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THE EFFECT OF WINNING THE 2010 FIFA WORLD CUP
ON THE TOURISM MARKET VALUE: THE SPANISH CASE
Juan Luis Nicolau
Dpt. of Marketing
Faculty of Economics
University of Alicante
Ap. 99
03080 Alicante
Spain
Phone and Fax: +34 965903621
e-mail: JL.Nicolau@ua.es
Citation:
Nicolau, J. L. (2012). The effect of winning the 2010 FIFA World Cup on the tourism market
value: The Spanish case. Omega, 40(5), 503-510.
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THE EFFECT OF WINNING THE 2010 FIFA WORLD CUP
ON THE TOURISM MARKET VALUE: THE SPANISH CASE
Abstract
The objective of this article is to analyze the effect of winning the FIFA World Cup on the
tourism market value, justified by the increase in brand knowledge experienced by the
winning team’s country. Filling this gap in research, the empirical analysis conducted on the
victory of the Spanish National soccer team in the 2010 FIFA World Cup finds a significant
increase in the Spanish tourism industry’s market value, and shows that the results of
individual World Cup matches also have an influence on tourism firm value: winning
enhances and losing diminishes firm value, with both symmetric and asymmetric patterns.
Important managerial implications are drawn and discussed.
Keywords: brand equity; firm value; loss aversion; sports tourism.
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1. INTRODUCTION
In the days around the 2010 World Cup final, the conclusions by Kuper and
Szymanski (2009) about the winning country experiencing a 0.7% increase in its GDP spread
like wildfire, generating debate as to how real this statement is and how cautiously one has to
look at it (El País, 2010; El Mundo, 2010; The Wall Street Journal, 2010). Certainly, winning
the World Cup is not going to bring about any long-term improvement in productivity
capacity, for example; nevertheless, if we consider immaterial, intangible consequences
derived from this victory, the concepts of image and branding immediately show up, which
are critical core concepts for destination marketing (Baloglu and McCleary, 1999). Therefore,
the objective of this article is to analyze the potential existence of an effect of winning the
World Cup on the tourism market value, justified by the increase in brand knowledge for the
winning team’s country.
At the same time, this aim fills an existing gap in research. With the tourism market
witnessing a fiercely competitive arena and destination marketing organizations looking for
mechanisms to attract clients (Bonn et al., 2005; Sirgy and Su, 2000), it is no wonder that
events are a key element in destination strategy (Kim and Chalip, 2004). Not for nothing is
the management and marketing of events regarded as a critical area of research for tourism
(Tkaczynski and Rundle-Thiele, 2010), and a large number of studies have been carried out
specifically on mega-events (Delpy-Neirotti et al., 2001). These are large hyped events of
world importance that are held with the expectation of having a major positive impact on the
image of the host destination (Bramwell, 1997). In this regard, Ritchie (1984) and Ritchie and
Aitken (1985) indicate that mega-events increase awareness of the region as a destination,
help position it and improve its long-term future prosperity by increasing economic activity
and creating new jobs; and, as Dwyer et al. (2005) plainly suggest, they help “put a city on
the map”. Among them, sports events stand out. In fact, Higham and Hinch (2002) identify
sports tourism as one of the fastest growing sectors in the contemporary tourism industry,
where sport event tourism plays a significant role (Funk and Bruun, 2007).
This special interest tourism, in which people “participate in a sports activity,
recreationally or competitively, travel to observe sport at grassroots or elite level, and travel
to visit a sports attraction” (Delpy-Neirotti, 2003) has received a great deal of attention from
academics and decision-makers (Lee and Taylor, 2005; Tassiopoulos and Haydam, 2008).
This is because of its ability to help re-image destinations (Smith, 2005), but especially
because of its high income-generating capacity and its major economic impact on the
economy of the region (Daniels et al., 2004; Dwyer et al., 2006; Lee et al., 2010); in fact, it is
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considered a multi-billion global business (Tassiopoulos and Haydam, 2008). This explains
why high-profile sport events are strategically included in the marketing plans of tourism
destinations (Gibson, 1998).
In this context, along with the Olympic Games, the other international sports event
that garners much of the attention is the FIFA World Cup. Categorized as a hallmark event
(Kim et al., 2006), this mega sports event generates a myriad of tourists, creates immense
publicity in the media and, as Lee and Taylor (2005) point out, showcases the host location;
all of which help raise knowledge of the destination (Lee et al., 2005).
Paralleling the large number of studies on mega-events, tourism literature has
analyzed —besides the usual impact analysis (e.g. Samsung Economic Research Institute
(2002))— several facets of World Cup events (Lee et al., 2010), such as tourist motivations to
attend (Kim and Chalip, 2004), residents’ perception of its impact (Kim and Petrick, 2005;
Kim et al., 2006), the environmental impacts (Collins et al., 2009) or the capacity of the event
to help change the image of the destination (Kim and Morrison, 2005).
