Super Bowl Spending

On NYC FAN radio, sports “guru” Mike Francesa said that Super Bowl 2014 at MetLife Stadium was going to be really cold. For a normal football game, you might occupy your seats for 3 hours. For the February 2 Seattle/Denver game, counting half time and all security constraints, seat time could be 7 hours. Yesterday in NYC, the temperature was 11 degrees. Even if it warms up, still 7 hours in wintry temperatures is cold. Super Bowl planners, though, would say that the extra revenue entirely offsets the downside.

According to the NY/NJ Host Committee for the Super Bowl, a surge in demand for hotel rooms, restaurant meals, souvenirs, buffalo wings, even the dry cleaners teams use for their uniforms, would total half a billion dollars in extra revenue for the New York and New Jersey communities near MetLife Stadium.

Maybe.

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 normal spending being replaced by World Series or Super Bowl spending. Local citizens avoid areas congested by mega events. People stay home to watch the game. Meanwhile nationally owned hotels receive revenue that is spent far from the event’s venue.

We could say it is all about crowding out and leakage. The mega event is 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. 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. Meanwhile, because hotel and restaurant chains have their HQ elsewhere, there is a leakage of dollars from the event to the big business located elsewhere.

The bottom line? Comparing cost and benefit for the Olympics, the Super Bowl, the World Series, for any “mega” sports extravaganza, we seem to have a benefit bias. The event is great for morale.  However, academic studies conclude that extra spending might not be close to projected amounts. Further diminishing revenue, congestion, vandalism, and the cost of public safety could be considerable.

Consequently, a half billion dollar gold mine of Super Bowl spending might not quite work out.

Sources and resources: Quoting the St. Louis Convention Center representative, a Forbes article focused on the spending created by the World Series. But then, reading a Matheson/Baade paper, “A Fall Classic? Assessing the Economic Impact of the World Series,” and Matheson’s “Economic Multipliers and Mega-Event Analysis,” you can see why the Forbe’s conclusions are debatable. I’ve also quoted and used sources from econlife on mega event posts here and here. H/T to Jacob Goldstein at NPR for his Super Bowl economics.