Economic Impact of the UEFA European Under-21 Championship Final Round 2007

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Economic Impact of the

UEFA European Under-21 Championship

Final Round 2007

Student: H.J. Timmer University: Rijksuniversiteit Groningen Programme: MSc. Economics Student Number: 1258451 Supervisors: Prof. Dr. R.H. Koning and Prof. Dr. J. Oosterhaven Commissioned by: the City and Province of Groningen

Date: 30 November 2007

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Preface

This study investigates the economic impact of the 2007 European Under-21 Championship final round 2007, on the economy of the city of Groningen and the surrounding region (also known as Ommeland). This study, commissioned by the municipality of Groningen, started in April 2007 and was finalised in November 2007.

I want to thank all the organizations that contributed to this research. Although these were often busy with the tournament, they always made time available to provide me with information. Two organizations I want to mention with emphasis, namely the Dutch football association KNVB and the municipality of Groningen. My supervisors Prof. Dr. J. Oosterhaven and Prof Dr. R.H. Koning gave valuable recommendations that contributed to the quality of this research. Dr. L. Broersma helped me with the collection of data.

Last but not least, I want to thank the people that assisted me with the interviewing of the visitors: Jan Arend Verbeek, Steffen Fokkema, Arnold Mulder, Teun Brinkman, Altan Ilhan, Ernesto Kettner, Maurice van Hessen, Christian Lucas, Mattijs de Kleuver, Roelof Jan Vochteloo, Maarten Nekeman, Gelijn Werner, and Bram Veenvliet.

With this thesis, a period of academic training comes to an end. A new period in my life will commence. I will look back on my period in Groningen with positive feeling on both my academic as well as my social experiences.

If questions are left after reading this thesis, I am prepared to provide some clarification. I can be contacted

via e-mail (harmjantimmer@hotmail.com), via phone (+31628175687), and by mail (Verlengde

Oosterstraat 3b, 9711 EN Groningen, The Netherlands)

Groningen, November 2007

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1 Introduction

The UEFA European Under-21 Championship final round was hosted by the Netherlands in 2007. Besides Heerenveen, Nijmegen and Arnhem, Groningen was 1 of the 4 cities where matches were played. On the occasion of the tournament several “side-events” were organized in the city and province of Groningen. The tournament and the side-events attracted a lot of spectators and media attention to the city and the province of Groningen. In total 33,505 out-of-town visitors visited the city of Groningen to watch one or more matches of the UEFA European Under-21 Championship final round (hereafter: EC<21). One of the rationales for securing events is often the expected benefit for local businesses. An economic impact analysis is performed, in order to estimate the economic impact of the EC<21 and her side-events on the city of Groningen and the immediate region (the rest of the province of Groningen, hereafter: “Ommeland”) These regions are illustrated in figure 1. The city of Groningen is colored dark gray and Ommeland light gray.

The primary goals of this study are as follows:

• To identify the economic impact of the UEFA European Under-21 Championship on the city of Groningen and on Ommeland.

• To assess the robustness of the outcomes by performing sensitivity analyses.

The economic impact is defined as the net change in the local economy which can be directly attributed to the staging of a particular event (Turco and Kelsey, 1992). The economic impact consists of direct spending effects, indirect effects, and induced effects. The effect of the EC<21 on a number of economic key indicators (namely output, income, and employment) is estimated

The economic impact of an event depends on two changes in the host economy. Firstly, the economic impact depends on the spending (directly attributable to the event) by non-residents, which injects new money in the host economy. Second, the economic impact depends on the degree to which local residents rearrange their entertainment spending (Turco and Kelsey, 1994). Evidence on this rearrangement is at present limited to anecdotes. Virtually all economic impact studies assume that money spent by locals on an event would have been spent in the local economy anyway.

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The focus of economic impact studies is on expenditure by visitors from outside the host-region. The effect of this first round (so-called direct) expenditures are wages, salaries and profits to local residents working in businesses that are the direct recipients of this visitor expenditure. Indirect income is the income to other businesses and individuals within the local economy as a result of the initial expenditures but who were not the direct recipients of these expenditures. Examples are local suppliers to the shops, restaurants and hotels that were the recipients of the direct expenditures. Induced income is the income resulting from the re-spending of additional income earned directly or indirectly on locally produced goods and services (Gratton, Dobson and Shibli, 2000).

As stated above we focus on the net economic change. A part of the spending related to the tournament (as for instance the above mentioned spending by local citizens) does not contribute to economic growth in the city of Groningen and Ommeland.

In order to achieve the goals described above we use the following approach:

1. We start by estimating the direct expenditure. Three groups are identified. Data on

spending behaviour of spectators are collected through personal interviewing. Data on spending by the City of Groningen and the local organizing committee are obtained from the concerned organization.

2. To estimate indirect and induced expenditure we use a tri-regional input-output model. Our tri-regional model covers the city of Groningen, Ommeland and the rest of the Netherlands. This tri-regional model allows for discriminating between the economic impact on the city of Groningen and the economic impact on Ommeland.

3. After estimating the indirect and induced expenditure we proceed by estimating the

effects of the EC<21 on employment and income.

4. Finally we employ scenario analysis to assess the robustness of the outcomes.

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2 Background information on the event

The UEFA European Under-21 Championship, organised every 2 years, is the second most important tournament for countries organised by the UEFA in terms of attendance rates. The tournament in 2007 was extra special because some changes were made. Firstly, for the first time the tournament was staged in an odd year. To free the tournament from competition of other big soccer tournaments the UEFA moved the tournament from even to odd years. Because of the move to odd years the qualification campaign was shortened. Secondly, the host country was chosen ahead of the competition and was exempted from qualification. In the past the host country was chosen among the nations that qualified. The 8 nations that qualified for the 2007 edition were Belgium, Czech Republic, England, Israel, Italy, Portugal, Serbia, and the Netherlands (as host country).

