Home Hospitality The Infrastructural Economics of Mega Events

The Infrastructural Economics of Mega Events

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Event venues represent a class of urban amenities that anchor subsequent developments in neighborhoods and communities. Major event venues such as arenas, stadiums, and convention centers are topics we’ve explored at length in the past, both in how they’re developed and in the local impact they’ve had on their cities. But one angle that we haven’t explored is the very real inefficiency of the economics behind the mega events infrastructure.

We’ve looked at brands of mega events like the Olympic Games and the World Fairs, so the concept of them should not be unfamiliar. While most events are hosted by a venue in a city or a city in a region, mega events are hosted by entire countries and draw a global live audience of millions. The production and staging of these events take many years to complete, and the budget is almost invariably in the billions and supported at least in part by the host country’s government. The inefficiency of the infrastructure lie precisely in this dynamic.

For almost any event that isn’t a mega event in the world, staging the event is a process of finding the right combination of vendors and services and paying for rentals and contracts. For event producers who want to make a profit, the game is one of arbitrage between the cost of renting the staging elements and the value of the event itself. If hosting a 100 person conference will cost an average of $500 per person between all the staging expenses, but the producer can gather a valuable enough group that each person will pay $1,000 to attend, then that difference is where the profits lie. The beauty of these business models is that after each event, the economics of that particular event is over, and the producer either made money or lost, and it’s on to the next one.

Then we look from the perspective of the cities, and examples where they finance the infrastructure of non-mega events. When a city builds a new arena, it is built with the partnership of a sports team who will use the arena as their home court. Same with stadiums, and for convention centers the partnerships come from the events industry who drive the major convention brands to a particular city. Even venues like performing arts centers are typically built in conjunction with a partnerships with symphony orchestras or opera troupes who sign to perform there in regular seasonal intervals. Point being, the typical event venue infrastructure in any given city is built on the analysis of its usefulness on the long term as an urban amenity.

The blessing and curse of the mega event comes from the combination of the above two factors. When the one-time-deal mindset of the event producers combine with the big budget possibilities of major event venues, what we have around the world are these massive event infrastructure that barely gets used after the event itself has taken place. Whether it’s the abandoned Olympic stadiums in Russia or the abandoned soccer stadiums in Brazil, they all represent the ubiquitous phenomenon of these brands in mega events leaving a trail of massively costly and useless infrastructure around the world in their wake.

It isn’t necessarily realistic to confine these mega event brands to selecting only among the countries and cities with existing infrastructure to host their future productions. The topic of the economics — short term and long term — of these mega events and their impacts on especially a developing country is a topic of heated debate in the events industry. On the one hand, I do think there are many justifiable ways to develop new infrastructure for a mega event, both as a marketing investment for a country as a whole, or to even assess the project from the perspective of an individual event production. On the other hand, I do think there is also much detriment for any city to devote its resources to building these massive new event infrastructure to be used only for a few months and then to be left empty for evermore. The necessary solutions to this issue is as much a political topic as it is a private sector topic, and among industries in the private sectors, it will likely require as much innovation from the real estate industry as it does from the events industry.

See you at the next exploration!

Harry

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