Sports Events in Denmark: What´S Next? the Prospects of EURO2024 in Denmark
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University of Southern Denmark, Esbjerg Submitted: 11. September 2012 Department of Environmental and Business Economics [email protected] Sports Events in Denmark: What´s Next? The Prospects of EURO2024 in Denmark Master Thesis Summer 2012 Submitted by: Supervisor: Mads Strib Sørensen: 120787-xxxx Oliver Budzinski MSc. Sports & Event Management, 8. Quarter Department of Environmental and Business Economics Preface This thesis represents the final chapter of my five years of study at the University of Southern Denmark, Esbjerg. I wish to thank everyone I have met along the way who have helped me achieve this accomplishment that being friends, family, colleagues, and the SDU staff. Special credit is given to my supervisor, Oliver Budzinski, for his always helpful, inspiring, and knowledgeable guidance and assistance both in terms of the thesis, but also along previous encounters. Furthermore, I wish to acknowledge Jørgen Hansen of TSE Consulting for his excellent and inspiring help in the creative process of forming the outline for the thesis, and for setting me off by providing some great literature suggestions. An inevitable thank you must also be given to all of the respondents of the survey, and not least to my good friends Allan Baunsgaard and Kristian Sørensen for both their moral and practical support during the project. Without any of you, none of this would have been possible. Esbjerg, Denmark, August 2012. Mads Sørensen ii Sworn Statement ”I hereby solemnly declare that I have personally and independently prepared this paper. All quotations in the text have been marked as such, and the paper or considerable parts of it have not previously been subject to any examination or assessment.” Mads Sørensen _________________ iii Abstract Despite having hosted a considerable share of Europe´s many different sports events, the Kingdom of Denmark has still yet to host one of the biggest of the world such as the Olympic Games, the FIFA World Cup, or the UEFA European Championship. Meanwhile, these so‐called mega sports events (MSEs) have grown to become really big businesses requiring heavy investments borne by the organizing country, while a major portion of the revenue flows to the governing bodies of the events. This study aims at predicting whether they, in economic terms, have grown to become too big for a Danish candidature, or if such a mega‐event, exemplified by the UEFA 2024 European Football Championship Finals (EURO2024), could be a realistic opportunity to pursue. A Cost‐Benefit Analysis (CBA) is applied for two project alternatives; 1) EURO2024 in Denmark and 2) EURO2024 in Denmark/Sweden. Besides estimations on the financial costs and benefits, the Contingent Valuation Method (CVM) is applied among 309 respondents in order to assign a value to the increase in social well‐being caused by intangible impacts of the EURO2024 (e.g. uniting of the nation/feel‐good factor, motivation to participate in sports etc.). The results show that the preferred alternative is to host the EURO2024 in co‐ operation with Sweden. The costs for the project reach DKK 1.3 billion, while benefits account for DKK 2.2 billion, resulting in a net social benefit of approx. DKK 915 million. iv Table of Contents List of Tables ............................................................................................................................................... vii List of Figures ............................................................................................................................................. viii List of Abbreviations .................................................................................................................................... ix 1. Introduction ........................................................................................................................................... 1 2. Theoretical Framework ........................................................................................................................ 3 2.1 Effects of mega sports events on primary and secondary markets .................................................... 4 2.2 Costs and benefits of mega sports events .......................................................................................... 6 2.2.1 Tangible costs and benefits .......................................................................................................... 6 2.2.2 Intangible costs and benefits ....................................................................................................... 7 2.2.3 Event legacy ................................................................................................................................. 8 2.3 Tourism effects ................................................................................................................................... 9 2.4 Substitution‐, multiplier effect and leakages .................................................................................... 11 3. Research Design ................................................................................................................................... 14 3.1 Cost‐Benefit Analysis......................................................................................................................... 14 3.1.1 Fundamental steps in a CBA ...................................................................................................... 17 3.1.2 Cost‐Benefit Analysis vs. Economic Impact Analysis .................................................................. 21 3.2 Empirical data collection ................................................................................................................... 24 4. Cost‐Benefit Analysis of the EURO2024 .......................................................................................... 26 4.1 Presentation of scenarios ................................................................................................................. 26 4.2 Costs and benefits related to the EURO2024 ................................................................................... 28 4.3 Costs .................................................................................................................................................. 28 4.3.1 Stadium investments ................................................................................................................. 29 4.3.2 Infrastructure ............................................................................................................................. 35 4.3.3 Security and safety costs ............................................................................................................ 37 4.3.4 Investment in hotel capacity ...................................................................................................... 38 4.3.5 Bidding and promotional costs .................................................................................................. 41 4.3.6 Costs of preparation and operational costs for the government .............................................. 42 4.3.7 Tax exemption for UEFA ............................................................................................................ 43 v 4.3.8 Intangible costs .......................................................................................................................... 44 4.4 Benefits ............................................................................................................................................. 44 4.4.1 Tourism revenue ........................................................................................................................ 45 4.4.2 Expenditures by the Local Organizing Committee (LOC) and UEFA officials ............................. 51 4.4.3 Expenditure by national teams, media, and VIP´s/sponsors ..................................................... 53 4.4.4 Non‐included benefits ................................................................................................................ 55 4.4.5 Intangible benefits ..................................................................................................................... 59 4.5 Contingent Valuation Results: Quantification of intangible impacts ................................................ 60 4.5.1 WTP for scenarios ...................................................................................................................... 62 4.5.2 Perception and WTP for intangible impacts .............................................................................. 63 4.5.3 Aggregation of WTP for intangibles ........................................................................................... 65 4.5.4 Biases, validity, reliability, and the implications for results ....................................................... 65 5. Results of the CBA and implications for the EURO2024 ............................................................... 68 5.1 Cost‐benefit account for the EURO2024 ........................................................................................... 68 5.2 Sensitivity analysis and recommended alternative .......................................................................... 70 6. Prospects of the EURO2024 in Denmark ......................................................................................... 74 6.1 Advantages/disadvantages of the scenarios ...................................................................................