⚽ Qatar, FIFA and the Economics of Sports Tournaments

Qatar is spending 20X of what most host countries spend on the football World Cup. Here's why.

A massive pilgrimage has been taking place across the world. 

Football fans around the globe are heading towards Qatar, their new Mecca for a month, to take part in what has to be the biggest sports tournament in the world: The 2022 FIFA World Cup! 

With over 3 million tickets sold, this year's FIFA World Cup promises to be a huge money making opportunity. 

But not for the host country Qatar. Wondering why? 

Well, let's dive deep into  the economics of hosting a major sports tournament. 

ReadOn! 

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💵 The Economics of FIFA

This year's FIFA World Cup is set to be very different and historic for a number of reasons. 

First: Qatar. 

Never has such a tiny country held such a huge tournament.

Second: Qatar has spent an insane $300 billion dollars for the event! 

Do you know how much the previous World Cup hosts spent? 

Brazil 2014 World Cup: $15 billion

Russia 2018 World Cup: $14.2 billion 

So, why is Qatar spending almost 20X of this? 

Because Qatar is almost rebuilding the whole country for this World Cup. 

It has built 7 new stadiums and renovated one.

Plus, it has built several new hotels, many new roads, metro stations, and so much more. 

Basically, Qatar right now is an Indian mom who has just heard that fancy guests are coming over on Diwali. 

It wants its house to wow everyone! 

But isn't $300 billion a little too much? What is Qatar going to gain from all of this? 

Honestly, not much. 

In terms of money, most of the revenue from the World Cup goes to FIFA. 

All ticket sales: FIFA

Money from Marketing Rights: FIFA

Money from Broadcasting Rights: FIFA

So, what does Qatar get? 

A measly $1.7 billion from FIFA for hosting. And out of this money it will have to give $440 million to the winner.

Plus, it's not like extra sales of goods and services will bring Qatar tax revenue. Qatar anyway doesn't have a system of GST Or VAT and even if it did, it would have to give tax breaks to tourists to win the FIFA contract. 

Then why is Qatar hosting FIFA? In fact, why does any country host FIFA? 

Well, for most countries, hosting FIFA or any major sporting event is a loss-making proposition. 

But usually they recover this money in a few years. How? 

You see, these events make a huge public relations campaign, boosting travel and tourism. Plus, the infrastructure they build for these events helps boost the economy. 

But this is no justification for Qatar's $300 billion splurge. 

Qatar is building close to 130,000 hotel rooms to accommodate guests.  

To ensure that even 70% of these hotel rooms are occupied at all times, Qatar needs a 15x rise in tourism, which is almost impossible. 

Now, you would think that this whole exercise would at least generate employment, right?

Wrong. Qatar currently has only about 360,000 Qatar nationals. The others, especially those employed in building infrastructure projects, are all migrant workers, most of whom send their earnings back to their home countries, keeping and spending very little in Qatar.

So, Qatar is not going to see much financial benefit from this. It can gain at max $17 billion from the whole tournament.

Here’s what the CEO of Meesho has to say about this:

This brings us back to our main question…

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🧐 Why is Qatar Spending So Much?

Because Qatar wants to rebrand itself. 

Right now, it is just some tiny country in the Middle-East that is guzzling gas and printing money. 

But very soon, the world will shift from oil and gas to renewable energy, leaving Qatar and other such oil-rich countries in the darkness. 

So, Qatar and other Middle-Eastern countries are all trying to rebrand themselves. 

Qatar wants to become a sports hub for the world. It is also set to host the Formula 1 Grand Prix from 2023 and maybe even the 2036 Olympics. 

This $300 billion can be considered a long-term investment towards that goal. 

Building world class infrastructure for sports fanatics over the years will ensure steady revenue from sporting events. 

It will also bring advertisers and tourists. It could also renew its image from a closed off orthodox region to an up and coming country, bringing more business and investors. 

And Qatar is not the only Middle Eastern country following this strategy. 

Saudi Arabia too has turned to sports, but e-sports. With a prince interested in gaming, the country is fast becoming a gaming hub, holding e-sports tournaments. 

But that's not all. It also wants to invite more tourists and residents. So, it is creating a whole new climate change-proof city (you can read all about it here). 

And the United Arab Emirates wants to be your year-round tourist destination. Dubai has already become a prominent shopping hub for the rich and famous. 

It is constantly creating new infrastructure, whether it be underwater caves, or the Museum of the Future or the Eye of Dubai Ferris Wheel. 

So, the Arab countries are trying their best to stay rich even after their oil wells turn into nothing but memories.  

Will they be successful in achieving this? Only time will tell.

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⚡In a line: Qatar is spending billions of dollars to become the world's sports hub because it can no longer continue to depend on natural gas for its riches.

💡Quick question: Do you think Middle Eastern countries will be able to survive without oil?

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