On 15 December 2005 the Netherlands was chosen as host country. Subsequently on 6 April 2006 the KNVB announced the four host cities: Arnhem, Groningen, Heerenveen, and Nijmegen. These were chosen out of fourteen cities that showed their interest in becoming a host city. An important consideration for the choice of Groningen as a host city was the sizeable side program that the city of Groningen had in mind. Groningen also distinguished itself by guaranteeing for disappointing ticket sales. The city of Groningen decided to guarantee they would fill the ticket receipts up to € 300.000 for every group match. Furthermore for the final they guaranteed the receipts of 30.000 visitors (this is the capacity of the Abe Lenstra stadium located in Heerenveen).

The KNVB assigned 3 group stage matches and the final to the city of Groningen. The 3 group stage matches that were assigned were Portugal-Belgium (10 June), Netherlands-Portugal (13 June), and Israel–Portugal (16 June). The final was played on 23 June between The Netherlands and Serbia, resulting in a 4-1 victory for the host country. All matches were played in stadium “Euroborg” (capacity 20.000 seats) located in the city of Groningen. The best 4 teams of the tournaments qualified for the 2008 Olympic Games in Peking. All matches were broadcasted live on a number of European television stations. The Dutch TV station Tien provided the international signal.

For the organization of the tournament the EURO 2007 foundation was established. This organization was responsible for all activities that took place inside the stadiums, while the city and province of Groningen were responsible for the organization of the side-events. These side-events might have induced visitors of the tournament to spend more time and money in the province of Groningen. The hosting of the EC<21 was seen as a huge opportunity for city marketing by the City of Groningen. The city of Groningen wants to profile herself, more and more, as a “City of Talent”. Accordingly, the central theme of the side-events was “talent”. The city and province of Groningen organised side-evens that were sporty, cultural and informative.

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The 3 group stage matches and the final of the UEFA European Under-21 Championship and the side-events that took place in the city and the province of Groningen that were organized on the occasion of this championship.

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3 Literature Review

The academic debate among economists has resulted in more or less consensus about how to perform economic impact studies of sports events. Methodology is discussed in Crompton (1999) and UKsports (2004).

Most studies recognize that the economic impact of an event depends on two changes in the host economy. In the first place, the economic impact depends on the spending (directly attributable to the event) by non-residents, that injects new money in the host economy. In the second place, the economic impact depends on the degree to which local residents rearrange their entertainment spending (Turco and Kelsey 1993; Siegfried and Zimbalist 2000). A reason for this rearrangement is the relatively inflexible leisure budget of consumers. The more time and money that is spent on an event, the less is available for golf, bowling, amusement parks, restaurants, theater, or concert halls (Siegfried and Zimbalist 2002)1. At present, evidence on this rearrangement of entertainment spending is limited to anecdotes. The lion’s share of economic impact studies simply assumes that all money spent by local residents on the event replaces spending in other local entertainment venues. Although this assumption is easy to work with, the correctness can be challenged. Scholars have recognized that some expenditures substitute for imports, but have rarely corrected for this. Import substitution occurs when local residents would have spent a part of their income outside the region where they reside, but do not do this because of the presence of the event (Seaman 2004). Crompton (2006) uses the term “deflected impact” for the impact of this phenomenon. Oldenboom (2006) corrects for the spending of inhabitants of the Netherlands that would have visited EURO 2000 if the tournament had not been staged in the Netherlands by treating the spending of this group as additional.

An important concept within economic impact studies is the concept of additional spending. This concept, in the context of economic impact studies of sports events, is first mentioned by Burns et al. (1986) in their study on the effects of the Adelaide Grand Prix of 1985. They recognize that a part of the expenditure attributable to the event replaces other expenditure in the region and correct their estimates for this “crowding out”. This crowding out can occur in both the public sector and the private sector. Oldenboom (2006) refines this concept of additional spending. He devises two scenarios. In the 0-situation (the “normal” situation) the event is not hosted by the geographical area (city, region, country). This 0-situation is the explicit reference 0-situation. In the 1-0-situation the event is hosted by the geographical area. Comparison of the two situations can help to determine whether expenditure is truly additional.

A neglected area in the economic impact literature is the “scaring off” of tourists. Crompton (2006, p76) describes this phenomenon as follows: “There is some likelihood that visitors from outside a community who are attracted by a major tourism event may displace other visitors who otherwise would have come to the community but do not, either because they cannot obtain accommodations or because

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they are not prepared to mingle with crowds attracted by the event.” Hultzkrantz (1998) studies this phenomenon for the World Athletic Championship of 1995 in Gothenburg. He analyses data on overnight stays and finds that the effect of visitors attracted to the championship was neutralized by the effect of tourists that stayed away. Oldenboom (2006) finds evidence for tourist that did not visit the Netherlands during EURO 2000 because of the staging of the tournament.

In contrast to the methodology, there is less consensus on the usefulness of economic impact studies for policy makers. According to Barget and Gouguet (2007) and Crompton (1995) economic impact analyses are insufficient to evaluate the economic success of an event. They are in favour of cost-benefit analyses. These cost-benefit analyses also take intangible costs and benefits into account. A possible benefit could be an improvement of the public image of the area or an improvement of the social cohesion in the area. Examples of possible costs are traffic congestion, overcrowding of public transport (leading to travel time losses by residents) and noise.

Oldenboom (2006) develops a methodology for evaluating major sports event and applies this methodology to the UEFA European Championship 2000 hosted by the Netherlands and Belgium. In his dissertation the concept of multiple accounts is introduced. For all parties involved in EURO 2000 a profit-loss account is constructed. On both sides tangible (financial) and non-tangible components are separated. Examples of these parties are the local government, the national government, the local organizing committee and the local businesses community. Using multiple accounts demonstrates that whether effects can be labeled positive or negative can depend on the perspective. For instance, price rises of hotel rooms during the event are positive for hotel owners, but negative for the tourists that visit the event. Another example is a subsidy from the central government to the local government for the staging of an event. For the whole country this subsidy is a transfer, however for the region under consideration the presence of the subsidy is positive.

Mules and Faulkner (1996) demonstrate that in general staging events results in the city authorities losing money, while the city itself benefits greatly. They use the Adelaide Grand Prix to make their point. They show that the hosting Australian cities made financial losses while the Gross State Product (GSP) increased substantially as a result of these Grand Prixs.

