New study: What was the hosting of the Tour de France in 2022 worth to the Danes?

It's been a year since the world's most prestigious cycling race, the Tour de France, passed through Denmark. While proponents of hosting major sporting events typically argue that such events boost the local or national economy, there is a broad consensus among researchers that hosting major sporting events is rarely beneficial to the economy because they typically shift resources away from more productive societal activities.

While sporting events don't usually produce positive, tangible economic effects, they can still be a source of 'utility' among citizens. Firstly, it creates value for citizens who take the opportunity to visit one or more of the Danish Tour de France stages. On the other hand, all citizens have the opportunity to enjoy any intangible effects such as joy, unity, identity and/or prestige that sporting events can also create.

Study estimates the willingness to pay

In a new study, Christian Gjersing Nielsen, senior analyst at the Danish Institute for Sports Studies and PhD student at the Department of Sociology, Environmental and Business Economics at SDU, together with Arne Feddersen, Professor at the Department of Sociology, Environmental and Business Economics at SDU, have examined the value of the 2022 Tour de France hosting for the Danish population in terms of willingness to pay.

The study has recently been published in the journal Sports Economics Review.

The study uses the survey technique 'contingent valuation', where respondents are asked to make purchasing decisions in a hypothetical market: Participants are presented with a scenario where they have to imagine that due to price increases caused by the corona pandemic and the postponement of the Danish Tour de France from 2021 to 2022, a gap in the budget for the Danish Tour de France has been created.

They were then told that the only way to finance the extra costs was to introduce an extra one-off tax on all Danish households, and that the Danish stages would be moved to new destinations in France if there wasn't enough support to implement the extra tax.

Participants were then presented with one of five amounts (randomly selected) that it would cost their household if Denmark were to continue hosting the 2022 Tour de France and asked to vote for or against hosting.

The question participants were asked in the survey was whether they would be willing to pay the amount presented in order to continue hosting the Tour de France in Denmark.

Worth between 95 million and 194 million DKK

Based on the responses to the questionnaire, it is estimated that the almost 2.8 million Danish households were collectively willing to pay between DKK 95-194 million to host the 2022 Tour de France in Denmark, depending on a number of assumptions. The study finds that the most accurate estimate is a willingness to pay DKK 110 million, which corresponds to just over DKK 39 per household in Denmark.

Based on this, the conclusion is that it cannot be ruled out that organizing this type of event - where the costs are 'relatively' modest - can be beneficial, even if the tangible economic benefits are also small, but that it requires a proper cost-benefit analysis to really assess this.

Willingness to pay is influenced by many factors

When Danes are asked about their willingness to pay, there are several factors that influence their answers. Willingness to pay is influenced by both direct consumption - whether you expect to visit one or more stages - and indirect consumption of the Tour de France on TV. Secondly, the study shows that longer distance to the event has a negative impact on the probability of voting for the extra tax, which can partly be attributed to the higher travel costs for Danes living far from the route.

Perhaps surprisingly, living in one of the host municipalities (the start or end of a stage) has a negative effect on willingness to pay. This can probably be attributed to a number of inconveniences caused by the event, such as lockdowns, traffic challenges, less accessibility to other things due to the race, congestion and a perception of too many tourists. However, it should be noted that there are no significant differences between host and non-host municipalities if you do not control for distance to the event. Thus, it seems that the positive aspect of lower travel costs for the population of host municipalities outweighs the negative aspects.

The (important) caveats of the study

In the study, there are some caveats that are important to highlight.

The most important thing is the survey's lack of consequentiality. A survey is consequential if respondents feel that they have the ability to influence the policy decision through their answers and that they may pay the amount of tax they are presented with if the policy is implemented. Conversely, if their answer has no consequences, answering the willingness-to-pay question truthfully is not necessarily a utility-maximizing strategy, and there is a risk of respondents protesting or being strategic in their answers, for example, under- or overstating their true willingness to pay.

Although the study contains a number of control questions aimed at identifying 'protest bids' and strategic bids, the timing - i.e. the fact that the study was conducted after it was decided that Denmark would host the Tour de France - may affect the validity of the results.
Therefore, the article argues that future studies should attempt to estimate the willingness to pay for specific sporting events before a bid is submitted, as this will ensure a high degree of consequentiality and thus a higher degree of validity.

As sporting events are 'experience goods', it should also be noted that there may be a discrepancy between the expected utility before the event and the actual perceived utility after the event.

A third caveat is that the study does not take into account that some Danes experience a negative welfare impact (disutility) from the Danish Tour de France and would have been better off if the race had not been held at all. If the study had also taken negative welfare changes into account, it would reduce the (net) willingness-to-pay estimates.