Santa Clara’s Super Bowl 50 negotiating position specified that the host committee would have to pay all safety, fire and medical expenses. At $3,597,300, that will be a lot more than nearby San Francisco will get.
Where are we going? To whether mega games are good business deals.
Super Bowl Spending
The official message from San Francisco is that a surge in demand for hotel rooms, restaurant meals, souvenirs, buffalo wings, even the dry cleaners teams use for their uniforms, will exceed the $5 million extra that Super Bowl weekend will cost them.
Some sports economists believe spending is just shifting. In his “reality check” paper on mega sports events spending, economist Victor Matheson concludes that cities hosting World Series games had little or no spending increases from 1972-2000. The reason is shifting and departing dollars. The shifts relate to the normal spending that is replaced by World Series or Super Bowl money. Local citizens avoid areas congested by mega events. People stay home to watch the game. Meanwhile nationally owned hotels receive revenue that travels far from the event’s venue.
But, on the other hand…
An economist working for the Super Bowl host committee says the event will turbo charge a mind boggling $350 million for local businesses. Looking back at N.Y.’s Super Bowl XLVIII, officials say the local economy got $600 million.
Not only does Dr. Matheson disagree but he and economist Robert Baade calculated specific projections. You can see below that they say there is a much greater probability of no economic impact than one in the hundreds of millions:
Our Bottom Line: Crowding Out
Whether you believe the turbo number or Dr. Matheson depends on crowding out and leakage. Mega events could be crowding out the revenue that might have been there anyhow. When the 2002 Super Bowl was postponed because of 9/11, a New Orleans auto convention was “crowded out” for that week. Similarly, because of demand from the sports event, other tourists were prevented from occupying booked hotel rooms. Then, because hotel and restaurant chains have their HQ elsewhere, there is a leakage of dollars from the event to the big business located elsewhere.
In addition, sales at other local businesses shrink. Commenting on the 2011 World Series, one movie theater owner said he loves his team but, “The sooner they lose the better.” During the 2004 Republican Convention in NYC, Broadway ticket sales were down by 20% from the previous year.
A final question: Even if Dr. Matheson is right, is the morale boost priceless?Read More