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“out of the league” for most cities. Besides this, type B events are often staged in the same geographical location and not subject to a bidding contest. According to their typology the UEFA European Under-21 Championship is of type C.

Gratton, Shibli and Coleman (2006) provide an overview of 10 economic impact studies of major sports events in the UK since 1997. These studies were conducted using the same methodology, which allows for comparison. The research concentrates on the direct impact attributable to additional expenditure (i.e. indirect and induced impacts are left out of consideration). From the analysis of the 10 studies they draw a number of conclusions. First of all, comparison of the economic impact attributable to various events should be on an economic impact per day basis. Secondly, events where the majority of expenditure originates from spectators are likely to have a higher economic impact than events where the majority of expenditure originates from competitors2. In the third place, the key determinant of total economic impact is the number of spectators attending an event. And finally, visitors from outside the immediate area are likely to account for the majority of admissions to major sports events. Other examples of studies that compare the economic impacts of multiple sports events are Meerwaarde (2006) on “Rotterdam Sportjaar 2005” and Sports Foundation Denmark (2005) on 19 major sports events that took place in Denmark between 1998 and 2005.

Economic impact studies commissioned by proponents of the event are often more optimistic than studies done by independent researchers. According to Crompton (2006, p. 69) this is because “most economic impact studies are commissioned to legitimize a political position rather than to search for economic truth”. And according to him this would result in “the use of mischievous procedures”. Examples from economic impact studies performed by consultants are selected to illustrate 10 of these mischievous procedures. We will discuss these procedures in greater detail one by one.

1. Including local residents: Under scholars consensus exists that spending by local residents should not be counted as economic impact. Some economic impact studies “forget” this rule, and include the spending by locals. According to the author this is the most frequent mischievous procedure. 2. Inappropriate aggregation refers to the situation when studies fail to account for changes when

regions are aggregated. This occurs because a share of the visitors that used to be locals changes in visitors (or vice versa).

3. Inclusion of time switchers and casuals. Time switchers are people that intended to visit the local community but shifted their visit to let it coincide with an event. Casuals are visitors, already in the local community and decide to visit an event instead of doing something else. Spending in the host region by both these groups would have occurred anyway so can not be attributed to the event. 4. Abuse of multipliers. The criticism on the use of multipliers is comprehensive. (Crompton, 1995

and Siegfried and Zimbalist, 2000). Gratton et al (2006) argue that consultants often borrow (sometimes outdated) multipliers from other sectors or economies.

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5. Ignoring of costs born by the local community. Events can cause costs for the local community. These costs must be taken into account.

6. Ignoring opportunity costs. Ignoring the effect of the alternative use of the money used to stage an event.

7. Ignoring displacement cost. Ignoring the effect that “normal” tourists do not visit a region because

an event takes place.

8. Expanding the project scope refers to the situation where speculation on future developments is

included.

9. Exaggerating visitation numbers Event organizers have the tendency to exaggerate their visitation

numbers, which leads to overestimations of the economic impact.

10. Inclusion of consumer surplus. Consumer surplus is the difference between the willingness to pay

for a product or service and the actual price a consumer has to pay.

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4 Direct and additional Expenditure

This section contains a description of the method used to gather information on direct and additional expenditure. With additional we mean that the expenditure is not a replacement of spending that would have taken place without the event. With direct we mean that this expenditure is done by parties directly involved in the EC<21 (namely the visitors, the organization, and the City of Groningen). The following definition of direct expenditure is employed:

Expenditure generated within the city and the rest of the province of Groningen, which can be directly attributed to the staging of the UEFA European Under-21 Championship final round.

The direct expenditure can be categorized by origin. We arrive at 3 types of expenditure: • Expenditure by the local organizing committee: EURO 2007

• Expenditure by the City and Province of Groningen • Expenditure by the visitors

In the following sections we analyze the spending of the different groups in more detail and discuss which shares of their expenditure is additional. In section 4.1 we examine spending by EURO 2007, in 4.2 we examine spending by the City and Province of Groningen, and in 4.3 we examine spending by the visitors. In 4.4 we allocate the direct and additional expenditure to the producing domestic and foreign industries while correcting for the presence of value-added taxes, trade margins, and transport margins.

4.1 Expenditure: Local Organizing Committee EURO 2007

For the organization of the tournament the foundation EURO 2007 was established. This foundation acted independently of the KNVB (Dutch football association) on financial, commercial, and legal basis. However, a close relationship existed as personnel had been freed from their tasks at the KNVB to work for the foundation. An attempt is made to construct (as accurately as possible) a financial statement of the local organising committee (see table 1).

Table 1: Financial statement of the local organizing committee: EURO 2007

Expenditure: € 5,000,000 Income € 5,000,000

Central Organization € 1,000,000 Contribution from UEFA € 1,000,000

Local venue Groningen € 1,000,000 Contribution from KNVB € 400,000

Local venue Heerenveen € 1,000,000 Contribution from VWS € 600,000

Local venue Arnhem € 1,000,000 Ticket Sales € 2,700,000

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For our research it is important to determine which amounts were spent in the province of Groningen. From conversations with employees of EURO 2007 and employees of local businesses involved in the EC<21, the following spending that took place in the province has been distilled3.

First of all, from 3 June onwards until 25 June the organization stayed in the Hampshire hotel located in the city of Groningen. Furthermore accommodation was provided for VIPs and participating teams. From personal communication it was learned that in total €200,000 was spent on accommodation in the city of Groningen. Second, printing offices were hired to print brochures. In total € 10,000 (in the city) was spent. We consider the spending of the LOC as additional for the city of Groningen.

4.2 Expenditure: City and province of Groningen

The costs of the staging of the EC<21 and her side-events, for the City and Province of Groningen, amounted to approximately € 1,510,0004_{. A share of these costs was financed out of the budgets reserved} by the City of Groningen and the Province of Groningen (together €800,000). An amount of €450,000 was financed out of other (mainly governmental) budgets. The amount reserved for disappointing ticket sales (€ 300,000) appeared to be too low. An extra amount of €260,000 (estimation) will be needed to comply with the contractual agreement. By which budget this amount will be remunerated is unclear.

