The Economic Impact of Super Bowls

Mark Yost has written a piece for the Wall Street Journal ($$$ req’d) on the economic impact of Super Bowls and the possibility for Detroit to see a positive net income flow from next Sunday’s game. The piece contains descriptions of research by and quotes from a veritable Who’s Who of sports economists, including our own King Banaian (every other letter’s an A). Reading it gives a good summary of the consensus of the academic profession:

“The NFL says $300 million, but I’d say it’s closer to $50 million,” says Allen Sanderson, a University of Chicago economist.

… Tell that (Super Bowls generate “tremendous value” to host cities – PM) to Phil Porter, a University of South Florida economist who has looked at the economic impact of six Super Bowls. He found that Miami-area hotel rates and occupancy levels increased only 4.4% for Super Bowl XXIX compared with the same period in the prior and following years. Similarly, he found that Super Bowl XXXIII, also in Miami, had no more than a $37 million impact on the South Florida economy. Economists Robert Baade of Lake Forest College and Victor Matheson of Williams College pegged it at $21 million to $32 million, about one-tenth of the NFL’s claims.

… But the key figure, Prof. Porter and others argue, is taxes collected, not taxable sales. With a 7% tax rate, the gross economic impact of Super Bowl XXXIX comes to about $3 million. Factor in that it costs about $15 million in infrastructure improvements, security, overtime for police, fire and EMS personnel, and the economists claim that hosting the Super Bowl actually cost Jacksonville about $12 million.

… “Most economic impact studies implicitly assume the hotel occupancy would have been zero without the event,” says University of Texas economists Craig Depken and Dennis Wilson, who looked at the 2004 Super Bowl in Houston.

“The athletes, the chain hotels and restaurants receive money from the Super Bowl and take the money out of the area,” notes King Banaian, economics chairman at St. Cloud State University in Minnesota. “This reduces the impact on the local economy.”

“They swipe the credit card in Detroit, but that’s about all Detroit will see of that money,” says Prof. Porter. Furthermore, he argues that higher hotel rates and occupancy have more of an impact on hotel investors in Riyadh than on taxpayers in Detroit.

… Even if a Detroit Super Bowl does draw more new money, the economic impact is still likely to be minimal, says Prof. Sanderson of the University of Chicago. “With league-wide revenue sharing and other external commitments, most of the game-related money will leave Detroit faster than the corporate jets on Super Bowl night. The one thing that remains will be the costs.”

On a micro scale, my guess is that relative to Super Bowls in winter vacation destinations, there will be more activity on game day at the airports around Detroit next Sunday.

HT to Fraters Libertas.