which is suitable for any winter Olympic event (lbid). As a
result, over two million tourists visited the city annually. The infrastructure of Sochi contributed to the
advance factor to put forth the preparation of the 2014 Sochi games (Arnold, 2014). The 2014 games led
to the improvement of highways, train track, and airport. They upgraded them up to the Morden standards
for smooth transportation across the Sochi (Barabanova 2013). Sochi has hosted many mega-events like
Xl Paralympic winter games, XXll winter Olympic games, Russia Formula 1 Grand Prix, and it was also
one the host cities of the 2018 FIFA World Cup (lbid). Such mega-sports events lead to the refurbishment
of several stadiums in the city like the Olympic Oval, Maly Ice Palace, and the central stadium (BOA
2014).

Therefore, in Russia, the sports tourism industry plays a crucial role in economic development and yet
there has been a lack of study on the economic impact of these mega-sports events because the event was
only recently conducted. As per the critical analysis of the literature conducted in this thesis in this
chapter, there has not been any specific study conducted to estimate the economic contribution of the

20
FIFA World Cup 2018 in Russia. Hence, the next chapter would focus on determining the economic
contribution of mega-sports tourism on Russia by focusing on the economic impact generated in Russia
due to hosting FIFA World Cup 2018.

3. Methodology

3.1 Introduction to research methodology

As per Goundar 2013, research methodology refers to a systematic pattern of solving a problem or
science to study how research is conducted. As per Lewis, Saunders, and Thornhill (2007), research
methodology refers to the process performed during research where data and information are collected to
derive a conclusion of the topic or answer the research question.

3.2 Research Purpose and Objective

As previously stated in the introduction - the research question for this thesis is - 'What is the economic
contribution of sport tourism in a country?'

Hence the objectives of the research are:

To analyze the contribution of FIFA World Cup 2018 on different economic variables in Russia.

To understand and explain the various positive and negative economic impact in Russia after hosting the
FIFA World Cup 2018.

To determine, describe, and explain the economic contribution of sports tourism in a country based on a
sample study conducted.

3.3 Research Approach

For this thesis, we would highlight the economic contribution of sports tourism in a country by
conducting quantitative research. The available literature on this topic has provided the theoretical
framework to conduct economic analysis using certain economic variables. Therefore, the literature
helped us determine the economic variables that need to be analyzed to understand the economic impact
of sports tourism in a country.

21
As per Aliaga and Gunderson (2002), quantitative research methods explaining and exploring an issue by
collecting data in a numerical format and analyzing these data using mathematical methods or statistical
tools. Hence this method helps to find generalizable findings that would apply to other populations as
well.

As mentioned earlier, for this thesis, the economic analysis conducted consists of various economic
variables. To analyze the significance of the economic contribution of FIFA World Cup 2018 on Russia's
economy, we utilize the real Gross Domestic Product (GDP) growth and GDP per capita at current prices.
The labor market analysis is by utilizing the data of the unemployment rate. Imports and exports are also
two essential economic indicators that would help determine the level of economic activity between the
host country for sports tourism and other countries (Galetić, 2019). The specific contribution of the FIFA
World Cup to these economic factors are ascertained to understand the significance of the economic
contribution of FIFA World Cup 2018 in Russia.

3.4 Sample and Sample characteristics

For this thesis, we have chosen a form of non-probability sampling - Judgmental or Purposive sampling.
The goal under this form of sampling is to select the subject intentionally to gather information as per the
requirement of the author and the research (Lavrakas, 2008).

After conducting a thorough literature review, we were able to derive that there is a lack of detailed study
on the economic impact of sports tourism on a country's economy and especially in the case of Russia,
where we could notice a growing trend of sports tourism. To under that economic impact of sports
tourism in a country, we chose to analyze the effect of FIFA World Cup 2018 in Russia as it one of most
recent example for a major mega-sports events hosted by a country and there hasn't been any detailed
study conducted to study the economic impact on Russia's economy from the tourism resulting due to this
event.

3.5 Data collection tools and methodology

To conduct the research, we have used a secondary source of information. The data regarding different
economic variables and the specific contribution of FIFA World Cup 2018 towards these economic
variables are collected from the statistical data available at the database of World Bank, International
Monetary Fund (IMF) and, Federation Internationale de Football Association (FIFA) over last five years
for Russia. The aspects analyzed are inclusive of economic variables such as real GDP growth rate, GDP
per capita, unemployment rate, and imports and exports.