By reason of the EC<21, the city of Groningen also decided to invest in the upgrading of 2 parking strokes (expected costs €377,000). This upgrade was required by the UEFA. This was already planned for a later stage and has only been shifted forward in time.

Tourism tax is the only money flowing back to the City of Groningen to the staging of the EC<21. The tourism tax is included in the total price that people pay for their overnight stay. The revenue from the taxes increases in total by an estimated (4,372 extra overnight stays times * €3 per night per person =) €13,233 in the municipality of Groningen.

Initially, the expenditure by the City and Province of Groningen will be left out of consideration. The spending will not be used to estimate the indirect and induced effects. In the sensitivity analysis we report the outcomes while assuming that the money spend on the ticket guarantee is considered as a loss for the region.

4.3 Expenditure: Visitors

This section aims to estimate the spending by the visitors. We define 6 visitor groups and try to estimate their spending pattern and their size. For this purpose ticket sales data from EURO 2007 and data from the visitor surveys are combined. These surveys can be found in appendix A (for domestic residents) and in appendix B (for foreign residents). In total 564 spectators were interviewed. The following groups are distinguished:

3_{Unfortunately EURO 2007 was not willing to investigate thoroughly the exact amounts that were spent in the city of}

Groningen and in Ommeland. They were however prepared to estimate the amounts spent. In the sensitivity analysis in section 6 we will examine alternative figures.

4_{Because the financial settlement takes place at the moment of writing the figures mentioned in this section are}

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Locals: These are residents of the municipality of Groningen that visit the EC<21. All spending by residents of the municipality of Groningen is treated as non-additional56.

Ommelanders: Visitors originating from the rest of the province of Groningen. The spending of this group is seen as a shift from spending in Ommeland to spending in the city of Groningen.7

Domestic visitors that do not stay overnight: Visitors originating from the rest of the Netherlands that stay overnight at home. Their spending is seen as additional (of course with the exception of the spending by casual visitors, see below)

Domestic visitors that stay overnight: Visitors originating from the rest of the Netherlands that stay overnight. Their spending is seen as additional (of course with the exception of the spending by casual visitors, see below)

Foreign visitors that do not stay overnight: Visitors originating from foreign soil that return to their home country after the match. Their spending is seen as additional (of course with the exception of the spending by casual visitors, see below)

Foreign visitors that stay overnight: Visitors originating from foreign soil that stay overnight in the Netherlands. Their spending is seen as additional (of course with the exception of the spending by casual visitors, see below)

In section 4.3.1 we will describe the method use to estimate the size of the different groups. Differences in spending behavior and possible explanations for these differences will be discussed in section 4.3.2. The method of calculation of the direct expenditure is treated in section 4.3.3

4.3.1. Size of the groups

For the ticket sales to the “general” public EURO 2007 employed 3 channels. Tickets were sold via the internet, via the ticket box system, and via the counters at the stadiums (on the match day). According to EURO 2007 data 57.6 % was sold via the internet, 33.0 % via the ticket boxes, and 10.3 % via the counters of stadium Euroborg.

Only the residence location of persons that buy tickets via the internet is known and not the residence location of spectators that buy their tickets via the ticket box system or at the stadium counter on the match day, or that receive their tickets freely (for instance because they are sponsors, VIPs, or officials).

5_{In theory residents of Ommeland and of the City of Groningen that would have visited the EC<21 in the situation}

when the EC<21 been staged outside the province of Groningen are eligible for inclusion. This is because they spend their money in the city of Groningen instead of spending their money elsewhere. Two situations can be seen as alternative situations. Namely, first the tournament is staged abroad. And second, another Dutch city would have been host city. We choose for the first option because clearly most of the times this is the situation. Given that the tournament attracts mainly domestic visitors it is assumed that no residents of the municipality of Groningen and of Ommeland would have visited the tournament if it had been staged abroad.

6_{A part of the spending (on tickets) can even be seen as detrimental because the money flows out of the region. We}

will return to this issue in the sensitivity analysis.

7_{Spending on tickets by Ommelanders can also be seen as detrimental. This will also be discussed in the sensitivity}

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Also the residence location of visitors that are brought to the matches by persons that bought tickets via the internet is unknown. To cope with these limitations we make the following assumptions:

1. For the internet sales we assume that spectators that are brought to the match by the “ticket buyer” are from the same geographical location as the “ticket buyer”.

2. The geographical distribution of origin of the buyers that buy their tickets via the ticket box system is a reflection of the sales to Dutch residents via the internet8_.

3. The geographical distribution of the origin of buyers at the stadium counters is

comparable to the origin of all spectators.

4. We assume that the geographical origin of spectators that received their tickets for free is comparable to the origin of all spectators.

Table 2: number of spectators and estimation of the distribution of the origin of the spectators per match in % (source: own calculations based on EURO 2007 ticket sales data)

Table 3 displays the origin of the foreign visitors. The largest share of foreign visitors originates from Serbia, the country that participated in the final. Not surprisingly the residents of countries that played their group matches in Groningen (Belgium, Portugal and Israel) are represented well. Furthermore a substantial share of the foreign spectators originates from neighboring countries Germany, United Kingdom, and Belgium.

Table 3: Origin of foreign visitors in %. Country Share Serbia 38.6 United Kingdom 13.5 Germany 12.4 Portugal 10.7 Israel 9.3 Belgium 9.0 France 2.6 Other 3.8

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The ticket box system is only accessible in the Netherlands.

