To Build A Home

When rebuilding a stadium, it is harder to be “a club in transition” in London and it has nothing to do with football.

Chelsea are going to be third big London club to take up stadium reconstruction. Here is why they can never do what Juventus have.

Clubs generate large revenues from a greater attendance if the fans show up. In the long run, a club can expect to really build itself as a brand. Stefan Szymanski, in his book Money and Soccer, points out that most fans travel from a 10-mile radius of the stadium. If, therefore, a club is well-located in a large city, it makes sense for it to expand its stadium.

However, it will also cost a lot more money to do so.

Planning rules make it especially harder to build a safe and durable stadium in the middle of a city like London, which has a population 10 times the size of Turin and faces a much higher demand for property. A simple comparison of rent prices also shows the UK to be 41% more expensive than Italy; property is simply more expensive in the UK.

Spurs have been trying to rebuild their stadium and their reconstruction costs are nearing a whopping 1 billion pounds. Chelsea, meanwhile, want to expand their stadium by 20,000 seats and are looking at a similar bill.

Inflation is one issue. Arsenal spent only 390 million pounds to build Emirates back in 2006. Even that, however, is more than double of what it takes to build a stadium in Turin 5 years later.

Juventus demolished and rebuilt their stadium back in 2011. It cost them just about 137 million pounds.

It is obvious that the more you spend on the stadium, the less money you have to spend on your team. Spurs shelled out 221m pounds on their new stadium in 2016-17 (Deloitte Annual Review of Football Finance, 2018), consequently have gone through 2017-18 with a net spend of only 14.8m pounds and a summer with zero signings. It’s a club in transition, they say.

They have still managed to qualify for the Champions’ League in both seasons, but only time will tell how long this can be sustained. Spurs continue playing at Wembley while the work is on. Every season they wait until the stadium is complete is a season they will have to pay interest for, while earning nothing.

It is never cheap or profitable in the short run to build stadiums. Italian clubs whose stadiums were renovated for the 1990 World Cup are still repaying debt. It is widely discussed that international competitions end up being harmful for host countries because of the massive weight of stadium building expenditure.

While the government is happier taking up such ventures without hoping for profits, they want a say in the running of the stadium and keep prices low and that can be frustrating for clubs. Juventus actually bought and tore down the government-built stadium from 1990.

Private ownership allows clubs to redevelop stadia and keep the infrastructure at par with world class clubs, but there is also less incentive to do so because it takes a long time to recover the money spent on the stadium.

Dreams of being an affordable club for the fans can go straight out the window. A very simple repayment calculation tells us that a loan as big as 500 million pounds accumulating at 5% interest rate per annum, given that all 60,000 seats are sold for 30 home games a season will take 13 years to be recovered, if every ticket is sold for 30 pounds. That is 13 years of zero revenue from ticket sales. It is no wonder, then, that Arsenal have the most expensive tickets in the world. The season tickets were priced in a range of 891 to 1769 pounds for 2017-18. The corresponding price range for Juventus, who started earning back from their stadium five years later, is from 480 to 1596 pounds.

Meanwhile, inflation of both player transfer fees and wages keeps soaring, and since this market is international, the competition for quality players keeps these prices at par across countries.

While an 88m pound price tag is affordable for Juventus 7 years after their rebuilding, it will not be for Chelsea or Tottenham.

A lot depends on the club’s spending philosophy. Spurs Chairman Daniel Levy has been very vocal about the fact that Spurs have not yet encountered a player they want and can’t afford, and they want to focus more on bringing players through from the academy

The emphasis here, however, is on the fact that they simply can’t afford to spend it even if they wanted to. Because they are a club from London.


Note: The exchange rate used is 1 euro = 0.89 pounds, as on the date posted.


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