Euros, Eras and Les Jeux
While the Euros and Wimbledon may have come to an end (Enhorabuena to the winners), there’s no rest for our stadiums. Paris is gearing up for the Olympics. More notably, the cultural phenomenon of Taylor Swift’s Eras tour continues, as she starts her German leg off with three nights in Gelsenkirchen.
The economic impacts of hosting international sporting events are still debated. On one side: the German Economic Institute predicts a shift in consumer spending resulting from hosting the Euros rather than “economic fireworks”. On the other side: places like Gelsenkirchen and Leipzig did see a 500% increase in hotel bookings compared to the same period last year. The UK’s sport agency also claims that hosting international sporting events brings a 6x ROI. In parallel, we have Taylor Swift, whose record-breaking Eras tour is being described in geological and fiscal terms. Not hyperbole: excessive dancing from her fans has led to several cities recording minor earthquakes, and central bankers are reporting local inflation rate rises whenever she’s in town.
I want to move away from the events and look at the stadiums and venues themselves. The Las Vegas Sphere is an interesting case study, notable for its design and visual impact on the Vegas Strip.
The Sphere significantly contributes to light pollution. But, its capacity is too low for it to materially impact the city, or the local area. It seats less than 20k people, which is a rounding error compared to some of the larger stadiums. I want to focus on these larger ones.
We might not classify the Colosseum as a stadium anymore, but it’s a good archetype for the classic large stadium. It also shows just how well established this concept is. What’s most interesting about the Colosseum is that the size of larger stadiums hasn’t really changed. Upper bounds of the Colosseum’s capacity put it at 80k people. If it were still in use, it would be in Europe’s ten largest. For reference, Europe’s top three are Barcelona’s Camp Nou, London’s Wembley Stadium, and Madrid’s Santiago Bernabeu (seating 99k, 90k and 83k respectively).
These venues bring together millions each year and have a huge impact on the local infrastructure, urban design, and economy. Building, owning, and operating these assets also costs a lot.
Let’s start with infrastructure and urban design. The first problem is the flow of people and vehicles. Having 83k people come in and out of Wembley needs a lot of planning and work. The local council heavily restricts parking on event days, just so traffic can keep flowing. The tube and bus run at full capacity, and even so, this isn’t enough. The image of people walking from the stadium to the local tube station is well established at this point.
But, public transport is necessary. Urban planners have known this for while, and allowed for it in the designs. As part of Wembley’s renovation in the early 2000s, £70m was invested to improve public transport routes and rail capacity. Without good public transport, you end up with the monstrosity that is Los Angeles’ Dodgers Stadium. Take a look:
The majority of its footprint is the carpark, which has 16k spaces. I estimate that’s 320k square metres, just used for parking, for one venue. To put that into perspective, imagine turning 15% of Berlin’s Tiergarten into a carpark. To make things worse, the Dodgers Stadium only fits 56k people. Imagine how much more space would be wasted if it were the size of Camp Nou.
So good public transport is key for stadiums to be a success. Despite this, the entire area around Wembley still shuts down during events. Not everyone wants to, or can take public transport. And so people park wherever they can in the area, and then walk to the stadium. This is despite parking restrictions in the immediate vicinity of the stadium. This is a challenge to enforce, and must be inconvenient for residents. And having spoken to a few - they agree.
But is it all doom and gloom for locals? Are there upsides to living near a stadium? A few studies have shown that real estate prices increase near stadiums. A US study shows an 9% increase in rents for properties which are closer to NFL stadiums. However it’s hard to diagnose the cause and effect here. Is proximity to a stadium the cause of increased property value? Or is it the proximity to good restaurants, amenities, and transport routes that gravitate to stadiums?
Stadiums also have an impact on the local economy. In 2018 Deloitte published an analysis of Wembley Stadium, trying to quantify its economic impact on the local area, on London, and on the UK as a whole. It’s a great read: the 2017/18 season saw 58 events held in Wembley, with 3.8m spectators in total. These 58 events had a £615m economic impact to England - of which a quarter goes to the local area, and two thirds goes to London. This gives us a very rough framework to work with. Adjusting for inflation, a spectator at Wembley contributes £200 to the UK economy. Even more interestingly, this Deloitte report segments the value add based on the type of spectator. According to them, the top three events (by total value added) in 2017/18 were an Ed Sheeran concert, a Taylor Swift concert, and an NFL game. A driver for value add is what the spectators spend, and the most money is spent on local accommodation, ticket sales, and then food and drink. Events like concerts and international sports matches add the most value, because they attract overseas spectators. On average, these spectators spend several days in the area, and spend far more than locals. And this is anecdotally true as well: I myself am travelling to Hamburg for a few days next week for the sole purpose of attending a concert. I won’t name the artist but astute readers will guess her all too well.