Date: Match: Spectators: Groningen Ommeland Rest of the Netherlands Abroad

10 June Portugal-Belgium 7,197 13% 4% 55% 28%

13 June Holland-Portugal 19,498 17% 14% 66% 3%

16 June Israel-Portugal 10,883 9% 3% 51% 36%

23 June Final: 19,876 11% 9% 65% 14%

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It is important to recognize the difference between spectators and visitors. In our case the matches attracted 57,404 spectators. On average spectators appeared to possess approximately 1.5 tickets, which results in 37,805 unique visitors of the matches in Groningen of which 33,505 originate from out of town. The differences in the average number of ticket per member of visitor groups are reported in table 4. The survey learned that 55% of the foreign visitors stayed overnight in the Netherlands, and that 8% of the visitors originating from the rest of the Netherlands did not stay overnight at home. Using this information with the information that is available on the average number of tickets per visitor we arrive at following group sizes: Table 4: Number of unique visitors per visitor group

Spectators Average number of

tickets per member

Unique visitors

Locals 8,169 1.9 4,300

Ommelanders 6,938 1.9 3,641

Domestic visitors that stay overnight 2,798 1.3 2,176

Domestic visitors that do not stay overnight 34,098 1.4 23,941

Foreign visitors that stay overnight 3,271 1.6 2,044

Foreign visitors that do not stay overnight 2,180 1.3 1,703

Total 57,454 1.5 37,805

4.3.2 Spending behavior

To estimate the spending behavior of the above described groups, a 5 minute survey has been performed. These surveys can be found in appendix A (for domestic visitors) and in appendix B (for foreign visitors). In total 564 visitors were interviewed around stadium Euroborg on match days. The average spending of spectators on a match day is presented in table 5.

Table 5: Average expenditure on categories per day (with the exception of accommodation) in € Category Expenditure

Tickets 15.86

Food and drinks 11.86

Travel expenses 9.09 Shopping 1.84 Souvenirs 1.06 Other 0.75 Other entertainment 0.21 Total 40.68

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KNVB, so does not circulate in the local economy, so does not stimulate it. For this reason we treat the spending on tickets as non-additional. This reasoning is also employed by Sports Foundation Denmark (2006). On food and drinks visitors spend on average €11.86. Euroborg Horeca provided food and drinks within the stadium for VIPs as well as “normal” visitors. They were interviewed by telephone. In total a turnover of € 250,000 was realized. They experienced the tournament as educational and as an opportunity to promote their company. A large number of adjustments had to be made to fulfill to the requirements of the UEFA and EURO 2007, which led to lower profit margins (compared to matches of the local football club FC Groningen). The spending by visitors on the categories souvenirs, shopping, other entertainment and other were low.

Analysis of the data teaches us that there is a clear difference between the groups in spending behavior. This is illustrated in figure 2.

Figure 2: Average spending of a spectator of a visitor group per day in € of 2007 (with the exception of spending on accommodation). € 0.00 € 5.00 € 10.00 € 15.00 € 20.00 € 25.00 € 30.00

locals ommelanders domestic visitors that do

not stay overnight

domestic visitors that stay

overnight

foreign visitors that do not stay

overnight

foreign visitors that stay overnight

tickets food and drinks souvenirs shopping other entertainment travel expenses other

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Table 6: Share of group that pays a visit to the city center in percents.

Group % Ommelanders 25 Domestic visitors that do not stay overnight 34

Domestic visitors that stay overnight 62

Foreign visitors that do not stay overnight 40

Foreign visitors that stay overnight 93

Furthermore there are differences in the shares of the groups that stay overnight in the Netherlands. The following information on overnight stays can be learned from the outcomes of the surveys:

- On average 9% of total visitors stayed overnight.

- Most visitors stayed overnight in the city of Groningen (59%), 16% of the visitors stayed overnight in Ommeland and the remaining 25% elsewhere in the Netherlands.

-

The majority of the visitors that stayed overnight (62%), stayed in a hotel. Approximately a quarter of the visitors that stayed overnight (24%) stayed with friends or family, 12 % indicated they stayed in a pension, and 1 % stayed on a campsite (see also table 7).

- Visitors that stayed overnight in commercial accommodation (76% of the total visitors that stayed overnight) spend on average €61.

- Foreigners that stayed overnight, stayed longer (on average 3.2 nights) than domestic visitors that stayed overnight (on average 1.4 nights).

Table 7 displays the number of overnight stays generated by the EC<21.

Table 7: Number of overnight stays in commercial accommodations in the 3 regions attributable to the EC<21.

Region Number of overnight stays

City of Groningen 4372

Ommeland 1166

Rest of the Netherlands 1895

total 7810 4.2.3 Estimation of direct expenditure of visitors

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Figure 3: Percentage of casuals and additional visitors per visitor group

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% foreign visitors that stay

overnight foreign visitors that do not

stay overnight domestic visitors that stay

overnight domestic visitors that do not

stay overnight ommelanders locals % additional % non-additional

Furthermore a share of the spending (on “tickets” and “travel expenses”) does not generate income, value-added, and employment in the city of Groningen and/or Ommeland. To estimate the direct expenditures of the visitors we make the following assumptions:

1. Spending behavior of visitors on all categories is equal on match days and on non-match days (with the exception of spending on tickets, this is only done on the match day).

2. Spending of visitors that stay overnight in the Netherlands on non-match days is done in the region where they stay overnight, and on match days is done in the city of Groningen (of course except spending on accommodation).

3. Spending on the categories “travel expenses” and “tickets” is non-additional, so will not be used to estimate the indirect, and induced effects.

4. It is assumed that the money spent on a category would have been spent on the same category in the home region of the visitors.

For the groups “Ommelanders”, “foreigners that do not stay overnight” and “domestic visitors that do not stay overnight” the calculation of direct expenditure is as follows:

Average expenditure per visitor per day x Average number of tickets per member of the visitor group x number of members of the visitor group x percentage of members of group whose spending is additional.

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Average expenditure per day x Average length of stay in days x number of members of visitor group x percentage of members of group whose spending is additional.

Performing these calculations, while taking the assumptions made above into account, leads to table 8.