22
A comparative year on year analysis is conducted to observe the change in these economic variables
every year between the years 2014 to 2019. This is followed by a critical analysis of the existing reports
that have information regarding the economic outcomes of the FIFA World Cup 2018 in Russia. These
contributions are compared and matched with the derived change trend of the economic variables from
the comparative year on year analysis to understand the significance of these economic contributions to
the economic variables of the country. It is essential to mention several external factors affecting the
change in the trend of the economic variables have been mentioned in the study and have been taken into
consideration while deriving the result and inference of the outcomes.

Table 1 - Economic indicators for Russia (2014-2019)

2014 2015 2016 2017 2018 2019

GDP per capita14.07 9.26 8.72 10.75 11.29 11.16

(USD) in
thousands
Real GDP growth 0.7 (2.3) 0.3 1.6 2.3 1.1

Unemployment 5.2 5.6 5.5 5.2 4.8 4.6

rate (%)
Imports (Bil. USD) 24.46 17.50 19.55 24.18 22.40 24.13

Exports(Bil. USD) 38.09 28.78 31.21 37.25 40.08 39.60

Balance of trade 13.63 11.73 11.66 13.07 17.68 15.47

Source -(imf.org, 2020)

3.6 Validity and Reliability

Validity refers to the concept of accurately measuring a concept in a quantitative study. It comprises parts
such as content validity, which refers to the accuracy of the research instrument to measure every aspect
of a construct, construct validity, which refers to the ability to derive inferences from the tests conducted
regarding the topic being studied. Criterion validity refers to the degree to which a research instrument is
connected to another instrument that computes the same variable (Heale and Twycross, 2015). For this
research, we have taken measures to ensure that it reflects all the different aspects of validity. By taking

23
into account five different major economic variable data from the website of an established organization
such as the World Bank and IMF, which would reflect the economic impact arising from sports tourism
with a high degree of accuracy, we have covered the content validity aspect. Year on year comparative
analysis of the five economic variables helps determine the effect, and the extend of the effect FIFA
World Cup 2018 on Russia's economy with a high level of accuracy and helps cover the construct validity
aspect. The results derived from the comparative analysis of the economic variables provide desirable
correlations when if tested with other tools and thus helps cover the criterion validity.
Reliability refers to the consistency of a measure. It comprises three attributes, namely, homogeneity,
stability, and equivalence (Heale and Twycross, 2015). In the case of this thesis, since the data is
collected through secondary sources and analysis conducted is year on year comparative analysis, only
the equivalence aspect of reliability is applicable in this scenario. Since the data regarding the economy is
collected from the website of the World Bank and IMF, they can be compared and seen that the data
collected matches both the websites or any other website portal that consists of these data. Therefore, this
helps establish consistency among the information across different platforms. Using a year on year, the
comparative analysis also eliminates the chances of any inconsistency in interpreting the data as it acts as
a scientific tool.
3.7 Limitations of methodology
Even though necessary measures were taken to ensure accurate interpretation for the data collected and of
the outcomes generated, by taking into consideration the external factors affecting the economic
variables, it is difficult to ascertain if all the external factors have been taken into consideration. Also, it
was difficult to collect the exact amount of contribution of the FIFA World Cup 2018 towards certain
economic variables due to the lack of transparency and data availability from the Russian government and
other organizing bodies.
3.8 Ethical Consideration
Measures were taken to assure that the research was conducted ethically for verifying the secondary data
collected for data analysis by comparing the information using multiple sources and stating them in the
research. A self-declaration has been attached in this thesis, which confirms that all the factual data
presented in the thesis are accurate. These procedures were taken to ensure the basic ethical norms during
the research.

24
4. Results, Data analysis and Findings
Table 1 - Economic indicators for Russia (2014-2019)
2014 2015 2016 2017 2018 2019

GDP per capita14.07 9.26 8.72 10.75 11.29 11.16

(USD) in
thousands
Real GDP growth 0.7 (2.3) 0.3 1.6 2.3 1.1

Unemployment 5.2 5.6 5.5 5.2 4.8 4.6

rate (%)
Imports (Bil. USD) 24.46 17.50 19.55 24.18 22.40 24.13

Exports(Bil. USD) 38.09 28.78 31.21 37.25 40.08 39.60

Balance of trade 13.63 11.73 11.66 13.07 17.68 15.47

Source -(imf.org, 2020)

Table 2 - Year on year comparative analysis for the economic indictors of Russia
2015 on 2014 2016 on 2015 2017 on 2016 2018 on 2017 2019 on 2018

GDP per capita(4.81) (0.54) 2.03 0.54 (0.13)

