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Super Windfall Forecast Debated
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Super windfall forecast debated

[4 STAR Edition]

Houston, Tex.
Sep 14, 2003. pg. 01


Full Text (2450  words)
(Copyright 2003 Houston Chronicle)

In Detroit, local organizers of the 2006 Super Bowl say the game will have a $400 million economic impact on the city.

In Phoenix, which is vying for the 2008 game, Arizona Cardinals officials talk about impacts topping $360 million in cities that already have hosted the game.

The NFL and Houston Super Bowl Host Committee are predicting a $250 million to $300 million economic impact for the Feb. 1 game here.

But many economists say those figures are wildly off the mark. One says the local economic benefit of hosting a Super Bowl is zero. Several others told the Chronicle that there will be some benefit, but only a fraction of the one touted by the NFL, maybe $20 million to $50 million.

The NFL's economic impact numbers, those economists say, fail to take into account the hotel, car rental, restaurant and other business that would have occurred if the game were not held. And the NFL, they say, also fails to consider that corporate-run hotel or restaurant chains make a lot of money during Super Bowl week but send the profits to out-of-town headquarters.

"The people who do these (NFL and host committee) studies are very good at two of the four areas of arithmetic - adding and multiplying. And they're not very good at subtracting and dividing," said University of Chicago sports economist Allen Sanderson. "If a city wants to host a game because it's fun, that's fine. But it doesn't stimulate economic development."

Remarks like that infuriate Jim Steeg, NFL senior vice president in charge of the Super Bowl. Cities, he said, fight for the Super Bowl because it provides a strong boost to the local economy. A study commissioned by the NFL and the San Diego host committee, he says, found that hosting the 2003 Super Bowl in San Diego had a $367 million impact on the local economy.

And, he says, no economist would say the game has little or no impact after spending time in a host city and seeing all the money spent on lavish parties, meals, cabs, golf outings, car rentals, flowers, entertainment, television productions, the half-time show and a long list of other diversions.

"I'm just tired of this crap," says Steeg, who has run the Super Bowl since 1979. "When I retire, I'm going to write a book, and I am going to blow them out of the water. I do hate these guys with a passion."

Past host cities tout strong benefits

Officials in cities that have held the game say it brings a strong local economic benefit. Ky Snyder, president of the San Diego International Sports Council and president of the host committee for the 2003 game, said the San Diego study concluded that there was $194 million in direct spending in the region because of the game.

"If you called any hotel and asked them what it meant to them, you would get positive answers," he said. "I'm around the businesspeople affected by the Super Bowl, and they're saying, `You made our year, thank you.' "

Host committees and the NFL don't have to work very hard to get the message out that hosting a Super Bowl is an economic bonanza. Cities seeking the game do that. And local newspapers - the Chronicle included - routinely quote the numbers cited by local organizers.

Crain's Detroit Business, for instance, reported in July: "The granddaddy of sporting events, the Super Bowl, (is) expected to bring up to $400 million in economic impact."

Economists have tried to measure the impact through their own studies. Some point out that a local economic impact as great as $300 million should be reflected in taxable sales in a city or county. But Stanford University sports economist Roger Noll said research has shown that there is little or no increase in taxable sales during the month when a Super Bowl is played in a town.

"You will not be able to find a single person at a university who will say the NFL figures have any reality to them," Noll said.

Philip Porter, sports economist at the University of South Florida and director of the school's Center for Economic Policy Analysis, studied taxable sales in several cities that hosted the game. When the Super Bowl was played in Miami in January 1999, taxable sales that month in Dade County were about $2.26 billion, Porter says.

But the following January, when the game was played elsewhere, taxable sales were actually greater, rising by $193 million to nearly $2.42 billion, following a two-decade pattern of rising sales tax revenue in the county.

Hillsborough County saw taxable sales rise to $1.4 billion during January 2001, when the game was played in Tampa, Fla. But the total was only $52 million more than in January 2002, Porter says.

Hotel occupancy another key indicator

Hotel occupancy is another way of measuring the economic impact of a Super Bowl. Occupancy rates have risen slightly or stayed the same in Super Bowl host cities the month the game was played compared with the same month the next year, said Porter and the University of Chicago's Sanderson.

