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Tuesday, May 25, 2010
Super Bowl could be a financial bust

By Peter Keating
Special to ESPNNewYork.com

Hey, New York, watch out what you ask for!

Boosters claim that if the New York Giants and New York Jets Jets win the right to host the 2014 Super Bowl, the big game will inject $550 million into the local economy.

But independent economists who examine these kinds of estimates almost always find them to be massively overstated.

In 1999, for example, Phil Porter of the University of South Florida, looked at six Super Bowls at three different venues and concluded there was "no measurable impact on spending." In 2006, Robert Baade of Lake Forest College and Victor Matheson of the College of the Holy Cross found that on average, Super Bowls generate about one-fourth of the impact projected by the NFL, and that two cities -- Atlanta in 2000 and Tampa in 2001 -- actually lost money on the game.

Why the gap?

First, there's a problem economists call "crowding out," which is what happens when a mega-sports event attracts fanatics but drives agnostics away. The Meadowlands Liberty Convention and Visitors Bureau is counting on the 2014 Super Bowl to boost area businesses from hotels to taxicabs to football clinics. But when the World Cup came to Giants Stadium in 1994, local highway signs directed drivers away from the arena and, you can be sure many native New Yorkers and New Jerseyans will flee the crowds, traffic and high prices next time, too.

Second, there's "substitution," where residents respond to a big sports event by shifting their spending, instead of increasing their overall consumption. Bars and restaurants generally do well, while retail and alternative entertainment do not. Indeed, in Salt Lake City, a dropoff in department-store and ski-resort business led taxable sales to actually decline during the 2002 Winter Olympics.

"If a large event like the Super Bowl were to come to New York, the magnitude of the economic impact would depend a lot on how willing fans were to get away from the game and spend money on things like Broadway shows," says Matheson.

Finally, there's an economic effect called "leakage," which is the tendency for money to circulate out of rather than through a local economy. Super Bowl supporters fixate on fans' spending because it seems so dramatic: 100,000 fans descend on a city, spend $1,000 each, those dollars ripple among merchants, suppliers and employees, and voila! The event's impact reaches into the hundreds of millions. Unfortunately, much of that cash leaves town pretty quickly in the form of inflated profits. When hotels quadruple their room rates, they don't quadruple their maids' pay rates. Instead, their shareholders benefit most.

If big sporting events infuse a local economy with cash, what about New Orleans? Since 1980, the Big Easy has hosted five Super Bowls and more than 30 Sugar Bowls, not to mention dozens of PGA tournaments, college football championships, Final Fours, NCAA regional basketball tournaments and SEC basketball tournaments. Somehow, the whole ongoing package hasn't translated into an engine of economic development for the city as a whole.

Typically, city governments, host committees and the NFL all have powerful incentives to make economic impact estimates as huge as possible, because big dollar signs help convince voters and local pols to approve big new stadiums. It is to the great credit of the Giants and the Jets that -- unlike, say, the Cowboys -- they have not used league promises of vast Super Bowl benefits to leverage public funds for an arena. Private funds will cover the cost of their new stadium, and of staging the 2014 Super Bowl.

Make no mistake, though, about who the real winners are in this plan. Put an NFL championship game in New Jersey, and the Giants and Jets will finally be able to find a naming rights sponsor for the Meadowlands -- some local company that will pay the teams up to $500 million in a long-term deal that includes hanging its logo on a Super Bowl.

As always, the economic benefits to the rest of the metropolitan area will be less certain.

Peter Keating writes about sports business for ESPN The Magazine. Check out his blog on ESPN Insider.