(USD) in thousands
Real GDP growth % (3) 2.6 1.3 0.7 (1.2)

Unemployment rate0.4 (0.1) (0.30) (0.4) (0.2)

(%)

25
 Imports (Bil. USD) (6.96) 2.05 4.63 (1.78) 1.73

Exports (Bil. USD) (9.3) 2.43 6.04 2.83 (0.48)

Balance of trade (1.9) (0.07) 1.41 4.61 (2.21)

Source - Author’s analysis

Table 3 - % analysis
2015 on 2014 2016 on 2015 2017 on 2016 2018 on 2017 2019 on 2018

GDP Per capita (34.18%) (5.83%) 23.27% 5.02% (1.15%)

Real GDP growth (3%) 2.6% 1.3% 0.7% (1.2%)

Unemployment 0.4% (0.1%) (0.3%) (0.4%) (0.2%)

rate (%)
Imports (Bil.(28.45%) 11.71% 23.68% (7.3%) 7.72%
USD)
Exports (Bil.(24.41%) 8.4% 19.35% 7.6% (1.2%)
USD)
Balance of trade (14.23%) (0.6%) 12.09% 35.27% (12%)

Source - Author’s analysis

Table 4 - Economic contributions of FIFA World Cup 2018 in Russia (2013-2019)

2013-2019

Impact on GDP 20 Billion USD Amount spent on hosting$14.5Billion

the tournament
Employment Upto 315000 Jobs per year

Increase in Personal6.5 Billion USD

Income
Future earnings estimate 2.3Billion USD annually

Over next five years

(2018-2023)
Source - (Sorokin, 2018).

26
4.1 FIFA World Cup 2018 Russia - Overview

As per the critical analysis of FIFA World Cup 2018, it is observed that Russia invested $14.5 Billion to
host FIFA World Cup 2018. 38% of the total budget is spent on developing sports infrastructure. This
includes 12 stadiums with a cumulative seating capacity of 550,000 spread across 11 different cities in
Russia, namely St. Petersburg, Kazan, Sochi, Moscow, Kaliningrad, Saransk, Volgograd, Nizhny
Novgorod, Rostov-On-Don, Samara and, Yekaterinburg. It also includes 96 training facilities with a total
capacity for 16000 people across, which could be utilized even after the World Cup is over. Significant
investment has been made to develop the Transport and utility infrastructure inclusive of $1.9 billion
investment for constructing 11 new terminals at airports, $2 billion investment for constructing a new
railway line consisting of 31 stations. Additional investment is made for constructing 12 new roads and
junctions as well as three new metro stations. $1.18 billion is spent to construct medical a housing
infrastructure. According to the Russian Federal Tourism Agency, 5 million tourists visited the country in
2018, inclusive of 2.9 million foreigners. There is an average growth rate of 74% of tourists visiting the
host cities of the world cup (Sorokin, 2018).

4.2 FIFA World Cup 2018 effect on GDP

As per the comparative analysis conducted, it is observed that GDP per capita in Russia was decreasing
till the year 2016. However, the year before the event, it was increased by $2030, which is a 23.27%
increase from the year 2016, and the year FIFA World Cup was conducted, the GDP per capita increased
by $540 which is a 5.02% increase from the year 2017. It is also noticed that the real GDP growth rate
reduced in the year 2015 by 3%. However, in the year, the real GDP growth rate increased in the year
2016, 2017, and 2018 by 2.6%, 1.3%, and 0.7%, respectively. Therefore, it can be established that the real
GDP growth rate of Russia increased at a decreasing rate. In the year 2019, there the annual real GDP
growth rate decreased by 1.2%.

From the critical analysis of the economic benefits of conducting the FIFA World Cup 2018 in Russia, it
is observed that the FIFA World Cup 2018 contributed $20 billion to Russian GDP between 2013 and
2018, which is equivalent to 1.1% of the GDP. This effect is a result of the investment in infrastructure,
expenses for preparing for the championship, and the tourist spending during the championship (Sorokin,
2018). It can be noticed that the FIFA World Cup had a positive contribution to Russia's GDP. It is also
observed that annual gross regional product (GRP) for most of the host regions for the contribution of

27
holding and preparing for FIFA World Cup 2018 ranged between 2-6% of the GRP annually. In the case
of the Republic of Mordovia and the Kaliningrad region, the contribution was 17% and 20% of the annual
GRP, respectively (Sorokin, 2018). This positive contribution would be one of the reasons for the
increasing GDP of Russia from 2016 till 2018. However, the same is not reflective of the decreasing GDP
variables in the years 2014 and 2015.

