Super Windfall Forecast Debated

Super windfall forecast debated

[4 STAR Edition]

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BILL MURPHY");" href="javascript:void(0);"> Houston Chronicle

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 saysthe local economic benefit of hosting a Super Bowl is zero. Severalothers told the Chronicle that there will be some benefit, but only afraction of the one touted by the NFL, maybe $20 million to $50 million.

The NFL'seconomic impact numbers, those economists say, fail to take intoaccount the hotel, car rental, restaurant and other business that wouldhave occurred if the game were not held. And the NFL,they say, also fails to consider that corporate-run hotel or restaurantchains make a lot of money during Super Bowl week but send the profitsto out-of-town headquarters.

"The people who do these (NFLand host committee) studies are very good at two of the four areas ofarithmetic - adding and multiplying. And they're not very good atsubtracting and dividing," said University of Chicagosports economist Allen Sanderson. "If a city wants to host a gamebecause it's fun, that's fine. But it doesn't stimulate economicdevelopment."

Remarks like that infuriate Jim Steeg, NFLsenior vice president in charge of the Super Bowl. Cities, he said,fight for the Super Bowl because it provides a strong boost to thelocal economy. A study commissioned by the NFLand the San Diego host committee, he says, found that hosting the 2003Super 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 impactafter spending time in a host city and seeing all the money spent onlavish parties, meals, cabs, golf outings, car rentals, flowers,entertainment, television productions, the half-time show and a longlist of other diversions.

"I'm justtired 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 themout 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 stronglocal economic benefit. Ky Snyder, president of the San DiegoInternational Sports Council and president of the host committee forthe 2003 game, said the San Diego study concluded that there was $194million in direct spending in the region because of the game.

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

Host committees and the NFLdon't have to work very hard to get the message out that hosting aSuper Bowl is an economic bonanza. Cities seeking the game do that. Andlocal newspapers - the Chronicle included - routinely quote the numberscited by local organizers.

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

Economistshave tried to measure the impact through their own studies. Some pointout that a local economic impact as great as $300 million should bereflected in taxable sales in a city or county. But Stanford Universitysports economist Roger Noll said research has shown that there islittle or no increase in taxable sales during the month when a SuperBowl 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 Floridaand director of the school's Center for Economic Policy Analysis,studied taxable sales in several cities that hosted the game. When theSuper Bowl was played in Miami in January 1999, taxable sales thatmonth in Dade County were about $2.26 billion, Porter says.

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

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

Hotel occupancy another key indicator

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

The NFLand host committees generate numbers assuming that hotels andrestaurants in a particular city would be empty without the Super Bowl,said University of Maryland sports economist Dennis Coates. Buteconomists say "displacement" occurs - travelers avoid a Super Bowlcity 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 andnever notice that all the hens were gone," Porter wrote in a chapter inSports Economics: Current Research.

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

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

NFLand host committees often rely on a "multiplier" in calculatingeconomic impact. According to this principle, a waiter who earns extratips from Super Bowl customers may buy items locally, thus multiplyingthe effects of the original expenditure.

But economists criticize the practice of applying a multiplier to mostor all of the direct spending by Super Bowl tourists. They also takethe NFLand its host committees to task for using far too big of a multiplierin determining economic impact - sometimes 1.8, which means nearlydoubling direct spending.

Only moneythat stays local, such as the tips of a waiter or earnings of a personhired for Super Bowl security, should be subject to the multiplier, andit shouldn't be used on direct spending that turns into leakages, Nollsays. The multiplier, he said, should be no bigger than 1.1 - meaninglittle 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 thegame) must be subtracted.

Some economists say little to nothing gained

The San Diego study estimated that the city spent $4.1 million to hostthe game there. Sanderson and other economists questioned the accuracyof that figure, estimating that it costs local governments about $10million 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 NFLis being realized by the national economy - corporations with hotelsand restaurants in Houston, out-of-town contractors hired annually bythe NFL to stage the game and Super Bowl week, Sanderson said.

Several economists said Houston's economy may get a bigger boost fromthe game than Miami, San Diego, Tampa and New Orleans, because unlikethese cities, it draws far fewer tourists. In tourist- dependentcities, football fans displace other types of tourists during SuperBowl week.

During game week, Houstonwill likely fill many more hotel rooms than it would during the samedays in years the game is not held here, and it will see an increase indining 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 economicdevelopment department, said New Orleans has hosted nine Super Bowlsbecause of the economic benefit.

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

RobertDale Morgan, president and chief executive officer of the local hostcommittee, scoffed at Porter's belief that the Super Bowl has noeconomic benefit. Porter would think differently if he was part ofSuper 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 hashosted three Super Bowls.)

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

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

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

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

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

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

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

Noll saidthe multiplier is far too high and should have been applied only to theportion of direct spending that remained after leakages anddisplacement were accounted for.

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

One projected impact on Houston's economy

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

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

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

Steeg said hefeels so strongly that Sanderson and other sports economists are wrongthat 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'sdata and methodology a month in advance. And we want the press to beinvited 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'seconomic 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. TheSuper Bowl is unlike any event in this country. We certainly welcomethose who have criticized funded studies to proffer new measurementmodels, but this will take research. They shouldn't be offeringopinions 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. Ifanything, the NFLundersells the event. Hotel people and others say it exceeds theexpectations we create. How in your rational mind do you say it's notworth 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 inthree different locations, there is no measurable impact on spendingassociated 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 thatmight tend to moderate the projected impact. These include investigatorbias, error in measurement, unanticipated leakages from the region,substitution in consumption, diminishing returns in production, andcrowding out (capacity restraints). What we find here is that acombination 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: ACritique of Impact Analysis," a chapter in Sports Economics: CurrentResearch

[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 IMPACTON SPENDING' (p. 18, TEXT); Graph: 5. NOT-SO- SUPER SALES (p. 18, BARGRAPH)