Certainly, a hallmark event such as the World Cup is designed to enhance the
awareness, appeal, and profitability of a tourism destination in the short and/or long term
(Ritchie, 1984), as well as advertise products to a global audience and leverage business
opportunities in export and new investments (Barney et al., 2002). In this respect, all the
analyses have obviously revolved around the country hosting the event, attempting to find the
benefits of holding the World Cup for the destination.
However, there is a lack of research on the World Cup winner; that is, how beneficial
in tourism terms is it for the country that wins the World Cup? In a way, one can think of the
winning team as a publicized product derived from the event; but here, the team represents a
country, i.e. a destination. Therefore, the crucial question is: is winning the World Cup going
to have an effect on the tourism industry of the winning national team? This article
complements prior research by attempting to answer this question. With this purpose, Section
two reviews the relationship between winning the World Cup and the variation in the tourism
market value, Section three describes the research design, covering the method and data used
and the results obtained, and Section four shows the conclusions.
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2. THE EFFECT OF WINNING THE WORLD CUP ON THE TOURISM MARKET
VALUE
Several teams compete in the World Cup, but only one is crowned with a golden halo
(arrow 1 in Figure 1). According to Figure 1, and as justified below, we expect that this
golden halo will have a positive effect on the winning country’s tourism market value via
brand knowledge enhancement of the country as a destination (arrow 2). The sources of this
positive effect, based mainly on the components of brand knowledge, are discussed in detail
below; a discussion that will be guided by the relationships depicted in Figure 1 (note that the
purpose of this figure is to outline -not to test- the relationships).
Brand knowledge is comprised of two basic elements (Keller, 1993): brand awareness
(arrow 3) -which in turn implies brand recognition and brand recall-, and brand image (arrow
4) -which is determined by the different associations an individual links to the brand-. These
concepts are reviewed and applied to the World Cup context.
“Insert Figure 1 about here”
In accordance with the Associative Network Memory Theory, information is held in
the memory through an interrelated structure of “cognitive networks”, in which each
cognitive network has various “nodes” and “links” between nodes (Collins and Loftus, 1975).
For the case of any country, say Spain, the cognitive network of brand "Spain" consists of a
number of concept nodes and links, and according to this theory, these nodes contain a
variety of associations, such as attributes, experiences, and evaluations related to Spain. In
this theoretical context, winning the World Cup is a concept node that has become associated
with Spain (i.e., the brand), and the link between the World Cup winning team and its country
is very strong.
Certainly, the connection of the winning team to the destination brand is very high,
both quantitatively and qualitatively. In quantitative terms, i.e. how much information an
individual receives when encoding it, the FIFA World Cup is a global news-generating sports
event that creates huge media attention; there is no denying that the hype generated around
the World Cup is gargantuan (Court and Lupton, 1997; Gartner and Shen, 1992; Govers et
al., 2007). In qualitative terms, i.e. what an individual thinks of the information received, the
effect created by the champion of a FIFA World Cup is unparalleled. Note that soccer, apart
from being the world’s most popular sport, has millions of people enthralled constantly1; as is
1 The relevance of soccer as an all-year-round professional sport activity has not gone unnoticed for researchers,
who have examined the phenomenon from different perspectives, such as: the design of the UEFA Champions
League (Scarf et al., 2009), the adequate season schedule (Drexl and Knust, 2007; Ramussen, 2008), the
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often stated “soccer is much more than just a game”, sometimes possessing the traits of a
global religion (Carlin, 2004), with clubs having players become stars as if they were
Hollywood actors and with millions of fans around the globe following the team as well as
the players. Having said this, it does not seem to be trivial for a destination brand to be linked
with a first-class soccer team, as emotions aroused for the latter could be transferred to the
former. These quantitative and qualitative strengths increase the probability of node
activation, making the information more accessible in people’s memory and facilitating its
retrieval; that is, enhancing what Keller (1993) calls “spreading activation”.
Thus, winning the World Cup becomes a secondary association for Spain, and this
secondary association is both favorable (the association of the winning team with the country
as a destination leads people to look for benefits, especially experiential and symbolic
benefits, that can be obtained from visiting this destination) and unique (few things are more
unique and differential than winning a World Cup). Irrespective of individual tastes in sports,
it is a fact that the winner, as stated previously, is crowned with a golden halo.
Hence, on the one hand, winning the World Cup can notably help build a positive
image that identifies and differentiates the destination brand (Baloglu and Brinberg, 1997;
Cai, 2002; Mackay and Fesenmaier, 2000), which in turn, can influence consumer
evaluations of the brand and, consequently, brand choice (Woodside and Lysonski, 1989).
And, on the other hand, the awareness of the brand “Spain” after the 2010 World Cup is
enhanced. The brand will be evoked under many different situations or circumstances much
more easily and more frequently after this landmark victory, increasing “consumers’ ability
to confirm prior exposure to the brand when given the brand as a cue”, i.e. brand recognition
(Keller, 1993) and reinforcing “consumers’ ability to retrieve the brand when given the
product category”, i.e. brand recall (Keller, 1993). Thus, when considering a list of possible
vacation countries, the winning country will be recognized on that list, and more importantly,
it is more likely to be recalled when forming the list. Remember that, in line with Nedungadi
(1990), increasing brand awareness raises the likelihood of being part of the individual’s
consideration set and, consequently, of being selected as a destination.