Furthermore, it is expected that the creation of the infrastructure concerning FIFA World Cup 2018 would
further contribute $6.5 billion to the annual GDP growth between the period of 2019-2023 (Sorokin,
2018).

It is essential to understand that the Russian economy started to stagnate after 2013 due to one of the
major economic shock the country received after the country moved into the post-oil-boom phase. There
was stagnation economically, and the fixed investments became negative as the oil model got exhausted.
Also, from 2014 to 2016, the European Union and the United States had imposed sanctions on Russia due
to the violent conflicts in Donbas, the annexation of Crimea, and Russian counter-sanctions against the
EU and the United States. Therefore this fall in the GDP related variables between 2014-2016 can be
attributed to these reasons. It should also be noted that while the positive economic effect contributed
towards the increase in the annual real GDP growth rate, it should not be solely attributed to this increase.
The oil price rebounding in 2017-2018 also helped increase the annual real GDP growth rate in this
duration (Dabrowski, 2019). The seizure of three navy vessels of Ukraine by Russia in November 2018
lead to more sanctions on Moscow from the United States and extension of the existing sanctions from
the European Union, which majorly impacted Russia's banking, energy and defense sector. This would
explain the reduction in the GDP growth rate in the year 2019 (Ostroukh and Fabrichnaya, 2018).

It is also worth observing that amidst the economic crisis, the investments related to the FIFA world cup
2018 was conducted with the hope of economic renaissance.

4.3 FIFA World Cup 2018 effect on Employment

As per the comparative analysis conducted, it is observed that there was a slight 0.4% increase in the
unemployment rate in the year 2015, but from 2016 onwards, the unemployment rate has been decreasing
at an increasing rate up until the year 2018 which was the year FIFA World cup was conducted in Russia
when the unemployment fell to 4.8% (a 0.4% decrease from the year 2017). It further reduced by 0.2% in
the year 2019.

From the critical analysis of the economic benefits of conducting the FIFA World Cup 2018 in Russia, it
is observed that the FIFA World Cup 2018 helped generate and maintain up to 315,000 jobs annually

28
between the year 2013-2018 for the preparation and hosting of this mega-sport tournament. More than
300,000 people were also provided with employment opportunities in June and July 2018, which were
directly related to the operational delivery of the tournament. The jobs generated were is different types of
fields such as the hotel industry, the construction industry, the food, and beverage industry, the transport
industry, and the telecom industry, to name a few. The majority of the volunteers and the workforce were
of Russian origin, which reflects a substantial investment in the labor market locally. Many of these
employees received formal training in the fields of staging the tournament or promotional activities
related to the development of these capacities, which would be applicable for other professional areas or
future events. It is also observed that the increase in employment resulted in an increase in the personal
income of the population by $6.5 billion. This, in turn, resulted in an increase in the tax revenue in Russia
by $2.34 billion (Sorokin, 2018).

It is essential to understand that Russia's unemployment rate has always been comparable to most
developed countries. It has always had a very competitive unemployment rate compared to the
international standards, for example, the average unemployment rate in the Eurozone is 7.9%. This can be
attributed to the strict labor protection legislation in Russia that does not allow companies to fire their
employees without a very important reason. This is the reason that even during an economic recession,
the unemployment rate in Russia barely fluctuates. However, employers are allowed to deduct salaries if
the economy declines drastically. It would rebound as the economy improves. Also, to avail of the
unemployment benefits in Russia, one must accept one of the two jobs that the state employment centers
provide, irrespective of how low the job pays (Yegorov, 2019).

However, it can be observed from the analysis that the FIFA World Cup 2018 generated a significant
amount of employment between the period of 2013-2018, which positively contributed towards the
reducing unemployment rate in Russia.

4.4 FIFA World Cup 2018 effect on Import and Exports

As per the comparative analysis conducted, it was observed that Russia maintains a positive trade balance
between the years 2014-2019. The imports in the country reduced by 28.45% in the year 2015 compared
to 2014, and they went on an increase in the year 2016 and 2017 by 11.71% and 23.68%, respectively. It
then went to reduce by 7.3 % in the year 2018, and then the same percent was recovered in the year 2019.
The exports in the country reduced by 24.41% in the year 2015 compared to 2014. It kept increasing in
the years 2016, 2017, and 2018 by 8.4%, 19.35%, and 7.6%, respectively. It fell by 1.2% in the year
2019. Based on these data, it is also observed that the balance of trade decreased until 2016 and went on
to increase by the year 2017. In 2018, when the FIFA World Cup was conducted in Russia, the Balance of

29
Trade increased by 35.27% from the previous year. The balance of trade reduced by 12% in the year 2019
compared to the previous year.

