June 26 (Bloomberg) -- The 2010 World Cup in South Africa was a bust for the company that owned rights to corporate hospitality there. It will bounce back at the next edition thanks to Brazil’s booming economy.
Match Hospitality AG lost about $50 million because of weak demand in South Africa. It says it’s already made $262 million in sales for Brazil, compared with the $150 million it paid soccer’s governing body FIFA for rights to an event that’s still two years away. It paid $120 million for the right to sell corporate seats in South Africa.
“Although international demand has exceeded our expectations for this early stage, not surprisingly almost 80 percent of sales to date have been to Brazilian companies or residents of Brazil,” Andreas Herren, a spokesman for Zurich-based Match, said in an e-mailed response to questions.
Brazil’s economy grew at an average 3.8 percent annually between 2001 and 2011, boosted by commodity exports ranging from iron-ore to beef. Under the presidencies of Luiz Inacio Lula da Silva and incumbent Dilma Rousseff, more than 30 million people have been pulled out of poverty since 2003, boosting domestic consumption.
Economists have been lowering their forecast for economic growth this year amid a slowdown in commodity exports to China and a decline in industrial output. Analysts surveyed by the central bank last week said they expect gross domestic product to expand 2.18 percent this year.
The demand for the 32-team World Cup comes at a time when some events like the current European Championship in Poland and Ukraine have struggled to meet targets.
The 16-team European competition is sport’s biggest tournament after the World Cup and the summer Olympics. The semifinals start tomorrow, and its UEFA Club Prestige operation, responsible for corporate hospitality, still had availability for both semifinals and also the final in Kiev on July 1 six days before the first of those matches. Defending champion Spain plays Portugal tomorrow, Germany meeting Italy the day after.
David Taylor, head of the commercial operation at European soccer’s governing body, said before the 1.3 billion-euro ($1.6 billion) tournament he expected corporate hospitality income to be 30 percent lower than the 150 million euros at the competition in Austria and Switzerland four years ago.
Rene Proske, managing director of Germany-based Proske Sports, is responsible for organizing sponsor Coca-Cola Co.’s hospitality at Euro 2012. He said Brazil’s booming economy and passion for soccer -- it’s the record five-time world champion - - explain why revenue has been so good. Herren said he expects even more sales as the tournament nears.
“Certain types of packages in a couple of the venues are no longer available,” he said. “Other types of hospitality packages are still available in significant quantities. Construction plans for stadia have not been completed, and qualifying competitions in the various continents are still in their early stages or yet to start.”
Proske started a joint venture in Brazil with a local travel management company to profit from interest in the World Cup. He said the distance to South Africa and reports about lack of infrastructure and crime made some companies wary of hosting clients there in 2010.
“It’s definitely sexier to say to a client ‘Come and join us at the World Cup in Brazil,’” Proske said in a telephone interview from Warsaw, where Coca-Cola’s hospitality base for Euro 2012 is located. “With the football and the beaches I’m sure it will be fantastic.”
The buildup to the World Cup in Brazil has not been all smooth after South America’s biggest nation was awarded the rights to sports’ most-watched event in 2007. Rising construction costs, delays, labor disputes and a disagreement with FIFA over legislation have slowed preparations.
Match Hospitality also has offices in Johannesburg and Rio de Janeiro. It’s majority-owned by U.K.-based Byrom Holdings Plc and counts Dentsu Inc., Infront Sports & Media AG, Bidvest Group Ltd. and Winterhill Investments Ltd. as shareholders.
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