Dr.Sc.Econ., Professor Y.V. Vertakova¹
PhD, Associate Professor M.G. Klevtsova¹
Dr.Sc.Econ., Professor V.A. Plotnikov^2
1Southwest State University, Kursk
²St. Petersburg State University of Economics, St. Petersburg

Keywords: sport project, region’s image, socio-economic development, international sport events, sport industry.

Background. At the present stage of the national socio-economic development, an increasingly high priority in the regional competitiveness building initiatives is given to region’s image. A favourable image makes it possible for the region to become highly competitive in the struggle for investments and material and human resources and lobby its political and economic interests in the national projects. A good image of a region is commonly acknowledged to notably facilitate its socio-economic development initiatives. Moreover, a good image may be viewed as one of the key instruments to attain the strategic regional missions to give a boost to the major developmental policies including propulsive clustering processes [1-4 et al.].

Success of the region’s image building efforts largely depends on how effective the regional public relations projects are. Public relations are known to play an increasingly high role in the regional economic development processes for the reason that they comprise one of the critical elements of the economic and political control and management system geared to establish effective communication with the partners and communities. The modern PR sector offers a variety of efficient communication tools to keep the relevant communities duly informed and supportive of the sector initiatives, with the choice of one or another communication tool being dependent on the actual purposes of the relevant PR campaign. Ever PR campaign is designed to establish and promote effective public communication to secure due public support for the relevant political, economic or social initiatives.

Large-scale sporting projects and events cannot be successful enough unless supported by efficient PR mechanisms. However, an analysis of the available reference literature shows that effects of the large-scale sporting projects and events supported by the relevant PR campaigns on the host region image are still underexplored as yet [5]. Therefore, the objective of the study was to develop and offer, based on a qualitative and quantitative data analysis, an efficient method to assess economic benefits of large-scale sporting projects and events and their effects on the host region’s image and its socio-economic development projects and progress rates.

Methods and structure of the study. The study included an analysis of the available reference literature of the regional image building and regional development issues and the alternative PR and communication project designs; and an analysis of the available study data and findings on the effects of sporting projects on the host region’s image; with the relevant mathematical toolkit being applied for the of socio-economic progress modelling purposes.

Study results and discussion. Multiple contexts related to the notion of region’s image include the areal branding, commercial advertising, economical, political and other initiatives and domains including the large-scale sporting projects and events that may be provisionally classified into once-only (like Students’ Festival, World Championship etc.) or regular events (like Moscow International Peace Marathon) for the host region [6]. With due regard to the variety of opinions on the subject, region’s image may be generally defined herein for the purposes of the study as the specific aggregate perception or the area by the relevant entities of socio-economic relationships. This characteristic is determined by a variety of the relevant objective criteria including the region’s geographic location, cultural and historical heritage, population density etc. plus the relevant subjective criteria that may be driven by emotional predispositions. It should be noted that attractiveness of the region for economic and business projects and potential immigrants is directly determined by its general image.

It may be pertinent to mention that the objective component of a region’s image may be viewed as a quite inertial one and hardly changeable in a short run; whilst the second, subjective component is much more volatile and, hence, sensitive to the focused efforts of governmental agencies, civil institutions and business entities willing to improve the region’s image to generate one or another benefit.

Our analysis of the relevant social practices and experiences demonstrates the regional images being increasingly sensitive to ambitious sporting projects and events that may be legitimately considered in this context as a kind of the region’s name advancing PR- and marketing campaigns. From the national government viewpoint, sports may be considered a highly valuable tool of government policies and a sound and effective ideological instrument [7].

Furthermore, due consideration is to be given to the ongoing infiltration of the modern market relationship into the national sport sector i.e. its growing commercialisation process [8]. Presently we have good reasons to state that the national sport industry has evolved into a fully-fledged sector of the Russian economy, with the professional sports being increasingly shaped up as new fields of business activity. The sector gives a high priority to the sport marketing subsystem that is designed to plan and implement the sector-specific pricing concepts and promote the relevant ideas, goods and services having direct or indirect impacts on or associations with the professional sport industry – to facilitate the social processes and cater for the individual/ group/ social needs, demands and interests.

Ambitious sport events nowadays are commonly viewed as a unique opportunity for many companies to come up with their projects, technologies and new ideas [9]. In this context, sport events are more often than not considered by the local governments and business communities as promising formats for PR activity, with the due public communication and relations becoming an indispensable component for any corporate sport activity. Increasing importance of the PR activity is widely acknowledged by many governmental agencies, commercial companies and social sector institutions. No less important is the sport-specific marketing services geared to create efficient market opportunities potentially beneficial for the clients and sponsors – conditional on the due resource (financial first of all) being invested in the opportunities.