Table 8: Overview of direct expenditure in €

Effect

City of

Groningen Ommeland

Rest of the Netherlands

Accommodation expenses of foreigners 170,244 45,398 73,772

Accommodation expenses of domestic visitors 78,889 21,037 -99,926

Expenditure on food and drinks of foreigners 133,263 14,924 24,251

Expenditure on food and drinks of visitors from the rest of the Netherlands

458,504 4,393 -462,896

Expenditure on food and drinks of visitors from Ommeland 39,544 -39,544 0

Total 880,443 46,208 -464,799

Expenditure on souvenirs, shopping, and “other” of foreigners 107,680 13,539 22,000 Expenditure on souvenirs, shopping, and “other” of visitors

from the rest of the Netherlands

89,022 2,038 -91,060

Expenditure on souvenirs, shopping, and “other” of visitors from Ommeland

13,894 -13,894 0

Total 210,596 1,683 -69,060

Expenditure on other entertainment of foreigners 2,628 397 645

Expenditure on other entertainment of visitors from the rest of the Netherlands

6,771 70 -6,841 Expenditure on other entertainment of visitors from the

Ommeland

823 -823 0

Total 10,222 -356 -6196

4.4 Allocation of expenditure

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Table 9: Overview of direct and additional spending in € (consumer prices)

Effect Origin Effect region amount

1 LOC Spending on brochures City of Groningen 10,000

2 LOC Accommodation expenses of EURO 2007 City of Groningen 200,000

3 Visitors Expenditure on “souvenirs”, “other”, and “shopping” City of Groningen 210,595

4 Visitors Expenditure on “food and drinks” City of Groningen 880,444

5 Visitors Expenditure on “other entertainment” City of Groningen 10,222

6 Visitors Expenditure on “souvenirs, other, and shopping” Ommeland 1,683

7 Visitors Expenditure on “food and drinks” Ommeland 46,208

8 Visitors Expenditure on “other entertainment” Ommeland -356

9 Visitors Expenditure on “souvenirs, other, and shopping” Rest of the Netherlands -69,059

10 Visitors Expenditure on “food and drinks” Rest of the Netherlands -464,799

11 Visitors Expenditure on “other entertainment” Rest of the Netherlands -6,196

The direct and additional expenditure in table 9 is quoted in consumer prices (i.e. the prices that the visitors and EURO 2007 pay for their products). However the amounts in the constructed tri-regional input-output table are quoted in producer prices. The difference is made up by trade- and transport margins and VAT9.

Unfortunately the exact package of commodities that is bought by visitors is unknown, as well as the geographical origin of these commodities. Goods are possibly produced in the city of Groningen, in Ommeland, in the rest of the Netherlands, or abroad. It is likely that a substantial share of the goods that were bought by visitors originates from out of town (namely from Ommeland, the rest of the Netherlands, or from abroad), however the exact distribution is unclear. To deal with these missing pieces of information, assumptions have to be made about the commodities that are bought, the origin of these commodities and the relevant level of trade margins, transport margins, and VAT tariff.

For spending done in the retail sector the following was assumed: - A VAT tariff of 19% was assumed.

- To the wholesale and retail sector in the region where the expenditure was done 50% margin was allocated.

- To each of the sectors 7,9,11,14,15,16,17,19,24, and 37 (see appendix C for the industrial classification 10% of the remaining production was allocated. Where regarding the origin of the production the following was assumed:

• For spending in the city 17% was allocated to the city itself, 16% to Ommeland, 33% to the rest of the Netherlands, and 34% to foreign countries.

9_{A VAT rate of 19% was assumed for all expenditure, with the exception of the spending on “other}

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• For spending in Ommeland 16% was allocated to the city, 17% to Ommeland, 33% to the Netherlands, and 34% to foreign countries.

• For spending in the rest of the Netherlands 1% was allocated to the city, 1% to Ommeland, 68% to the rest of the Netherlands, and 30% to foreign countries.

These assumptions are based on information from the constructed tri-regional input-ouput model (see appendix C)

Table 10 summarizes how the spending was allocated to the different producing industries in the different regions. It can not be denied that the allocation is in some way a little arbitrary, however in this situation assumptions have to be made.

Table 10: Allocation of direct expenditure to the producing industries.

Effect Region Sector* 1 2 3 4 5 6 7 8 9 10 11 12 84% 22 42% 84% 23 84% 36 94% City Other 1% 1% 12 22 42% 23 84% 36 94% Ommeland Other 1% 1% 12 22 42% 23 84% 36 94% Rest of the Netherlands Other 27% 27% 29% Import 0% 0% 13% 0% 0% 13% 0% 0% 13% 0% 0% Vat 16% 16% 16% 16% 6% 16% 16% 6% 16% 16% 6% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

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5 Estimation of indirect and induced effects

To estimate the indirect and induced effects we employ the technique of input-output analysis. The principle behind input-output analysis is to use the underlying trading structure of regions to estimate the effects of economic changes. All transactions between different industries, between consumers and industries, and between industries and factor supplies are identified and disaggregated. Input-output tables are a frequently used device to display these transactions. From the data in the input-output table model coefficients are derived (McCann, 2001).

A crucial assumption, where input-output models are based on, is the assumption of constant regional expenditure coefficients. This implies that marginal and average costs of production remain equal and constant when output increases. Furthermore it is assumed there are no supply constraints and that the it is assumed that prices of local factor inputs are invariant with output levels (McCann, 2001).

5.1 Model

We are interested in the economic impact of the EC<21 on both the city of Groningen and on Ommeland. In order to differentiate between the economic impacts for these regions we employ a tri-regional input-output table10 covering the following 3 regions:

1. The city of Groningen,

2. Ommeland,

3. The rest of the Netherlands.

The model is demand-driven (i.e. demand determines output). It is a so-called type 2 model. This implies that the household sector is treated endogenously. The model, derived from Oosterhaven and Stelder (2007), is structured as follows11: ex 21 v 21 l en

f

c

Zi

x

=

+

(1)

Ax

Zi

=

(2)

x

Q

x

Q

x

Q

c

en

=

c

+

o

+

r

=

c

+

o

+

r (3)

Cx

v

=

(4)

Equation (1) defines total output

x

as the sum of intermediate demand

Zi

, endogenous

consumption demand en

c

, final demand attributable to the EC<21 tournament of the local organizing committee 21

l

f

, final demand attributable to the EC<21 tournament of the tournament visitors 21 v

f

, and

remaining other exogenous final demand ex

f

.

10_{The technical details of the construction of this tri-regional input-output table are discussed in Appendix C.} 11_{Matrix notation: small bold cases are used to indicate vectors and capital bold cases are used to indicate}

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Equation (2) shows how intermediate demand

Zi

depends on the input coefficients (summarized in matrix

A

) and the output levels of the purchasing industries

x

.