At this point, the central question in this World Cup context is: Does the enhanced
brand knowledge of the destination have an impact on the tourism firms’ market value?
Defining firm market value as the wealth created by a firm measured by its market
application of game-theoretic principles to the strategic behavior of soccer teams (Dobson and Goddard, 2010),
or the analysis of efficiency in teams’ performance (Boscá et al., 2009).
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capitalization (Joshi and Hanssens, 2010), we expect that the World Cup victory will have a
twofold positive effect on the winning country’s tourism market value via destination brand
knowledge enhancement through both tangible and intangible components. Firm value is
comprised of tangible and intangible values, the former including elements such as sales and
profits and the latter encompassing components such as brand equity (Simon and Sullivan,
1993).
Regarding the tangible components -sales and profits-, note that as justified before: i)
the enhanced destination brand awareness implies that the winning country will not only be
recognized on a list of potential destinations but will also be recalled when making that list;
and ii) the favorability, strength and uniqueness of the associations elicited will form a
positive image. The consequence of this is an increment in the likelihood of the destination
being part of the individual’s consideration set and, consequently, of being selected as a
vacation destination (arrow 5). This increase in potential tourists should bring about a rise in
sales (arrow 6) and profits (arrow 7) on the part of tourism companies, which would represent
an increase in the tangible part of the firm value (arrow 8).
Concerning the intangible component of firm value -brand equity-. Keller (1993)
defines customer-based brand equity as the “differential effect of brand knowledge on
consumer response to the marketing of the brand”. Derived from this definition, one can
observe that brand recognition and brand recall, together with the favorable, strong and
unique associations have a direct impact on the destination’s brand equity. Simply put,
destination brand knowledge directly affects brand equity (arrow 9). At this point, the critical
question is whether this positive effect of destination brand knowledge on destination brand
equity also has an impact on the tourism firms’ market value.
Joshi and Hanssens (2010) suggest that any action creating brand-related intangible
assets should positively affect firm value. These authors explain this impact through a
spillover effect, in which the brand equity created through marketing activities can spill over
into investment behavior; and through a signaling effect, in which this equity enhancement
can help reduce uncertainty (Tsao et al., 2006). It is important to note that in our article, it is
not individual firms that are investing specifically in the event: remember that it is not a case
of sponsorship or celebrity endorsers and that this is precisely what positions this study
relative to the existing body of knowledge and fills this gap. Rather, it is the umbrella brand
of individual tourism firms that is gaining brand knowledge. Nevertheless, insofar as the
umbrella brand strategy seeks to effectively and efficiently promote multiple products with a
single marketing program (Erdem, 1998) and, according to Wernerfelt’s (1988) signaling
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theory, attempts to reduce uncertainty, it is evident that each individual brand under the
umbrella brand can benefit from this brand knowledge enhancement. Obviously, each firm
will make the most of this opportunity depending on its individual resources, but in general,
all of them can potentially benefit, with expected increases to their individual market value
(arrow 10).
Note that, as the analysis is based on the firm’s market value, we have to focus on
companies trading on the Spanish stock market. It means that we are analyzing strong names
for which the spillover is more likely to exist2; this assertion is made on account of Frieder
and Subrahmanyams (2005) conclusions that investors are more probable to favor high-
profile firms. These authors suggest that shareholders tend to invest in assets whose names
are widely recognized so that they can reduce uncertainty. Also, the fact that these companies
are leaders in their industries (airline and hotel, to be precise), it implies that, among all the
available competing alternatives, potential tourists should tend to favor these well-known
brands. That is, once they have chosen to travel to Spain, when it comes to the transportation
and accommodation decisions, these brands should be positioned high on people’s mind or, at
the very least, they should be included in their evoked set. Either way would enhance the
likelihood of being selected. On account of all of this, the central hypothesis is as follows:
H.1. Winning the FIFA World Cup has a positive effect on the country’s tourism
market value.
As a refinement of this hypothesis, we test for the existence of asymmetric shifts in
market value depending on each match’s results. Assuming that a relationship between sports
and business results exists on account of the previous arguments, a natural question arises:
which is bigger, the increment in market value as a result of winning a match or the reduction
in market value as a consequence of losing it? To answer this question, we follow Kahneman
and Tversky’s (1979) Prospect Theory; in particular, its well-known loss aversion property,
which has been notably analyzed, and theoretically and experimentally supported by research
(e.g. Bell and Latin, 2000; Klapper et al, 2005; Lahdelma and Saminen, 2009; Wang and
Webster, 2009). Loss aversion implies that people are more sensitive to losses than to gains.