As per the critical analysis of the economic benefits of conducting the FIFA World Cup 2018 in Russia, it
is observed that the year the mega-event was conducted, the balance of trade was $17.68 billion. The
exchange of goods and services between Germany and Russia increased considerably in 2017 due to
FIFA World Cup 2018 as a huge number of German-based companies were providing machinery and
chemical products for building projects related to the sporting events. The Russian export to Germany
increased by 21% over the same period, while Russia imported goods worth €19.7 billion from Germany
(German-Russian trade picking up sharply, 2018). The furnishing industry also benefited Russia due to
the FIFA World Cup 2018 in the context of import and export. In 2017 and 2018, Russia expanded its
furniture exports to several countries beyond its usual partnership with Eurasian Economic Union, such as
Kenya, Cambodia, Oman, and Australia. This is attributed to the boost that the furniture industry received
due to FIFA World Cup 2018 (Russia's 2018 in review, 2019).

It is essential to understand that Russia trade relations were impacted negatively due to the economic
slowdown in the country in which started in the year 2013 due to falling of the oil prices and the sanctions
that had been laid out against Russia by the United States and the European Union, which has been
previously discussed in the thesis. This explains the decreasing balance of trade from 2014 till 2016.
However, by 2017, Russia became the 14th largest economy in terms of export and the 19th largest
economy in terms of imports. Most exports from Russia are inclusive of crude petroleum, petroleum gas,
refined petroleum, wheat, and coal briquettes. Most imports to Russia are inclusive of vehicle parts,
packaged medicaments, planes, and broadcasting equipment (OEC - Russia (RUS) Exports, Imports, and
Trade Partners, 2018).

Unfortunately, the exact impact of the FIFA World Cup 2018 on Russia's export and import cannot be
ascertained due to the lack of data providing accurate figures in this context. It needs to be acknowledged
that this event did play a major role. Several articles have mentioned the fact that the mix of Higher oil
prices, the FIFA World Cup, and the new fiscal rule contributed to the increase in the positive trade
balance of Russia (Russia on course for the biggest trade surplus since 2011 this year, 2018).

30
5. Discussions

In this part of the thesis, we shall discuss the inference from the results and the findings of the data
analysis conducted in the previous chapter and finally get the answer to our research question.

RQ: What is the economic contribution of sport tourism in a country?

The question mentioned above is studied in this research using the case of FIFA World Cup 2018 hosted
by Russia.

5.1 Based on the comparative analysis of the economic variables.

As per the critical analysis done in the literature review, several authors have sided with the opinion that
sports tourism leads to positive cumulative economic impact in a country (Chen, 2008; Balogu et al.,
2010; Preuss, 2004; Halkias, Robinson-Jacobs and Case, 2011). According to the comparative analysis of
economic variables conducted for Russia between the year 2014 to 2019, a similar trend is visible. Before
discussing the positive contribution of FIFA World Cup 2018 on the different economic variables, it is
once again essential to understand that several different factors impact the economic variables of a
country, and these factors have been taken into consideration while interpreting the data in the previous
chapter. As per the analysis conducted, it is observed that FIFA World Cup 2018 has a positive
contribution towards the selected economic variables i.e., GDP related variables, Unemployment rate and
Balance of Trade such as, 1.1% contribution to the GDP between 2013-2018, 315,000 jobs generated
annually and boosts generated in different industries that facilitated the imports and exports of the
country. FIFA World Cup 2018 also lead to the development of the sports infrastructure, transport, and
utility infrastructure and medical and housing infrastructure of the country. It also helped receive a boost
in the tourist revenue generated from the approximately 5 million tourists (2.7 million tourists from
different countries) and $1.6 billion earned from the spendings of these tourists across the 11 cities where
the event was conducted. Cities like Kaliningrad and Yekaterinburg witnessed a ten times more increase
in the foreign tourist flow (Sziakov, 2018).