Economic benefits of the large-scale sports-driven PR projects are getting more and more important in the regional economic development projects [10]. Given hereunder are some findings of the subsector-specific analyses (to explore, among other things, sales of tickets, broadcasting rights, sponsorship and merchandising activities etc.) and macro-analysis to assess the economic benefits of the sport projects for the regional development [11]. Sponsorship, for instance, was estimated to generate 28.8% of the local sport market incomes and, hence, it is the sponsorship activity that is now considered a key driver of the income generation and growth process in the subject sector. It may be pertinent to mention that the global growth of this market component is estimated at 5.3% [per annum]. The sponsorship growth is presently more or less the same the world over, with the lowest growth rate of 4.4% reported for the Asian-Pacific region and the highest of 6.1% for the North American region. Sales of the broadcasting rights comprise the second income category in the sector accounting for 24.1% of the sector market. It should be emphasised that it is the second best subsector in terms of the income growth rate (3.8%) for the sport events on the whole (occasional plus regular) and the first for the regular sport events in particular (6.6%). Merchandising is one more subsector business currently generating the lowest income in the global sport sector: 14.5% [on the global scale] with North America leading in the subsector income estimated at 25.2% of the total sport industry income. No surprise that the North American merchandising market now accounts for 71% of the global market of the merchandising services.

On the whole, we have good reasons to expect further growth of the global sports industry as verified by the data we give herein, albeit it should be noted, first of all, that the sector-specific trends are quite sensitive to a variety of impacts that can even reverse them. Second, in the global and sport-discipline-specific market situation analyses, the analysts often omit some specific aspects that may be of decisive effect on a country or group of countries and, of course, on a specific region. And third, the sector income data are not always well connected with the beneficiaries albeit the sport industry is quite sensitive to the rights, responsibilities and cash flow distribution patterns since such a distribution may both encourage and discourage the regional development process.

Nevertheless, the reported data give the grounds to state that the global sport service market is well developed today with its share in the global economy showing a persistent growth trend and, therefore, its impacts on the other economic sectors need to be taken into account and analysed. This might be one of the reasons for the International Olympic Committee (IOC) recommending the Olympic Games organisers to apply the so-called OGI (Olympic Games Impact) assessment method to rate impacts of the Games on the host cities, region and country [12].

It is only natural for the IOC being interested in the Olympic host cities and countries making progress in their socio-economic development projects as a result of the Olympics and thereby inspiring other potential host cities and nations for hosting the Olympics. This is the way for the IOC to spur competition of the would-be hosts for the Olympics and secure the highest standards of services to the sports and spectators. The Olympic Games Impact assessment method involves a wide variety of the process rating criteria and analyses. On the whole, the method applies over 100 rating criteria with the specific combinations and numbers being reasonably varied depending on the local specifics. The rating criteria are generally classified into three groups of the economic, environmental and social ones. It should be noted, however, that a certain time lag always exists between the sport event and its aggregate impacts on the host region’s economy [13], with every impact, contribution and importance of a large-scale sport event for the regional economy being often fairly assessable only in a few years upon completion of the event.

We believe that the large-scale sport events like the Olympic Games may be the key drivers for the host region positive image building. Their direct and indirect positive impacts are generally due both to the growing economic activity in the area and better perception of the host region by the people worldwide, with the improved attitudes normally followed by inflows of the national and international investments. In this study we have analysed the regional development indices versus the impacts of the large-scale sport events on the subject Krasnodar Territory to analyse and assess, among other things, the impact of the sports-specific PR projects on the host region’s image. We applied an adapted version of the A. J. Hildreth scale to process the obtained data and develop a Krasnodar Territory image rating model: see Figure 1 hereunder; with the horizontal axis showing the host region attraction as verified by the numbers of visitors; and the vertical axis – foreign trade turnover of the host region.

Figure 1. The Kransnodar Territory image model based on the adapted Hildreth scale

Let us analyse the input data for the analyses and modelling process. The national statistics report 65 thousand visitors to the Formula-1 Grand Prix in Russia, and 237 thousand visitors to the 2014 Olympic Games in Sochi: see Table 1.

Table 1. Statistical data analyses using the adapted Hildreth scale

We used formulae (1)-(3) to calculate the Kransodar Territory image and attraction as follows: image component of the region attraction: ; the image component of the region attraction net of the sport events: =1,083; and the image component of the region attraction with the sport events: =1,227.