In this regard, this theory predicts that the absolute level of the change in demand due to a
loss is greater than the corresponding impact of an equal gain. Paralleling this argument, the
2 Myers’ (2010) example of the spillover effect from a psychological standpoint fits in this context. He literally
says that “arousal from a soccer match can fuel anger”, which can lead to non-appropriate behaviors. Of course,
in this example, this author talks about negative feelings, but from a financial point of view, we can extrapolate
this “arousal” from soccer results to investors, bringing about either a positive or a negative reaction depending
on such results.
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negative impact on firm value derived from losing a match by a certain number of goals
should be bigger than the positive impact from winning by the same number of goals. In
other words, the result of a match in the World Cup is expected to have asymmetrical effects
in such a way that lost matches have greater impact on tourist firm value than won matches,
even if the goal difference, be it negative or positive, is the same. Remember that, as the
popular saying goes, “soccer raises passions”, so the disappointment of a lost match is likely
to be greater than the joy of winning it; and these psychological outcomes might affect the
aforementioned brand associations. Accordingly, we state the following hypothesis:
H.2. The result of a World Cup soccer match has asymmetrical effects in such a way
that lost matches have greater impact on firm value than won matches, even if the goal
difference, be it negative or positive, is the same.
3. RESEARCH DESIGN
3.1. Method and data
To analyze the effect of the outcome of the World Cup on tourism market value we
follow a two-stage process: i) selection of the market model specification that best fits the
return series; and ii) estimation of the abnormal returns derived from World Cup results.
Selection of the market model specification
We use the market model of Sharpe (1963, 1964) as it allows us to calculate the
variation in share prices on any given day. By using this model, we can estimate the normal
returns that are expected when there is no other relevant information available, by means of
the following expression:
itmtiiit RR
(1)
in which Rit represents the returns on the firm’s share i on day t, and Rmt is the rate of returns
on the market portfolio on day t. The parameters
i and
i represent the constant and the
systematic risk on share i, respectively, and
it is the error term.
The existence of kurtosis and heteroskedasticity in the error term, which are detected
in various empirical applications, would lead to defective estimates (Morgan and Morgan,
1987; Connolly and McMillan, 1989). For this reason, we estimate autoregressive conditional
heteroskedasticity models to find the one that best fits the return series. The main purpose of
the autoregressive conditional heteroskedasticity models considered is to model the
conditional variance of returns. Such models distinguish between unconditional variance,
which is constant and stationary, and conditional variance, which is modified by the available
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information. The specific models appraised here are the symmetric models, ARCH by Engle
(1982) and GARCH by Bollerslev (1986), and the asymmetric models, EGARCH by Nelson
(1990) and TGARCH by Glosten et al. (1993) and Zakoïan (1994).
A symmetric model assumes that the effect of new information on the variance is
independent of its sign. Thus, letting p be the number of lags, returns defined by means of an
ARCH(p) model are obtained by the expression (1) where
ititit h
2/1
and
it/
it-1,
it-2,...N(0, hit)
being
it i.i.d. with E(
it)=0 and E(
2it)=1
In this context, hit is the conditional variance and is represented as
p
j
jitijiit ch
1
2
(2)
where ci and
ij are parameters to be estimated.
The generalization of this model gives rise to GARCH(p,q) models, where q is the
number of lags of the autoregressive part. In this case, the conditional variance is expressed
as
q
k
kitik
p
j
jitijiit hch
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2
(3)
However, returns can sometimes show a different degree of sensitivity in the face of
good or bad events. Considering such possible asymmetry, other generalizations have been
proposed. The first of these is the EGARCH(p,q) model, in which the conditional variance is
p
j
q
k
kitik
jit
jt
ij
jit
jt
ijiit h
hh
ch
1 1
2/12/1 )ln(exp
(4)
and finally, the TGARCH(p,q) model, whose conditional variance is represented by the
expression
q
k
kitikitit
p
j
ijitijiit hDch
1
1
2
1
1
2
(5)
where 1
1
it
D if 0
1
it
and 0
1
it
D otherwise.
To estimate these models the maximum likelihood method is used. The selection of
the best model is made by employing Akaike’s Information Criteria, defined as AIC=-
2log(LML)/M +2k/M, in which LML represents the likelihood function, M is the number of
observations and k the number of parameters in the model. This measure, apart from
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considering the likelihood function, takes the parsimony of the model into account by
adjusting for the number of parameters, which are considered as a penalty. According to the
way AIC is defined, the model with the lowest value will be preferred.
Estimation of the abnormal returns
To estimate the abnormal returns derived from the World Cup results, we rely on
Karafiath’s (1988) alternative event methodology. We have to resort to this, rather than the
traditional two-step event-study methodology3, because of the closeness of our events: the
Spanish National team played seven matches in just eighteen days. It would not be
appropriate to use an estimation period for each event, as it would imply dealing with
estimation periods that are full of events. In other words, if an estimation period is used to get
normal returns, it has to be clear of abnormal returns; otherwise, the estimation of
i and
i
would be spurious, and the estimation of the abnormal returns of a given event would be
affected by the abnormal returns of preceding consecutive events. However, Karafiath (1988)
indicates, and Norton and Pettengill (1998) corroborate, that the results usually obtained in
the traditional two steps can be obtained in a single multiple regression. In fact, Karafiath’s
proposal consists of appending a vector of dummy variables to the right-hand side of the
market model.