All these aspects reflect FIFA World Cup 2018 has a positive contribution towards Russia's economy and
acts as an example of the multiple economic benefits that sports tourism offers for a country. However, to
get a further accurate estimate of these contributions, it is essential to understand how significant these
positive contributions are compared to the investment done. While, it is expected that the creation of the

31
infrastructure concerning FIFA World Cup 2018 would further contribute $6.5 billion to the annual GDP
growth between the period of 2019-2023 (Sorokin, 2018), there have been certain critiques regarding the
actual benefits that FIFA World Cup 2018 which align with the critiques of several academic authors
regarding economic benefits of sports tourism resulting from mega-sports events (Finer, 2002;
Manzenreiter, 2008; Matheson & Baade, 2004; Matheson, 2006). According to a report released by
Moody's Investor Service, the economic benefit of Hosting FIFA World Cup 2018 is only a short-lived
experience. It is argued that the limited time duration of the FIFA World Cup 2018 does not generate
significant economic stimulus for a country with a 1.3 trillion dollar economy. While the regions hosting
the World Cup do receive short-lived economic benefits, it also adversely affects the government finances
in other cities, which in turn leads to accumulation of debt. It is also argued that most of the industries,
which were the key beneficiaries of FIFA World Cup 2018 in Russia, such as the construction industry,
have already realized much of the economic boost from this event. The regional banks of the country are
also not expected to observe any significant increase in the transaction revenue because the federal banks
are connected to most of the payment system flow (Mohammadi, 2018). The critiques mainly disputed
several reports from the Russian government that focuses on the benefits of hosting the FIFA World Cup.
Furthermore, the critiques attribute these discrepancies to political issues and corruption, claiming that
most of the benefits of such events go to politically connected companies. It is also claimed that the
limitation of Russian domestic football and Russian economy restricts the distribution of the economic
impact of the FIFA World Cup 2018, and exaggerating the economic benefit provides higher visibility
and a promotional platform for the Russian Premier League (Hurley, 2018).

As previously stated, in the comparative analysis conducted for the economic variables of Russia between
the years 2014 and 2019, it is indicated that FIFA World Cup 2018 did have a positive contribution
towards the economy of Russia. However, the study of the long-term effect of FIFA World Cup 2018 on
Russia's economy would require one to wait and observe the Russian economy over the coming years to
analyze if the claims of the Russian government regarding the long-term economic benefits generating
from this event progresses as per the estimates provided. At the moment, it is not possible to gather any
information without these data to conclusively accept or deny the claims of the Russian government or
the critiques. This also provides a pathway to reflect the fact the FIFA World Cup 2018 in Russia serves
as a sample or an example for this thesis to understand the economic impacts of sports tourism and its
contribution to a country's economy. From the critical analysis of the available literature and the data
regarding FIFA world Cup 2018, it, at least reflects that sports tourism does have a significant potential to
positively contribute towards a country's economic growth if appropriately planned by taking into
consideration the external factors such as the political situation of a country.

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5.2 Role of external factors in determining the economic benefits

While conducting the comparative analysis of the economic variables of Russia and doing a critical
analysis of the economic benefits of FIFA World Cup 2018 in the previous chapter, it has been mentioned
that the external factors play an important role in determining the contribution of sports tourism in a
country's economy. In case of Russia, it is noticed that even with the positive contribution in the initial
stage of building infrastructure and preparing for the FIFA World Cup 2018, the economic variables such
as the GDP Per capita, annual GDP growth rate and balance of the trade decreased due other external
factors such as the economic recession in Russia from 2013 onwards and the sanctions imposed on Russia
by the United States and European Union in response to the violent conflicts in Donbas, the annexation of
Crimea and Russian counter-sanctions against the EU and the United States. Such political and economic
instability makes it difficult to take advantage of the positive economic contribution arising from such
opportunities. This political instability also affected the import and export of Russia with other countries,
and it also hampers Russia's ability to fully utilize the opportunity arising from FIFA World Cup 2018 to
improve its balance of trade to the utmost capacity (Dabrowski, 2019). The rise in Inflation rate and
further new sanctions on Russia by the European Union and the United States in 2019 further let to the
economic slowdown of the country in the year 2019. This shows that Russia has difficulties in fully
utilizing the economic boost that the country received from the FIFA World Cup 2018 due to the political
and economic volatility of the Country (Ostroukh and Fabrichnaya, 2018). It can be inferred that while
Sports tourism does provide a certain positive contribution towards a country's economy, the utilization of
these contributions is dependent on other external factors such as a political condition or the economic
condition of a country.