So we know that stadiums can boost local real estate prices, and they have a positive effect on the economy. But we should talk about their funding. The Colosseum was paid for by the Emperor Vespasian. However, prices have gone up since then. Large stadiums in richer countries cost billions to build or even to renovate. For example, Camp Nou’s ongoing renovation costs €1.5b. There are some publicly owned stadiums, including Wembley and Berlin’s Olympiastadion. But I expect this share to decrease over time. If we look at the Beijing and London Olympics, new stadiums were built as part of larger regeneration projects. These stadiums are publicly owned. Whereas if we look at Paris, no new large stadiums were built. I think this shifting mindset is here to stay. Spending billions on event spaces in this climate would be political suicide for many European parties.
Many stadiums are privately owned. Some direct, like LA’s SoFi stadium, which is owned by Stan Kroenke, the real estate billionaire and owner of many sports teams (including Arsenal FC). Others indirect: ie Kroenke has a partial claim over Arsenal’s Emirates Stadium through his ownership of the club. And private ownership makes a lot of sense. FC Barcelona claim that Camp Nou will generate €247m of income per year. While Camp Nou isn’t “privately” like others, we still get a sense of how much money there is in this space. And a lot of the costs for a stadium are the initial construction. Once it’s built, you want to maximise the usage. This is also why stadiums which aren’t exclusively tied to one club can be more profitable: they can run more events!
Moving away from private returns, let’s look at the public impact, by using the Wembley framework from earlier. Assuming Camp Nou has as many fixtures a year as Wembley (58), we see the average fixture makes c€4m in income. Wembley had an average occupancy of 70%. Applying the same to Camp Nou, we see an income per spectator (to Camp Nou) of c€60. If the economic value of £200 (€240) per spectator (taken from the Wembley figures) applies here, we see a 4:1 ratio between the economic value of spectators to the income value of spectators. It also makes investing in stadiums far more compelling from a policy angle: investing €1.5b into Camp Nou yields almost €1b a year in indirect economic impact. Personally I think these numbers are too good to be true - I suspect Camp Nou has half as many fixtures as Wembley and that’s where the assumptions breakdown. But if we halve, or even quarter our assumptions, the numbers are still great. So could governments reconsider their stance on publicly funding stadiums?
We need to consider capacity. Stadiums must comply with the basic laws of supply and demand. We need enough supply - the events. But we also need demand for these events - the spectators. For some types of events, like concerts, we can manage excessive demand by repeating the event. To reuse the Eras tour as an example, it has a total of 8 nights in Wembley, allowing 720k spectators to take part. For other events, like sports fixtures, we can’t repeat them. There’s only one Euros final. We also see from the Wembley analysis that a) on average there’s only one event a week and b) most events don’t sell out. This isn’t specific to Wembley either - India’s Narendra Modi Stadium (the world’s biggest) has never sold out. Their capacity is 130k, but their max attendance so far has been 100k. So I would argue that many cities have enough capacity.
But not every city. And here’s where geography comes in. Stadium events are fundamentally in-person events. The metaverse hasn’t been able to disrupt this. People like to attend events in person. And this means an excess of capacity in one city doesn’t compensate for a lack of it in a different city, especially if the cities are far apart. We can see this by looking at the number of sports stadiums with a capacity greater than 40k. The USA has 133 of these stadiums, with an average capacity of 63k. The UK and Germany have 17 each, with average capacities of 61k and 57k respectively. We see similarities in stadium sizes, but even adjusting on a per capita basis, the US has over double that of what the UK or Germany “should have”. In fact, counting by number of stadiums with >40k capacity, we have the US, China, Brazil and India as the top 4. The UK, Germany and Japan are all joint in 5th. My analysis would be that the number of stadiums scales with both population density and GDP per capita. The UK, Germany and Japan all have similar population densities, and are all wealthy economies.
So what are the takeaways? I think we’ll still see more stadium construction, but in other countries. The UK and Germany seem to be capacity. As much of the global south gets wealthier, we’ll see more and more stadiums being constructed there. There’s positive economic value to be had, but a risk of oversaturation. Public transport and good urban design are key. I’m also intrigued to see what innovation looks like in this space. Is it better planning tools? Using BIM more effectively to streamline these complex projects? Or something entirely different, like better stakeholder management to speed up planning and consultations? Material innovations in concrete and steel will bring down the embodied carbon, as they would for any construction project. But, is there room for better stadium operations? UEFA categorise stadiums on several criteria, including their operations and technology. Could this extend to the operational carbon impact?
So next time you’re attending an event at a major stadium, have a think about the stadium of the future. And if you’re feeling hesitant about buying overpriced merchandise, food, or drinks, remember you could be contributing as much as €240 to the local economy. Enjoy it.