To analyze the effect of the results in the World Cup final a dummy variable DitF is
defined that takes a value of 1 during the eighteen trading days after the final4. The model is
as follows:
ititFimtiiit DRR
(6)
where
i is a parameter that will be positive if the victory has a positive effect.
As we are also interested in the abnormal returns derived from each match result, we
build a second model and introduce in expression (1) the dummy variable Dit, which indicates
the first two trading days5 after the match on day t and two result variables: WINt and LOSSt.
Calling GFt goals for (goals the team has scored) and GAt goals against (goals the team has
conceded), these two variables WINt and LOSSt are defined as follows:
WINt=(GFt-GAt)DW, where DW=1 if GFt-GAt>0 and DW=0 otherwise.
LOSSt=(GFt-GAt)DL, where DL=1 if GFt-GAt<0 and DL=0 otherwise.
3 In the two-step process, one first estimates the market model in a pre-event estimation period to predict normal
returns, and then, in a second step, one finds abnormal returns in an event window by observing the difference
between actual and expected returns.
4 We use this period to balance the statistical test since the number of days between the first match in the World
Cup and the Final match is eighteen; so, we compare the eighteen days prior to the final with the eighteen days
after it.
5 Two days is the maximum number of days we can analyze between matches without overlapping.
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The final market model is:
itittiittimtiiit DLOSSDWINRR
(7)
Loss aversion will be detected if
i/
i>1, i.e. if the parameter associated with the goal
difference in a defeat is greater than the parameter related to the goal difference in a victory.
The empirical application is applied to two sub-sectors within the tourism industry:
airlines and hotels. More concretely, we study the leading companies in each sub-sector in
Spain: Iberia and Sol Meliá, respectively. The raw data is the daily returns on the firms
during the sports event. Returns are adjusted by dividends, capital increases and splits, so that
they are expressed by Rit=Ln(PtSFt+rt+dt)-LnPt-1, where Pt is the price, SFt the split factor, rt
the subscription right and dt the dividend paid, all of which refer to day t. As a proxy of the
market portfolio Rmt, the IBEX-35 index is used, which is a representative index of the
Spanish Stock Market. The data is obtained from the Spanish Stock Exchange Society. For
the analysis of the effect of the World Cup final on the industry’s market value, we build an
aggregate return measure formed by the average of the two companies’ daily returns; and for
the analysis of the differentiate effect of won and lost World Cup matches on firm value, we
analyze each company’s market value independently to detect potential distinct effects. The
Spanish team’s results for the matches during the study period are obtained from the website
www.2010mundialfutbol.com/.
3.2. Results
The first step in the analysis is the selection of the market model specification that
best fits the return series. Table 1 shows each model’s fit. According to the Akaike
Information Criteria, for the analysis of the effect of winning the World Cup final, the
specification which appears to be optimum is the EGARCH(1,1), and for the effect of the
match results, the EGARCH(1,1) for Iberia and the EGARCH(1,3) for Sol Meliá (see figures
in bold in Table 1).
“Insert Table 1 about here”
Once the model that best fits the return series has been determined, we proceed, in the
second stage, to estimate the abnormal returns. Table 2 presents the parameter estimates for
the effect of winning the World Cup final. We observe that the systematic risk -or beta of the
stock- is 0.93, which is quite close to one, implying that it moves at a rate similar to the
market rate. Given that this is an indicator of the stock’s price volatility in relation to the rest
of the market, this close-to-one beta means similar price volatility to the market and,
therefore, similar risk. Regarding the parameter of interest, we find a significantly positive
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parameter for the dummy variable DitF , which represents abnormal returns for the eighteen
days after Spain winning the World Cup final; thus, Hypothesis 1 that winning the FIFA
World Cup has a positive effect on the country’s tourism market value cannot be rejected, as
a World Cup victory seems to have a positive effect on the winning country’s tourism market
value via destination brand knowledge enhancement through tangible and intangible
components, in line with Joshi and Hanssens (2010).
“Insert Table 2 about here”
Table 3 shows the effects of winning or losing a match in the World Cup on each firm
value. We observe that Iberia’s systematic risk (beta) is around 0.66, thus it moves at a rate of
about half the market rate, i.e., this less-than-one beta implies less price volatility than the
market and, therefore, less risk (specifically, about half that of the market). For the case of
Sol Meliá, the systematic risk is 1.32, meaning that it moves at a higher rate than the market
rate, involving more price volatility than the market and, therefore, more risk.
As for the parameters of interest, we find -for both Iberia and Sol Meliá- the expected
positive and significant parameters for both variables “won match x goal difference” and
“lost match x goal difference”, meaning that if the National team wins (loses) a World Cup
match, the company returns increase (decrease); thus, winning enhances firm value and
losing diminishes it. These results mean that the effect on tourism firm value is not only
contingent upon the result of the Final, but also upon the results of the matches leading up to
it.
