Public Release:  The success of the Red One in South Africa increased Iberia and Sol Melia shares by one percent

FECYT - Spanish Foundation for Science and Technology

It is no new concept that the sponsor of a world football championship benefits from an improved image. A study at the University of Alicante has proven that the winner can also bring about tourism benefits for its country. The study leading to such conclusions is the first of its kind to date and focuses on the triumph of the Spanish team in the 2010 world championships in South Africa, which brought about a 1% increase in the market value of Spain's national tourism companies, such as Iberia and Sol Meliá.

"More specifically, an increase of 1% in market value was observed, suggesting an increase of 10,000,000 euros in the market value of Sol Meliá and 22,000,000 euros for Iberia," as explained to SINC by Juan Luis Nicolau, lecturer in the School of Economics of the University of Alicante and author of the study.

Like the Olympic Games, the world championships fill their host cities with tourists and publicise their host country in the world media. According to the experts, these mega-events have a positive impact on the place where they are held.

As Nicolau explains, after Spain's success, proposals were made "to study the affects of winning a world football championship on the winning country in tourism terms." An empirical study was therefore carried out on two leading sectors: aviation and hotels.

"The study applies to Sol Meliá and Iberia as they are the two most representative companies in each sector and are listed in the stock market," states Nicolau. Presence in the stock market was an absolutely necessary requisite to be able to analyse the market value and thus relate it to sports results of the selection.

In this way, the researcher was able to analyse the stock market reaction of share prices when the Red One won games, when they lost and then after their final victory against Holland.

The result of each game was felt in the stock market

Data shows that "the days following Spain's win in the world championship final saw abnormally high profits in both companies." This proves that winning games "brings about an increase in the value of Spanish tourism companies, whereas losing causes a drop in value," explains Nicolau.

Victory in any game, not just the final, also translated into an increase in the market value of each company. When the selection won, profits increased and vice versa.

As the study concludes, "the effect on the value of tourism companies not only varies according to the result of the final but also according to the results of each game."

The case of Sol Meliá is very characteristic as it fulfils a property known as 'loss aversion'. "This involves a psychological effect which, in this case, means that losing games has a greater effect on the stock market than a victory, although the difference in goals, whether it be negative or positive, is the same," adds Nicolau.

According to this condition, the negative impact on the Sol Meliá market value after the Red One lost a game was four times higher than the positive impact when they won.

The data show that when a national team was victorious, the market value of the hotelier increased by 3,669,422 euros, whereas when it lost, its value decreased by 16,002,760 euros.

The importance of Spain as a brand

In order to understand the direct relationship between the result of games and the value of stocks, we must bear in mind that the emotions attached to a football team can be passed onto the host country and that the concept of success can be attached to the winning country.

According to Nicolau, after the 2010 world championship victory, "Spain as a brand has been and is remembered more frequently meaning it is more easily recognised and chosen as a possible travel destination."

The researcher believes that a possible limitation of the study is that this effect "could not be universal for all tourism companies" and ensures that in the future "it would be of interest to analyse if these results are also obtained for other less popular sports."

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