The NFL and host committees generate numbers assuming that hotels and restaurants in a particular city would be empty without the Super Bowl, said University of Maryland sports economist Dennis Coates. But economists say "displacement" occurs - travelers avoid a Super Bowl city because of the crowds and extraordinarily expensive hotel rates.

"If the foxes held the convention in the henhouse, (a host committee's) survey technique would attribute positive impacts to the foxes and never notice that all the hens were gone," Porter wrote in a chapter in Sports Economics: Current Research.

Economists also say it is incorrect to assume that money injected into a local economy has enormous benefits for that specific economy if it is transferred to out-of-town corporate headquarters soon after it is paid. They call such transfers "leakages."

"A lot of these (economic impact) figures include money that spends less than 24 hours in Houston," Noll said. "That money doesn't stick. It's just money that goes elsewhere."

NFL and host committees often rely on a "multiplier" in calculating economic impact. According to this principle, a waiter who earns extra tips from Super Bowl customers may buy items locally, thus multiplying the effects of the original expenditure.

But economists criticize the practice of applying a multiplier to most or all of the direct spending by Super Bowl tourists. They also take the NFL and its host committees to task for using far too big of a multiplier in determining economic impact - sometimes 1.8, which means nearly doubling direct spending.

Only money that stays local, such as the tips of a waiter or earnings of a person hired for Super Bowl security, should be subject to the multiplier, and it shouldn't be used on direct spending that turns into leakages, Noll says. The multiplier, he said, should be no bigger than 1.1 - meaning little is added to direct spending when the multiplier is used.

Further, once the multiplier is applied to all direct spending, displacements, leakages and local costs of putting on the Super Bowl (police and fire overtime, sprucing up the city, cleaning up after the game) must be subtracted.

Some economists say little to nothing gained

The San Diego study estimated that the city spent $4.1 million to host the game there. Sanderson and other economists questioned the accuracy of that figure, estimating that it costs local governments about $10 million to put on the game.

So what kind of local economic gain is realized after leakages, displacements and costs are accounted for?

Economists, including Porter, Noll, Sanderson, Coates and Webster University sports economist Patrick Rishe, say little or nothing is gained. The figures on taxable sales, they say, do not lie.

Much of the economic benefit touted by the NFL is being realized by the national economy - corporations with hotels and restaurants in Houston, out-of-town contractors hired annually by the NFL to stage the game and Super Bowl week, Sanderson said.

Several economists said Houston's economy may get a bigger boost from the game than Miami, San Diego, Tampa and New Orleans, because unlike these cities, it draws far fewer tourists. In tourist- dependent cities, football fans displace other types of tourists during Super Bowl week.

During game week, Houston will likely fill many more hotel rooms than it would during the same days in years the game is not held here, and it will see an increase in dining and entertainment spending, Noll said.

He estimated that the net economic benefit for Houston may be as high as $50 million.

Sanderson and Rishe estimated that it might fall between $20 million and $50 million.

Ernest Collins, an administrator in the New Orleans economic development department, said New Orleans has hosted nine Super Bowls because of the economic benefit.

"There is definitely a positive impact. It will provide a positive net gain in the sales tax or whatever other way you want to measure it," he said. "From a public relations standpoint, it does tremendous things for a city. Journalists from around the world will be writing stories about the city. That is invaluable."

Robert Dale Morgan, president and chief executive officer of the local host committee, scoffed at Porter's belief that the Super Bowl has no economic benefit. Porter would think differently if he was part of Super Bowl week and saw the lavish spending that goes on, Morgan said.

"How many Super Bowls has he been to? Call him back and ask him," Morgan said. (Porter lives and works in the Tampa area, which has hosted three Super Bowls.)

Several economists said their attendance at a Super Bowl is irrelevant.

Steeg also portrays critical sports economists as academics so isolated in an ivory tower that they are unable to see the common- sense benefits that a Super Bowl brings.