As for Hypothesis 2, we look at the difference between both parameters. For Iberia,
this difference is not statistically significant (Wald test’s Chi-square= 1.552; p<0.282), and
for Sol Meliá, it is statistically significant (Wald test’s Chi-square= 9.587; p<0.001), the two
Sol Meliá parameters reach a ratio of 4.843 (
/
=4.843>1). With the Sol Meliá ratio being
greater than one, loss aversion is observed; therefore, we can only accept Hypothesis 2 for
this company. It means that the result of a match has asymmetrical effects on firm value;
specifically, lost matches have greater impact on it than won matches even if the goal
difference, be it negative or positive, is the same. In other words, the negative impact on the
firm value derived from losing a match by one goal is about five times the positive impact
from winning by one goal. This difference in results -Sol Meliá showing asymmetrical effects
and Iberia having symmetrical effects- can be a consequence of the fact that Sol Meliá is
perceived as riskier than Iberia on account of their betas (
Sol Meliá=1.328>
Iberia=0.664), so
bad news items (losing a match) will be perceived as worse for the former than for the latter.
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“Insert Table 3 about here”
The economic impact of winning or losing is illustrated as follows: for an average
sample market value of €2,236,247,381 for Iberia and €1,019,284,135 for Sol Meliá (the
result of multiplying the number of shares by their share price), positive abnormal returns of
0.27% and 0.32% respectively, derived from a win match suppose an increase in market
value of €6,037,867 for Iberia and €3,261,709 for Sol Meliá, in only two days; for a lost
match, negative abnormal returns of 0.17% and 1.55% represent a decrease in market value
of €3,801,620 for Iberia and €15,798,904 for Sol Meliá.
One final test is necessary to confirm these results. Edmans et al. (2007) suggest that
shareholders’ sports sentiment can affect stock returns in such a way that the level of
excitement of shareholders could influence them. Therefore, we need to test that these
sentiments are not driving the reactions in the tourism market value we have detected. If
shareholders’ sentiment and excitement about the World Cup were affecting the reactions in
share price, the movement in prices would be common for the entire Spanish Stock Market.
We perform three Anova tests to find: i) whether there is a positive reaction in the whole
Spanish market eighteen days after the final match; ii) whether the Spanish market reacts
positively over the two days following a won match; and iii) whether the Spanish market
reacts negatively over the two days following a lost match.
We use the IBEX-35 index as a measure of the whole Spanish Stock Market. We find
that none of the above three tests are statistically significant. Specifically, we obtain the
following statistics for the respective Anova tests: F=0.001 (p<0.976), F=0.896 (p<0.356)
and F=0.086 (p<0.773). Consequently, no general reaction -either positive or negative- of the
Spanish Stock Market is found and, thus, sentiment and excitement derived from the World
Cup do not seem to be driving the evolution of prices.
In conclusion, although there are no general reactions in the Spanish Stock Market,
either during the World Cup or after it, we do find specific reactions in the tourism industry,
both “during” and “after”, on account of the awareness and associations that the champions
of this tournament, “Spain’s La Roja”, can bring about towards the brand of its country as a
tourism destination.
4. CONCLUSIONS
FIFA World Cups are hyped events of world importance that are expected to
positively impact on the knowledge of the host destination brand and, in this regard, the
literature has focused on analyzing different issues around the country hosting the event, in
15
an attempt to observe whether the event has been good or not -and by how much- for the
destination. Based on this event, this article looks at the World Cup winner and the
consequences on its country’s tourism industry. On account of the repercussions of winning
this tournament, the link between the World Cup winning team and its country is strong, and
the awareness of the brand “Spain” after the 2010 World Cup is enhanced. It implies that the
brand will be evoked more easily and more frequently, increasing its recognition and recall.
Moreover, in a high involvement decision framework like tourism, the characteristics of
brand associations, i.e. favorability (especially in terms of expected experiential and symbolic
benefits), strength (both quantitative and qualitative) and uniqueness (few things are more
unique and differential than winning a World Cup), play a particularly relevant role in
enhancing brand knowledge. Additionally, the country’s name enjoys secondary associations
and gets the advantages of sponsorship activities and celebrity endorsers without the large
expenses that these strategies usually imply. Consequently, there should be an increment in
the likelihood of the destination being part of the individual’s consideration set and,
consequently, of being selected as a vacation destination, producing a rise in sales and profits,
which would represent an increase in the tangible part of the tourism firms’ market value.
Likewise, there is also an increase in the intangible component of these tourism firms’ value,
via the enhancement of their umbrella brand equity.