The Krasnodar Territory image in the subject period was estimated as a square of the EFGD rectangle (see Figure 1) as follows: S_EFGD=45295274.96. And the current Krasnodar Territory image was rated as a square of the ABCD rectangle as follows: S_EFGD=55617024.96. Therefore, the square of the figure may be used to rate the Krasnodar Territory image in the subject period prior to the large-scale PR projects timed to the Olympic Games and Formula-1. The proposed method makes it possible to rate the Krasnodar Territory image growth as a result of the large-scale sport events both in the qualitative and general quantitative terms (using a combination of different progress criteria), followed by an integrative qualitative rating.

It should be mentioned that the economic benefits of the large-scale sport projects/ event include, in addition to the image component, an investment component which may be calculated using the following authors’ formula:

      ,

whereas I means the investment component; D means the region’s share in the national potential (as reported by Expert RA Agency in the case); Р_potential means the calculated potential value versus the national average; Р_risk means the calculated risk value versus the national average; R means the income generated by the large-scale sport projects; and I_n means the investments in the region.

Given in Table 2 are the input data and the above calculated rates for the Krasnodar Territory with the authors’ method being applied to calculate the investment component of the host region's image.

Table 2. Investment component of the economic benefits from the large-scale sport events in the Krasnodar Territory

The same calculations may be made for the past periods to obtain necessary data for a regression model. It is a gross regional product (GRP) that may be applied as the strategically important criterion to rate the regional economic growth with a special emphasis on the economic impacts of the relevant PR projects in connection with the large-scale sport events. We have calculated under the study the following key indices for the economic benefit rating purposes: GRP per capita; investment component; and the image component; and analysed the regional economic effects versus the large-scale sport event impacts using the multifactor econometric models.

We applied the following factors to calculate the multifactor function Y (GRP in RUR per capita): Х1 that means the image component; Х2 that means the investment component, as follows:

.

Having tested the proposed model validity using the Fisher F-criterion and Student t-criterion, we found the model being valid and the regression rates being significant. We have also calculated the elasticity rates indicative of the analysed rate variation degree in average percentage terms with each factor changing by 1% provided every other factor is constant, as follows: E1=5.2%, E2=9%. This means that when the region’s image component grows by 1%, the economic benefit will grow by 5.2% on average and the investment component by 9%, respectively. This finding supports the commonly known empirical rule that implies that the investment component of any large-scale sport project will be traditionally given a top priority, particularly at the stage of project development.

However, the investment business in the Krasnodar Territory still faces a few problems including the limited governmental support. Nevertheless, the positive impacts of the Olympics-related investments in the subject period were clearly manifested in the Territorial government budget as they obviously contributed to the stable annual growth (by some 10-15% on average for the period) of the Krasnodar government budget of incomes, and the growth allowed to mitigate the crisis situation in the regional budgeting process. As a result, the budgeting performance of the regional government was generally rated as satisfactory [14].

Conclusion. The study data and findings give the grounds to believe that large-scale sport events on the whole and international sport events in particular may give a boost to the relevant PR projects to facilitate the regional development purposes being attained. The sport projects and events are beneficial as verified by the host region’s image improvement and regional economic growth rates. The study gave the means to rate the host region’s image and tested the adapted Hidreth’s scale based regional image calculation method using the Krasnodar Territory for the case study. It was demonstrated that the large-scale sport projects may be pivotal for the socio-economic regional development and image improvement initiatives both on the national and global arenas.

References

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Corresponding author: fizkult@teoriya.ru

Abstract

The study analyses benefits of large-scale sport projects for the regional economy, including the sport market profit distribution under the sponsorship projects; proceeds from sales of broadcasting rights, merchandising projects etc. A variety of qualitative and quantitative criteria were applied to rate benefits of a few Winter Olympics. The study data and analyses demonstrated that the large-scale sport events may be among the key instruments to improve the host region’s image and stimulate its socio-economic development. A special emphasis is made on the positive effects of the Olympic Games on the host region's economic and social development and environmental aspects. The study data were used to assess the relevant effects on the image of the Krasnodar Territory, with the image being presented in terms of an economic benefit metering mathematical model. The study gives an integral estimate of the region’s image versus the rank and popularity of the sport event. A multifactor econometric model was used to analyze the host region’s economic benefits versus the large-scale sport project factors. A set of specific indicators was offered to rate the economic benefits of the sport projects and their qualitative effects on the image of the Krasnodar Territory.