Equation (3) shows that endogenous consumption en

c

is the sum of endogenous consumption

demand of residents of the city of Groningen c

c

, endogenous consumption demand of residents of

Ommeland o

c

, and endogenous consumption demand of residents of the rest of the Netherlands r

c

. This endogenous consumption demand depends on output (which determines total labor income) and consumption coefficients (summarized in 3

Q

matrices). The incorporation of the consumption effects is motivated by the expectation that changes in the level of labor income can lead to changes in the level of consumption.12

Finally, equation (4) links the impact variables

v

to domestic production per industry.

C

is a matrix containing coefficients of the impact variable of interest per unit of output (in our case income coefficients or employment coefficients), on the main diagonal.

The solution for the impact variables reads (derived by substituting (2) and (3) in (1), subsequently solving for x and substituting in (4)):

)

f

(f

)

Q

A

C(I

v

=

−

c

−

o

−

r −1 _l21

+

_v21

+

ex (5)

The impact of the spending attributable to the EC<21 tournaments on our impact variables are calculated by means of the following impact equation:

)

f

(f

)

Q

A

C(I

v

=

−

c

−

o

−

r −1 _l21

+

_v21 (6)

In order to obtain the solution for production the matrix

C

has to be replaced by the unit matrix

I

(see also Oosterhaven and Fan, 2006).

5.2 Data description

This section discusses the derivation of the coefficients (with the exception of the consumption coefficients, these are derived in appendix D). First of all, the input coefficients, summarized in the

A

matrix, are directly derived from the tri-regional input-output table by means of the following equation:

s

r

j

i

x

z

a

j rs ij rs ij

=

,

∀

,

(7)

Where

z

_ij refers to intermediate deliveries from industry i to industry j, and

x

_j is the output of sector j. The effects on income are estimated by using two series of income coefficients. The first is the labor income coefficient. This coefficient is defined as the wages earned per € of output of j, and is derived by means of the following equation:

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s

j

x

v

c

j s wj s wj

=

,

∀

,

(8) Where s wj

v

is the total wages earned in sector j in region s , and

x

_j is the output of sector j.

The total income coefficient is defined as gross value-added earned per unit of output of j in € of 2007.

s

j

x

v

c

j s j s vj

=

,

∀

,

(9) Where s j

v

represents the total value added earned in sector j and

x

_j is the output of sector j.

The effects on employment are estimated by making use of a series of employment coefficients. The employment coefficient is defined as the direct employment per unit of output in the sector. The series of employment coefficients relate to the number of FTE (Full-Time Equivalent) jobs (including self-employed workers). The employment coefficients are derived for 2003, and then adjusted for labor productivity and inflation developments. They are derived by means of the following equation:

s

j

g

i

x

l

e

j s j s fj

,

1

1 *

1

1 *

∀

+

=

(10)

Where

l

_jrepresents the labor volume in FTE jobs in sector j and

x

_j is the output of sector j, i is the growth rate in the price level, and g is the growth rate in real labor productivity, both from 2003 to 2007. Data on production and the labor volume were taken from CBS (2006b) 13, inflation figures from the CBS (CBS, 2007) and labor productivity growth rates from the CBP (2007).

The employment effect is the most uncertain effect of all effects under study. The short-term nature of most of the expenditures makes it difficult to estimate the impact on employment (Center of Business Research, 2001). Because firms know that the increase in work due to the event is temporal, few businesses will hire full-time workers for this short term increase in work, but make part-time workers perform extra work or make full-time workers perform overtime work. With regard to the hotel industry Matheson (2004, p.6) states: “existing workers are simply expected to work harder or more efficiently to meet the customers’ needs in the crowded hotel”

13 Unfortunately because of a revision in the industry classification, the sectors on which data are reported do not coincide with the sectors of our input-output-table. To cope with this we assume the following:

- The employment coefficients of industries 1 and 2 are equal to the employment coefficient of sector 1 in the REJ series.

- The employment coefficients of industries 4, 5, and 6 are equal to the employment coefficient of sector 3 in the REJ series.

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The employment impact will be estimated by making use of average employment coefficients. However due to the increase in demand firms will possibly only hire a few more employees (Oosterhaven, van der Knijff, and Eding, 2003). Ideally, we should use marginal employment coefficients; however no data are available on this topic. Because we use average employment coefficients the estimated number of jobs is on the high side.

5.3 Results

This section reports the outcomes of the estimation of the effects of staging of the EC<21 on 3 economic indicators, namely output, income, and employment for the city of Groningen and Ommeland. The effect on sectoral output is displayed in table 11. A distinction is made between the effects of expenditure by the local organising committee EURO 2007 and expenditure by the visitors of the tournament. Furthermore distinction is made between the direct effects, indirect effects, and the induced effects (consumption effects).

Table 11 : Effect on output in € of 2007.

City of Groningen LOC Visitors Total

Direct production effect _176,470 _{839,938 1,016,408}

Indirect production effect _19,877 _104,123 _123,999

Consumption effect residents of the city of Groningen _4,477 _30,997 _35,474

Consumption effect residents of Ommeland _3,841 _26,980 _30,821

Consumption effect residents of the rest of the Netherlands ₇₂ ₆₉ ₁₄₁

Total _{204,737 1,002,106 1,206,843}

Ommeland

Direct production effect ₀ _41,141 _41,141

Indirect production effect _17,681 _85,096 _102,776

Consumption effect residents of the city of Groningen _3,958 _27,403 _31,361

Consumption effect residents of Ommeland _3,394 _23,850 _27,244

Consumption effect residents of the rest of the Netherlands ₈₀ ₇₆ ₁₅₆

Total _25,112 _177,566 _202,679

The direct production effects were identified in section 4. In total €1,016,408 was identified for the city of Groningen and €41,141 for Ommeland. The direct expenditure leaded to €123,999 of indirect production in the city and €102,776 in Ommeland. Furthermore the spending induced production attributable to extra consumption due to an increase in wages in the city and. Together these effects amount to €66,436 for Groningen and €58,761 in Ommeland.

