A Brief Analysis of the Financing Mechanism of Sports Infrastructure in the Pandemic
Updated: Aug 29, 2022
Sports activities are considered to be one of the major driving forces for economic development and are considered to be an essential sector in various economies. The sports sector is famous for the mega sporting events that require proper dedicated sports infrastructure, along with training facilities and sports complexes. These sports events and infrastructure are for the amusements of fans who have been flocking to these sports stadiums to enjoy their favourite sports and get a glimpse of their role models since time immemorial. However, the outbreak of SARS-CoV-2(covid pandemic/ pandemic) and the subsequent lockdown brought this physical fan engagement at sports infrastructure to a grinding halt.
Pandemic and Sports Infrastructure
The interruption in the practice of spectatorship at stadiums, due to the pandemic, became a part of daily life in March 2020 and has raised various invasive protocols concerning organizing the sports events. Although various sports leagues at both international and domestic level have resumed, there has been a considerable modification in the way sports infrastructure were utilized and involved. The participation of fans, as well as other stakeholders, has changed since the spread of the pandemic leaving sports arenas empty across the world. Amid all this, the biggest burden has been over the state and local government as well as self-funded private bodies, which have been making efforts to fund their share of sports-related infrastructure expenditures, at a time where there has been zero income. The absence of income due to the pandemic jeopardizes the ability of the government body as well as the private bodies involved, to effectively manage their share of sports facility construction and maintenance charges.
Sports Infrastructure as Economic Hubs
Sports being a highly commercial activity in nature attract various associated forms of businesses including hotels, bars, entertainment parks, restaurants, and other recreational centres which experience a high rate of footfall on game days/nights. However, the loss of footfall on game days/nights at these sports complexes means that these associated businesses face decreases sales activity thereby affecting a peripheral source of income. Not only does this affect the financial status of these sports infrastructures but the economic repercussions result in job losses as well as local sales tax revenues, thereby adding to the financial distress of the concerned bodies.
Implications of the Pandemic on Sports Finance
The Covid-19 Pandemic has brought around multiple financial challenges for the government and sports regulatory bodies that are searching for efficient and effective ways to effectively manage the debt or recover the investment associated with the sports infrastructure projects. As the situation deteriorates, these sports infrastructures continue to challenge the financial position and stability of revenue for these infrastructures. The concerned bodies have either already started or will soon start navigating revenue sources to solve the financing issues to ensure proper operations and maintenance of the stadiums. One of the common sources of funding for sports facilities come from game-day collections, which has been absent due to fan-less environments at stadium created by the pandemic. In addition, the lack of fans can create a ‘spill over effect’ throughout the region as local businesses, such as restaurants, and hotels, struggle without the presence of game-day-related foot traffic, leading to a decline in sales revenues.
It has been noticed that in the pandemic, the professional sports franchises have been relatively less affected than these sports facilities. Although in-stadium attendance has been absent, the franchises have not been affected as they have got their share from the broadcast deals, individual team sponsorships deal, online sale of merchandises, brand endorsements as well as league title sponsorship deals.
In the short run, a remedy would be to lend the mega sports infrastructures to the health department to be used as make-shift hospitals or large-scale vaccination centres. Large hospital chains can take the stadium space for rent. This would not only speed up and improve the vaccination as well as a treatment facility, while generating income for the government or the sports regulatory body but will also help in improving the Covid-19 situations thereby assisting in the fast resolution of this pandemic, and thus bringing back fans in these infrastructures.
The majority of the existing sports infrastructures can be categorized to be dead assets (at least temporarily) and the best way to earn out of any dead asset is to sell it or monetize it. Fortunately, the Indian government has understood this and in a chance to increase revenue from dilapidated sporting venues, the government in its 2021-22 Union Budget announced that it will monetize its stadiums. Stadiums would be leased to the private sector by way of an operational and maintenance contract. Although the same question of the absence of fans and sports events arises, it needs to be understood that once these stadiums are monetized and handed over to companies (in this case mostly event or premises management companies), these companies can organize corporate events or generate revenue using their business model. Moreover, stadiums can help in ensuring social distancing in events where the physical presence of a large number is required. This should not be a one-time system of monetizing but should be taken seriously by the government and encourage more big corporate bodies to participate in monetizing these mega sports infrastructures so that even in the off-season, the stadiums do not fail to generate income and thereafter build a contingent fund.
India can also adopt practices followed in western countries especially the USA, where the lottery system, public funding through issuing of bonds, tourist taxes as well as revenue bonds have proven to be a great revenue source, provided the policy and public welfare allow these to prevail.
Sports have been a core element of our social life but unfortunately, sports facilities are not found to be one of the priorities while thinking of public infrastructure, even though the costs and impacts those sports have on the community are substantial from a social and economic perspective. Adding to this the repercussions of the pandemic will result in long-lasting impacts. Covid-19 pandemic has caused a disruption which has never earlier been experienced by our generation and might continue to repercussion on the social and economic scenario.It is high time that a policy change is brought in place to deal with these issues and not wait till situations go out of hand.