The empirical analysis designed to test this relationship is based on the victory of the
Spanish National soccer team in the 2010 FIFA World Cup and is applied to the two most
prominent Spanish tourism firms (Iberia and Sol Meliá), which are paradigmatic examples
within airlines and hotel chains, respectively. We find a significant increase in the tourism
industry’s market value as a consequence of Spain winning the cup, because of the
aforementioned positive effect of brand knowledge on firm value. Also interesting is the fact
that not only does winning the cup have an effect on the tourism market value but that
individual World Cup matches have an influence on firm value as well. Note, however, that
while for both companies, winning enhances their firm values and losing diminishes them,
for Sol Meliá these increases and decreases are asymmetric, providing evidence of loss
aversion; i.e., lost matches have greater impact on its market value than won matches even if
the goal difference, be it negative or positive, is the same. This raises the issue of
heterogeneity in the response and thus, each firm’s characteristics need to be considered. For
this case, with Sol Meliá being perceived as riskier and more volatile (on account of its beta),
bad news items (losing a match) will also be perceived as worse.
16
The findings have relevant managerial implications for both destination managers and
tourism firms operating in these destinations:
i) Firm value has traditionally been used to evaluate and judge managerial decisions,
but this article shows that it can also be used to measure external factors that are not even
management-related but that can have an effect on firm wealth.
ii) Even though the event assessed is not management-related, it affects intangible
assets; note that a large proportion of the value of today’s firms is formed by intangible
assets, so a way to capture any effects on them is the use of a forward-looking measure such
as the firm’s market value (rather than a backward-looking measure like traditional
accounting-based returns on investment).
iii) The results obtained show the importance of building umbrella brand equity for
the tourism industry, as the enhancement of the umbrella brand knowledge is transferred to
the individual brands. Evidently, this is the purpose of building such a brand type, but this
article shows additional evidence of the existence of this type of transfer, so managers can
still trust the umbrella brand strategy.
iv) In line with umbrella branding, it is important to note that today it is usual to find
regions interested in attaching a brand element of sport to their destination marketing profile
(Kim and Chalip, 2004), usually through sponsorship activities. These actions are generally
initiated by public entities in charge of tourism promotion but, according to the findings, they
must be supported by private tourism organizations. This is especially relevant for tourism
firms since, as has been shown, the specific reactions in the tourism industry are greater than
those of the general market. Moreover, it is important to remember the singularity of this
differentiation; i.e. this attribute “having a champion team associated to a destination” is not
easy to copy (in fact, there is only one at any given time) and, therefore, the destination as
well as the tourism firms operating in it, hold a unique competitive advantage. In a recent
interview, Joan Gaspart, former president of the renowned soccer club F.C. Barcelona and
chairman of a Spanish hotel group HUSA explicitly suggests that tourism firms operating in a
region whose main soccer team plays in the first tier (e.g. the “Premier League” in England,
the “Primera División” in Spain, the “Bundesliga” in Germany or the “Serie A” in Italy)
should regard the “decision to support the team as a very intelligent investment” (Diario
Información, 2010). Certainly, at the very least, and paraphrasing Dwyer et al. (2005), it
would help put the region on the map.
v) Spanish tourism firms have to take advantage of the brand recognition and brand
recall as well as the associations that brand Spain currently enjoys. No matter how easy and
17
potentially retrievable from memory the information is, tourism firms should use reminders
that keep linking the soccer victory to the country as a destination to retain it in the
individual’s consideration set.
vi) Finally, the brand equity reached should be kept as long as possible. Note that,
while in the short-term, the expected inclusion of the destination Spain in the consideration
set and its effects on sales can be accentuated by the recentness of the victory, in the long-
term, it is the brand equity the element that will facilitate the inclusion of the brand in the
consideration set (arrow 11) and will lead to increased sales (arrow 12). On this account,
sustainability is a critical aspect to maintain destination brand equity in this context: not only
do the destinations have to promote their sustainable use but they also have to be aware that
their brand equity is formed by individuals’ perceptions about the destination sustainability.
As people become more and more conscious about the natural environment, they will tend to
favor destinations that take this aspect into account. The environment issue is relevant in all
types of industries; in tourism, however, it is especially important as the environment is a
facet of the tourism product itself and, therefore, it helps build the destination brand equity.
Hence, firms and entities managing these products are expected to act responsibly as
externalities are particularly manifested.
An important limitation of the study is that the effect may not be universal on all
Spanish tourism organizations. As stated previously, we focus on quoted companies, so, the
observed effects can be associated with the organizations’ prominence linked to this well-
known firms.
A further research possibility is the analysis of the winners in other sports. Certainly,
soccer has unique characteristics, being an engrossing sport with all its Hollywood-like
superstar players, but can these results be obtained in other sports? If so, it would broaden
managers’ room for maneuver as it would not be restricted to just one sport. Another future
line of research is to assess which strategy has more impact: providing financial support to an
umbrella brand that has a sports team linked to its name (as in this case) or traditional
sponsorship, in which the company provides support directly to the team. Also, it would be
interesting to analyze if such a victory also brings about changes in the volatility of the firm’s
market value, which in essence would lead us to find out whether there is a reduction in the
firm risk. Finally, it would be appropriate to investigate whether these findings hold in other
soccer championships such as the UEFA Champions League for the top clubs in the
European national leagues or the FIFA Club World Cup for the champion clubs from the six
soccer confederations, with clear implications for the tourism firms located in the city the
18
winning club belongs to. This would be especially interesting for the Spanish case: note that
the awareness of Spain as a soccer power might already be present in relation to the continual
successes of Barça and Real Madrid. However, the strength of the national team win in the
World Cup might be to see "Spain" as a more universal brand as opposed to the two regions
represented in the two giant Spanish clubs. Consequently, it would be compelling to check
whether the impact of soccer championship victories on tourism firm’s market value is
contingent upon national vs. regional character of the team.
