The Economic Impact of the Super Bowl

If you listen to the Super Bowl Hype-a-Thon, big business interests, and the media, you would believe that everybody in Arizona will receive a huge economic boost from hosting the Super Bowl in 2015.  If Governor Brewer hadn't vetoed SB1062, the Super Bowl wouldn't come to Arizona!!!  (The articles on this disaster are easy to google.)

Pearl-clutching gasp!

 

 Well, what about that "economic boost"?  I for one have some questions.  For example, how much has it cost the taxpayers to build the Stadium that meets the requirements of the NFL?  How much will it cost the taxpayers to refurbish it?  How much will the taxpayers pay for additional police and fire protection?  Street maintenance?  Advertising?  

Did you know that SRP wasted $1 million of their customers' money on a Super Bowl  advertising campaign that did nothing to improve energy efficiency or serve its ratepayers?   Also, SRP isn't in competition with other utilities and doesn't even need to self-promote at the Super Bowl.  Stated Diane Brown, executive director of the Public Interest Research Group (PIRG), "When SRP promotes the Super Bowl, the arts or human services, no matter how valiant the program, the correlation to the purpose of providing electricy and water fails to exist and ratepayers are left with a tab they didn't order." 

What about all those economic benefits?  

According a Sports Illustrated article titled "There is no Blip: Super Bowl could be Super Bust for host cities, study finds":

"A look at six Super Bowls dating to 1979 -- three in Miami, two in Tampa, one in Phoenix -- found no increase in sales revenue over previous years without the big game, said Philip Porter, author of the study.

"One reason may be that the estimated 140,000 fans who attend Super Bowl events in tourist-oriented Florida, Arizona or California displace the usual visitors from colder regions, he said.

"'There ought to be a spike that sticks up like a sore thumb," said Porter, an economics professor at the University of South Florida at Tampa. "It doesn't exist. There is no blip. You don't find anything.'"

"We are being suckered," Porter said. "People who want us to do something for them are selling us snake oil."

That was then.  What about now?  Take a look at this January 2014 article "It's the Local Economy, Stupid"  

On one side, you have the NFL. Last week, the league, as part of its non-stop hype-a-thon for the First Super Bowl Outdoors In Cold Weather Isn't Snow Just Romantic?, reported that the New York/New Jersey economy would see a $600 million boost as a result of Super Bowl spending. "Thanks to the Super Bowl, we're seeing more hotel rooms booked and restaurant tables reserved and even more excitement than usual for this time of year," U.S. Rep Carolyn Maloney told reporters.

On the other, you have the nation's sports economists, who say the actual number is a fair bit lower. Like, maybe, zero. "There still remains no ex post evidence of an economic impact," says University of South Florida professor Philip Porter, almost audibly sighing over email since, as someone who's been studying this topic for more than a decade, he gets the same question every year at this time. "Super Bowl attendees simply don't buy much that the local economy sells."

One of the researchers quoted in the above article was Victor Matheson.  The abstract from his indepth study titled Economics of the Super Bowl states:  

"The Super Bowl is America’s premier sporting event. This paper details basic economic facts about the game and examines the controversy surrounding the purported economic impact of the game on host communities. While the league and sports boosters claim that the game brings up to a $500 million economic impact to host cities, a review of the literature suggests that the true economic impact is a fraction of this amount."

Matheson points out that "Over the fifteen year period from 1999-2013, eleven different cities held games, and in at least 6 of these cases (Tampa, Dallas, Indianapolis, Glendale/Phoenix, Houston, and Detroit), the game was awarded immediately after the construction of a new publicly financed stadium. There can be little doubt that the NFL would not place its premier event in Detroit or Indianapolis except in exchange for a large public subsidy in the form of a new stadium for one of the league?s franchises." 

 Matheson explains that you cannot estimate the economic impact by simply adding up the number of attendees at the game and estimating the average fan's expenditures in connection with the game.  

Three prominent problems frequently cited by economists are the substitution effect, the crowding out effect, and leakages.

Substitution Effect.  

The substitution effect occurs when consumers spend money on a sporting event 
that would normally have been spent elsewhere in the economy. For example, if a parent 
buys a child a Pittsburgh Steelers 2009 Super Bowl Champions sweatshirt for Christmas, 
it is unlikely that this sweatshirt represents an additional gift but instead will be given 
instead of another present. In this case, the Super Bowl has not increased total 
expenditures on gifts but instead has simply rearranged spending patterns towards sports 
paraphernalia and away from, say, ugly holiday sweaters. In a broader sense, spending on 
the Super Bowl by residents of the host city reduces the money available for these 
consumers to spend elsewhere in the economy.

Crowding Out Effect

Crowding out occurs when the crowds and congestion associated with a sporting 
event displaces regular economic activity. While there is no doubt that the Super Bowl 
attracts large numbers of tourist, it is equally clear that others are dissuaded from visiting 
Super Bowl host cities during the time period around the game. Indeed, the situation is 
much like Yogi Berra?s famous quote, “No one goes there anymore; it?s too crowded.” 
Traditionally, the Super Bowl has been held in warm weather cities that are popular 
vacation destinations even when the Super Bowl is not in town. Therefore, even if a city?s 
hotels during a Super Bowl are full to capacity with sports fans, if the hotels would have 
been 80% occupied anyway, the net effect of the Super Bowl is the incremental 20% of 
additional rooms that are sold not the entire number of rooms sold to Super Bowl visitors. 

Leakages

While a great deal of money may be spent within a city during a mega-event, much of the money may 
immediately leak out of the city and not end up in the pockets of local residents. In other 
words, the event may generate economic activity for the city but not generate income for 
its citizens.

For example, it is common practice for hotels to raise their rates to 3 or 4 times 
the normal level during the Super Bowl. Local hotel desk clerks and room cleaners,  
however, don?t see a 300% or 400% increase in their wages. It is not the local workers 
but instead shareholders back at corporate headquarters who benefit from the event.

Capacity constraints in cities also lead to leakages. The Super Bowl is a large 
enough event that many services demanded by visitors, ranging from high-end catering to 
exotic dancing, cannot be fulfilled solely by local providers. Therefore, labor and capital 
must often be imported into the host city to meet the excess demand. Of course, payments 
to these imported factors of production do not represent income for the city but instead 
increase incomes of the guest workers. 

The claims of riches are heady, but not for local taxpaying citizens, local businesses, and maybe not even for Arizona's tax coffers.

Maybe the math is more than Governor Brewer, some Republican legislators, and candidates for Governor can muster.

See also:

Indianapolis loses more Money than Expected Hosting the Super Bowl

Economics of the Super Bowl

It's the Local Economy, Stupid!

There is no Blip: Super Bowl super Bust to most Host Cities, study shows