Morningstar DBRS: European clubs looking to turn new stadiums into gold mines

Europe has seen a wave of announcements about stadium renovations in Europe , such as those of Manchester United and Valencia, which, according to Morningstar DBRS, should help clubs increase their revenues.

The credit agency expects this trend to be the result of a weakening of the television rights environment, coupled with the impact of UEFA and European league economic regulation , which links player spending to revenue. In this sense, to increase revenues and increase squad budgets, clubs are investing in stadiums .

Stadium refurbishments also disrupt club financing, with a shift to long-term debt models and structures, with top-tier clubs being eligible for investment credit ratings provided the financing entity has a special purpose (StadCo) supported by well-diversified and highly resilient stadium-related revenue streams such as ticket sales, VIP areas, naming rights or other sponsorship revenues, which would benefit from a minimum debt service coverage ratio of more than two times, it said.

Morningstar DBRS points out that, after a decade of prosperity for football clubs, recent television rights auctions have been disappointing , with the most notable example being the national broadcasting rights for Serie A (Italy) and Ligue 1 (France), which have fallen by 3% and 33% respectively compared to previous agreements. Furthermore, the Premier League (England) was renewed with a marginal increase (3%), i.e. approximately 20% less than the increase in the previous cycle per game broadcast. In the case of the Bundesliga (Germany), there was an increase in the value of its television rights for the next four seasons, although this represents an increase of only 2% compared to the previous cycle. The analysis includes the five main leagues, in addition to the Spanish one, and therefore does not include data for the Portuguese one.

According to UEFA, there are more people watching football in Europe than ever before, a claim that, the rating agency notes, is however out of line with the evolution of television rights. Even the current UEFA rights, following a change in the format of its European competitions, have seen a 7% decrease in revenue for clubs per broadcast match, despite an increase in gross revenue (+26% from €3.5 billion to €4.4 billion), which was offset by a 30% increase in the number of matches in the three main European competitions.

One of the main reasons for clubs to modernise their stadiums has been for major sporting events, such as the Olympics (London 2012 and Paris 2024), the World Cup (France 1998, Germany 2006) or the European Championship (France 2000 and 2016 and Germany 2024). The last major sporting events that Spain and Italy hosted were the 1982 and 1990 World Cups respectively, and most of the stadium renovations in these countries took place before these tournaments. But that is about to change, with Morningstar DBRS reporting that Spain, along with Portugal and Morocco, will host the 2030 World Cup, while Italy, along with Turkey, will host the 2032 European Championship.

"We hope that these competitions will lead to large-scale investment in stadiums and that the clubs in Spain and Italy that own them will close the gap in terms of revenue-generating capacity with those in the English Premier League," the agency said.