The scholarly criticism prompted the NFL and the San Diego host committee to hire a company to calculate the local economic impact of the most recent Super Bowl, Steeg said.

Marketing Information Masters in San Diego found the impact was $367 million, with $194 million of that coming from direct spending.

That figure took into account that San Diego spent $4.1 million to put on the event. But Michael Casinelli, Marketing Information Masters president, said he did not lower the figure for displacement and leakages because it was impossible to calculate what they were.

He did find that hotel occupancy rose to nearly 89 percent from Thursday to Sunday of Super Bowl week - about 25 percent higher than the rate for the same four days during the four previous years. Hotel revenues for those four days more than tripled compared with the same four days the previous year.

Casinelli, who holds an MBA, applied a multiplier of 1.8 to direct spending, a figure he says was recommended by the U.S. Department of Commerce's Bureau of Economic Analysis.

Noll said the multiplier is far too high and should have been applied only to the portion of direct spending that remained after leakages and displacement were accounted for.

The $300 million economic-impact figure put out by the local host committee was not the work of an economist, but an estimate based on the economic impact figures passed on by cities that have hosted Super Bowls, Morgan said. The committee, he said, didn't choose a multiplier and do a calculation.

One projected impact on Houston's economy

Steeg said about 100,000 out-of-towners will come to Houston for at least four days during Super Bowl week. The average game-goer makes $152,000 and spends about $2,500, he said. That translates into a conservative estimate of $250 million in spending, he said.

The host city, he said, also gets invaluable free publicity during Super Bowl week. And the event generates millions for charities in the host city, he said.

The NFL and those running NFL-sponsored parties and events, Steeg said, gave $4.3 million to San Diego charities. Casinelli offered a lower figure, somewhere between $2 million and $3 million.

Steeg said he feels so strongly that Sanderson and other sports economists are wrong that he may challenge them to a public debate in Houston this January.

"I'm tired of people making careers out of being negative," he said.

Sanderson said of Steeg, "I told him that my colleagues and I are willing to debate. All we want is the NFL's data and methodology a month in advance. And we want the press to be invited because we want to put this issue to bed once and for all."

...

PRO: `EXCEEDS THE EXPECTATIONS'

"There has been lots of intellectual debate over the Super Bowl's economic impact. Unfortunately, those individuals who have criticized (previous) studies have not offered alternative means of evaluation. The Super Bowl's value cannot be measured by any existing standard. The Super Bowl is unlike any event in this country. We certainly welcome those who have criticized funded studies to proffer new measurement models, but this will take research. They shouldn't be offering opinions without first-hand involvement and research.

"Super Bowl visitors don't spend normally, and they don't act normally. If you don't experience it, you don't know what we're talking about. If anything, the NFL undersells the event. Hotel people and others say it exceeds the expectations we create. How in your rational mind do you say it's not worth anything?"

- Jim Steeg, NFL senior vice president who has been in charge of the Super Bowl since 1979

...

CON: `NO MEASURABLE IMPACT ON SPENDING'

"The results are shocking. For each of the six (Super Bowls) studied in three different locations, there is no measurable impact on spending associated with the event. The projected spending and spillover (multiplier) benefits of regional impact models never materialize.

"Several sources of error have been discussed in the literature that might tend to moderate the projected impact. These include investigator bias, error in measurement, unanticipated leakages from the region, substitution in consumption, diminishing returns in production, and crowding out (capacity restraints). What we find here is that a combination of these sources, albeit in unique and unanticipated forms, works to eliminate any measurable impacts from Super Bowl events and, it is anticipated, from other mega-sporting events as well."

- Philip Porter, "Mega-Sports Events as Municipal Investments: A Critique of Impact Analysis," a chapter in Sports Economics: Current Research

[Illustration]
Mugs: 1. Jim Steeg (p. 18); 2. Philip Porter (p. 18); Graphs: 3. PRO: 'EXCEEDS THE EXPECTATIONS' (p. 18, TEXT); 4. CON: 'NO MEASURABLE IMPACT ON SPENDING' (p. 18, TEXT); Graph: 5. NOT-SO- SUPER SALES (p. 18, BAR GRAPH)
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