5.3 The opportunity cost for FIFA World Cup 2018

One of the significant counter-arguments against the positive contribution arising from sports tourism,
such as the one of FIFA World Cup 2018 in Russia, is the opportunity cost related to these mega-sports
events. These authors believe that it is difficult to justify the income from such a form of tourism when
compared to the huge amount of costs and investment associated with them (Howard and Cromptom
2004; Liu and Wilson, 2014). The money invested in upgrading or building new sports infrastructure
could be better utilized by investing it in critical areas of the economy. The argument is that the
construction and maintenance cost of sporting infrastructure is very high and challenging to cover in the
long run and might suffer the fate of 'white elephant' (Hall, 2018). As per the critical analysis of the
economic benefits of FIFA World Cup 2018 in Russia, it is observed that Russia constructed and
renovated 12 stadiums across 11 cities for this event. Upon further research on the condition of these
stadiums in the year 2019, it is also observed that while most of the stadiums have turned to host more

33
diverse events such as races and concerts along with the usual football matches, a few of them have been
struggling to survive. Mordovia Arena in Saransk, Kazan Arena, Yekaterinburg arena, Fisht Stadium in
Sochi, Otkritie Arena and Luzhinki Stadium in Moscow, Nizhny Novgorod Stadium, Gazprom Arena in
St. Petersburg and, Samara Arena have either turned into official football clubs grounds for different
Russian football teams or host different types of events such as fashion show or concerts. However,
Stadiums such as the Volgograd arena, Rostov Arena in Rostov-on-Don, Kaliningrad Stadium has faced
issues with maintenance and renovation projects after the world cup. Also, the maintenance cost of mostly
all the stadiums has been very expensive as well (The State of Russian Stadiums, a Year After the World
Cup – The Moscow Times, 2020). This does confirm the argument that maintenance of sports
infrastructure is indeed very high and lets to extra cost post the event is over. However, necessary efforts
have been taken by Russia to ensure that most of these event spaces are utilized to their full potential. It
can, therefore, be inferred that without a well-researched plan for full utilization of the investment in such
sports infrastructure, the opportunity cost of investment in sports tourism has the potential to be much
higher than the returns gained from such investment.

The discussions mentioned in this chapter can be summarised by stating that the FIFA World Cup 2018
conducted in Russia positively contributed towards the country's economy directly (increase in several
tourist and tourist revenue) and indirectly (returns from investment in different types of infrastructure).
However, given the current timeframe and a detailed analysis of the critiques, it difficult to conclusively
agree or disagree if the economic benefits will have a long-term impact on Russia's economy as it would
require one to patiently observe and analyze as time unfolds in the coming years and when the data for the
same would be available. As per the analysis and the discussion conducted in this study, the answer to the
research question is that Sports tourism does have the potential to positively impact a country's economy
direct and indirectly, but the significance of the economic impact would differ based on several other
external variables as well the thoroughness with which each of these projects is planned. Absence of
consideration for prior planning such as lack of cost-benefit analysis, analysis of the different opportunity
costs or lack of awareness regarding the external factors such as the political situation of a country, can
negatively impact the economy.

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6.Conclusion and Recommendation

6.1 Conclusion

Sports Tourism is one of the fastest developing sectors in the tourism industry. Various types and sizes of
sports events attract different tourists as participants or spectators, and the hosting destinations try to
provide a taste of the authentic local experience to distinguish themselves in the mind of the tourist.
Mega-sports tourism is one of the most prominent form of sports tourism. Mega-sports events such as the
World Cups and the Olympics act as a catalyst for the development of tourism if successfully utilized in
terms of infrastructure development, destination branding, and other social and economic benefits.
However, mega-sports tourism requires a huge investment from the government or other organizing
committees (International and Local). This makes it essential to understand the economic impact arising
from mega-sports events or mega-sports tourism. Therefore, the primary purpose of conducting this
research is to understand the economic contribution of sports tourism in a country.

The research question designed for this study is - 'What is the economic contribution of sports tourism in
a country?' To answer this research question, a literature review was performed on the several studies
previously conducted, which were closely related to this topic and provided an insight into several
arguments displaying the advantages and the disadvantages of mega-sports tourism. The research design
created takes FIFA World Cup 2018 in Russia as a sample because the event was only recently
conducted. Therefore, there has not been any study conducted to estimate the economic contribution of
FIFA World Cup 2018 in Russia. Year on year comparative analysis of the economic variables in the
country between 2014 - 2019 and the critical analysis of the contribution FIFA World Cup 2018 to these
economic variables helps in the investigation of this study using a quantitative approach.

The findings show that FIFA World Cup 2018 contributed $20 billion to Russian GDP between 2013 and
2018 which is equivalent to 1.1% of the GDP, helped generate and maintain up to 315,000 jobs annually
between the year 2013-2018 for the preparation and hosting of this mega-sport tournament and the mix of
Higher oil prices, the FIFA World Cup and the new fiscal rule contributed the increase in the positive
trade balance of Russia. Furthermore, it is observed that various external factors, such as the economic
and political situation of Russia, impacted the economic contribution FIFA World Cup 2018.