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compensated by the wages earned in the city of Groningen and Ommeland that flow to commuters originating from the rest of the Netherlands. Moreover spending in the City of Groningen and Ommeland by foreigners leads to indirect and induced production in the rest of the Netherlands.

Table 12 displays the estimated effect on income. Table 12: Effect on income in € of 2007.

City of Groningen Ommeland

Wages and salaries _{356,556 45,562}

Gross value-added _{756,810 129,255}

It has that be noticed that the values relate to income earned in a region. Because of commuting this is different from the effect on the income of residents of a region. Table 13 displays the estimated effect on 2 indicators of employment. According to estimations of CPB (2007), on average, an FTE job is performed by 1.28 workers. To estimate the total number of jobs that were generated the number of FTE jobs was multiplied by this number.

Table 13: Effect on employment.

City of Groningen Ommeland

FTE jobs (workers+self-employed) _{12.7 1.6}

Jobs (workers+self-employed) _{16.2 2.0}

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6 Sensitivity Analysis

In this section we re-estimate the effects of the EC<21, while employing different assumptions regarding three issues. First, we consider the issue of the effect of spending by locals and Ommeland residents on tickets. One could argue that the economies of the city of Groningen and Ommeland would have been better of in the situation where the money spent on tickets would have been spent in the local economy. In total, locals spent an estimated (8,169* €11.91=) € 97,293 and Ommeland visitors spent (6,938* €13.02=) € 90,332 on tickets. Second we consider the issue of the level of spending by EURO 2007 in the city of Groningen. Finally we examine the effects of treating the ticket guarantee (€ 560,000 financed by the City and Province of Groningen) as detrimental to the city of Groningen and Ommeland. For the three issues we discuss the base assumption and the alternative assumption.

Issue 1:

Base assumption: Spending of locals on tickets is not detrimental to the local economy. Alternative assumption: Spending of locals on tickets is detrimental to the local economy.

Issue 2:

Base assumption: Spending of EURO 2007 equals to € 210,000.

Alternative assumption: Spending of EURO 2007 is higher or lower then the estimated € 210,000 (reported by EURO 2007). We evaluate two scenarios:

- The spending of EURO2007 is € 100,000 lower then estimated. - The spending of EURO 2007 is €100,000 higher then estimated.

Issue 3:

Base assumption: Spending by the City and Province of Groningen on the ticket guarantee (€ 560,000) is not detrimental to the local economy (i.e. we assume this money would have flown out of the region anyway)

Alternative assumption: Spending by the City and Province of Groningen on the ticket guarantee is detrimental to the local economy (i.e. we assume the money spent on the ticket guarantee would have been spent similar to the average spending pattern by the city and province of Groningen) This average spending pattern is based on information provided by the bi-regional input-output table.

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Table 14: Results of 12 scenarios employing alternative assumptions.

scenario LOC tickets city spending City Ommeland

1 low detrimental non-detrimental 632 11 83% 58 1 45%

2 low non-detrimental non-detrimental 703 12 93% 122 2 94%

3 base detrimental non-detrimental 686 12 91% 65 1 50%

4 base non-detrimental non-detrimental 757 13 100% 129 2 100%

5 high detrimental non-detrimental 739 13 98% 72 1 56%

6 high non-detrimental non-detrimental 811 14 107% 137 2 106%

7 low detrimental detrimental 245 6 32% -72 -1 -56%

8 low non-detrimental detrimental 317 7 42% -8 0 -6%

9 base detrimental detrimental 299 7 40% -65 -1 -50%

10 base non-detrimental detrimental 370 8 49% 0 0 0%

11 high detrimental detrimental 353 8 47% -57 -1 -44%

12 high non-detrimental detrimental 424 9 56% 7 0 6%

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7 Conclusions

Groningen was 1 of the 4 host cities of the 2007 edition of the UEFA European Under-21 tournament. This study has examined the economic impact of this event on both the city itself and on Ommeland. We have identified expenditure done on the occasion of the tournament by three parties: the local organising committee EURO 2007, the City and Province of Groningen, and the visitors. In total € 1,016,408 of additional and direct expenditure was identified for the city of Groningen and €41,141 for Ommeland. The majority of this expenditure (83%) originates from the visitors. An input-output model was used to estimate the indirect and induced effects. The direct expenditure induced €190,453 of output in the city and €161,538 in Ommeland.

In total, 12.7 FTE jobs were generated in the city of Groningen and 1.6 FTE jobs in Ommeland. The EC<21 caused an increase in gross value added of €756,810 in the city of Groningen and of €129,255 in Ommeland. There were large differences in the benefits among sectors. The sector that benefited most is the hotel, cafes and restaurants sector (simply because most of the spending was done in this sector).

Scenario analysis was used to assess the robustness of the outcomes. Different assumptions with respect to the level of spending by EURO 2007 and the effect of spending by locals and the City and Province on Groningen on tickets were employed to re-estimate the economic impact of the EC<21. It is not easy to judge how accurate our estimates of generated jobs and value-added are (i.e. it is hard to assign error margins to our estimates). At least we can say that our estimates give an order of magnitude. With respect to the created FTE-jobs for instance, we can say these are between 5 and 15, and certainly not hundreds or thousands. Because marginal employment coefficients were used the estimates are optimistic. The estimations can be labelled as maximum estimates.

When the economic outcomes are compared to the outcomes of events of similar size, for instance to the outcomes of the UEFA CUP final 2007 in Glasgow (Glasgow City Marketing Bureau, 2007), the outcomes for the city of Groningen and Ommeland are relatively low. Of course the disappointing visitation numbers are an important explanation. Furthermore, the composition of the origin of the spectators was not favourable for the economic impact. A substantial share of the spectators originated from the City of Groningen and from Ommeland (together 26%). By assumption their spending does not inject new money in the region. Moreover, only 10% of the spectators originated from foreign soil. The survey outcomes learned that this group contributes relatively well to economic impact (because they tend to stay overnight more and longer and spend more, compared to domestic visitors).

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Economic Impact of the UEFA European Under-21 Championship Final Round 2007