19
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23
Table 1. Selection of the model specification
Model
Iberia & Sol Meliá model
(after World Cup Final)
AIC
Iberia
(during World Cup)
AIC
Sol Meliá
(during World Cup)
AIC
OLS
-
4.953
-4.868
-
4.594
ARCH (1)
-
4.
859
-
4.668
-
4.423
ARCH (1,1)
-
4.887
-
4.700
-
4.449
ARCH (2,1)
-
4.839
-
4.555
-
4.265
ARCH (2,2)
-
4.764
-
4.506
-
4.355
ARCH (1,2)
-
4.809
-
4.577
-
4.345
ARCH (3,2)
-
4.747
-
4.392
-
4.358
ARCH (3,3)
-
4.675
-
4.261
-
4.276
ARCH (2,3)
-
4.706
-
4.451
-
4.260
ARCH (
3,1)
-
4.769
-
4.487
-
4.464
ARCH (1,3)
-
4.859
-
4.439
-
4.207
ARCH (4,4)
-
4.582
-
4.140
-
4.317
EGARCH (1,1)
-5.112 -5.375
-
4.624
EGARCH (2,1)
-
4.820
-
5.051
-
5.116
EGARCH (2,2)
-
4.751
-
5.109
-
5.054
EGARCH (1,2)
-
5.049
-
5.163
-
5.298
EGARCH (3,2)
-
4.911
-
4.
703
-
5.056
EGARCH (3,3)
-
4.855
-
4.627
-
5.105
EGARCH (2,3)
-
4.954
-
5.103
-
5.205
EGARCH (3,1)
-
4.996
-
4.902
-
4.994
EGARCH (1,3)
-
4.980
-
5.120
-5.307
EGARCH (4,4)
-
4.692
-
4.504
-
4.878
TGARCH (1,1)
-
4.933
-
4.820
-
4.392
TGARCH (2,1)
-
4.860
-
4.648
-
4.223
TGARCH (2,2)
-
4.798
-
4.714
-
4.200
TGARCH (1,2)
-
4.828
-
4.685
-
4.241
TGARCH (3,2)
-
4.770
-
4.515
-
4.152
TGARCH (3,3)
-
4.663
-
4.519
-
4.326
TGARCH (2,3)
-
4.744
-
4.596
-
4.156
TGARCH (3,1)
-
4.802
-
4.619
-
4.612
TGARCH (1,3)
-
4.783
-
4.613
-
4.185
TGARCH (4,
4)
-
4.548
-
4.307
-
4.165
24
Table 2. Effect of Winning the World Cup Final on “Iberia & Sol Meliá” market value
Rm DitF c
1
1
1 R-
squared
Parameters 0.933
(0.065)
0.010
(0.001)
-0.002
(0.00006)
-15.843
(0.434)
0.898
(0.300)
-0.420
(0.1
23)
-0.819
(0.000)
0.409
z
-
statistic
14.193
5.173
-
41.639
-
36.482
2.984
-
3.419
-
20.518
25
Table 3. Effect of World Cup match results on firm value
Variables Equation 1
Iberia
Equation 2
Sol Meliá
Parameters
z
-
statistic
Parameters
z
-
statistic
Market portfolio
(Rm)
0.664
(0.006)
109.685 1.339
(0.042)
31.54
Goal difference x Won match
(WIN)
0.0027
(0.00006)
4.386 0.0036
(0.001)
3.519
Goal difference x Lost match
(LOSS)
0.0017
(0.0002)
6.000 0.0157
(0.004)
3.555
-0.0086
(0.0002)
-29.561 0.0049
(0.001)
3.589
c -7.057
(1.212)
-5.823 -6.222
(1.476)
-4.214
1 -2.371
(0.804)
-2.948 -2.361
(1.883)
-1.253
1 -1.496
(0.227)
-6.582 1.561c
(0.608)
2.566
1 -0.057
(0.111)
-0.518 0.549
(0.138)
3.980
2 -0.385b
(0.128)
-3.002
3 -0.073
(0.106)
-0.688
R-squared
0.452
0.229
26
Figure 1. Relationships between the World Cup winner and the tourism market value
FIFA
World Cup
Team
1
Team
2
Team
n-1
Winning team
with a golden
halo
Brand knowledge
of the winning
country
Brand awareness:
- Recognition
- Recall
Brand image:
- Associations (experiential
and symbolic benefits)
- Secondary Associations
Team
n
… …
1
2
3
4
5
9
Consideration set
Destination 1
Destination 2
Winning country
destination
…
Destination m-1
Destination m
Umbrella brand
equity of the
winning country
destination
Sales
Profits
Tourism firms’
market value
6
7
8
10
11
12