35
In the end, this research finally interprets and concludes the findings by discussing that as per this study,
that FIFA World Cup 2018 did have a positive contribution towards Russia's economy, however, it is
difficult to conclusively establish the long term significance of the economic benefits as it would require
one to patiently observe and analyze as time unfolds in the coming years and when the data for the same
would be available. It is thus finally inferred that sports tourism does have the potential to positively
impact a country's economy direct and indirectly. Still, the significance of the economic impact would
differ based on several other external variables, as well as the thoroughness with which each of these
projects is planned. Absence of consideration for prior planning such as lack of cost-benefit analysis,
analysis of the different opportunity costs or lack of awareness regarding the external factors such as the
political situation of a country, have the possibility to negatively impact the economy. While the findings
for this research cannot be generalized completely, it does provide valuable insight into the economic
contribution of sports tourism in a country.

6.2 Recommendation

Based on the study conducted and the findings of this research, the author has the following
recommendations:

Given the existing critiques of investment in sports tourism and mega-sports events, that it is difficult to
justify the income from such form of tourism when compared to the huge amount of costs and investment
associated with them, it is recommended that a detailed cost-benefit analysis should be done with utmost
accuracy while taking into consideration the other external factors that might affect the contribution of
sports tourism towards a country's economy. It is also essential to factor in the opportunity costs of
investing in sports tourism and justifying the investment in sports tourism will have significant economic
returns when compared to the investment done.

Given the existing critiques regarding investment done in sports infrastructure, that investment in sports
infrastructure such as large, expensive stadiums tend to go in waste due to phenomena such as the white
elephant, it essential for the responsible authorities such as the government or the International and local
organizing committees to ensure that there is a proper plan to the usage of the sports infrastructure. There
need to be reasonable plans for the usage of such facilities, mostly after these facilities have served their
primary purpose of creation. This would help ensure these facilities to cover their maintenance cost and
help gain higher profitability.

One of the reasons which limited the study regarding longevity and the significance of the economic
benefits of FIFA World Cup 2018 is the ambiguity regarding the data available to understand the impacts
on different economic variables. Responsible authorities should ensure that both direct and indirect

36
positive contribution of sports tourism towards different economic variables should be accurately
documented because the ambiguity in these data creates hurdles to correctly determine the economic
impact of sports tourism.

6.3 Limitations and Future research

6.3.1 Limitations

While the study has been conducted as per the detailed understanding of the literature available and
through the analysis of the data collected, it’s difficult to generalize the result of the study because FIFA
World Cup 2018 in Russia is a single event that took place in one specific country with it unique political
and economic characteristics.

Even though measures were taken to concentrate on the accurate economic contribution of FIFA World
Cup 2018 in Russia's economy, it was difficult to collect specific details regarding its impact on certain
economic variables such as its impact on export and effect due to lack of transparency and ambiguity in
the data available.

Given the fact the FIFA World Cup in Russia took place quite recently in 2018, the current period is not
sufficient to analyze the longevity of the economic benefits estimated by the Russian authorities and
hence limits the capability to conclusively agree or disagree with the counter-arguments regarding its
benefits.

Several economists and researchers have claimed that the data provided by the Russian government
regarding the economic benefits of the FIFA World Cup 2018 portrays a distorted image of the actual
scenario. However, due to insufficient data and the lack of transparency from the Russian government
authorities, these claims cannot be verified.

6.3.2 Future Research

The focus of this study is the understand the economic contribution of sports tourism in a country.
Therefore, the future research that could be conducted are:

A full-scale qualitative study to understand and analyze the long-term economic contribution of FIFA
World Cup 2018 between the year 2019-2023. This would further verify several claims discussed in this
thesis.

37
Long-term research can be conducted to study the full economic effect of different types of sports tourism
in a single country to get a comprehensive and holistic view of its economic impact.

A qualitative study on the social impact of sports in a country would help understand a different aspect of
sports tourism and its benefits.

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Appendices

Appendix 1 - Self Declaration

I, Rupesh Negi, hereby declare that this study is being undertaken by a student currently enrolled in the
postgraduate course – MA in International Tourism, Hospitality and Event Management at Berlin School
of Business and Innovation. The topic of the study is – Economic Impact of Sports Tourism – A case of
FIFA World Cup 2018 in Russia. All the secondary data provided in the thesis are from public accessible
data base and have been accurately entered in the project without any alternation.

47