Promotion, Relegation, and Stadium Size

Berlin Olympic StadiumAbout a year ago I attended a sports economics conference in Berlin.  At the end of the conference, the participants attended a Bundesliga football match between Hertha and Bochum in Hertha’s home stadium, Olympic Stadium (shown at right).  Hertha won the match, and with only a few weeks left in the season, was at that point tied for first place in the Bundesliga.  After the match I had a few libations in a beer garden near the stadium that was full of celebrating fans, and later rode a packed U-bahn train downtown with a lot of other celebrating fans.  Hertha did not finish the season well, and lost their remaining games to finish 4th in the Bundesliga; they qualified for the UEFA Cup competition.

Fast forward one year.  Hertha had a dreadful season this year, and were in last place in the Bundesliga for almost every week of the season.  Last week, Hertha were relegated to the second division of the Bundesliga.  Their opponent in the match I saw last year, Bochum, were also relegated this season.  Olympic Stadium seats 74,000 for football, and was extensively renovated in 2006 for the World Cup.  Given the lower quality of teams in the second division, I expect Hertha will have difficulty selling tickets next season.  Since many Bundesliga players have contracts that are valid only for the first division, many of Hertha’s players will not return next season, and they may have difficulty signing new high quality players.  Both costs and revenues will decline as a result of this relegation.  Hertha’s relegation demonstrates that having a large, newly renovated stadium does not ensure the success of the team playing in that stadium – a lesson that would benefit many in North America, where many people assert that new facilities are needed to upgrade the quality of teams.  It will be interesting to see if Hertha can return to the first division next season, or if their stay in the second division persists.

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