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    Alan Snel
  • 5 years ago
    • Categories: NFL

The Great Super Bowl Economic Impact Debate: Host City Economic Studies Vs. The Economists

Kansas City Chiefs quarterback Patrick Mahomes during Super Bowl 54 media interviews in Miami last week. Photo by Tom Donoghue.

By Alan Snel of LVSportsBiz.com

When NFL Commissioner Roger Goodell recently visited Las Vegas, he was frequently asked, “When is a Super Bowl coming to Las Vegas?”

And Goodell’s default response: “Let’s get through the Draft (in Las Vegas in April) and we’ll talk Super Bowl.”

But Goodell did offer a juicy verbal nugget about the prospect of a Super Bowl in Las Vegas when chatting at an event held by the Las Vegas Chamber of Commerce in January: “Super Bowl brings an economic impact of approximately $500 million plus and we believe Vegas has the potential to blow that out of the water.”

The Las Vegas chamber ran with that Goodell quote, posting this item on social media:

How do sports leagues and their event promoters come up with these economic impact numbers? LVSportsBiz.com asked Brian McCarthy, the NFL vice president of communications, how Goodell came up with the $500 million economic impact comment to the Las Vegas chamber. And LVSportsBiz.com also asked two sports economists — Victor Matheson at Holy Cross and Roger Noll at Stanford — to comment about Goodell’s observation that a Super Bowl delivers $500 million of economic impact.

Las Vegas is such an intriguing market on Super Bowl weekend because more than 300,000 visitors already come to the Vegas market for the Super Bowl. Let’s say they spend $1,000 per visitor on Super Bowl weekend. That means there’s already $300 million being spent on Super Bowl weekend in Las Vegas without the big game even being staged here. That’s why the general manager of a brand name hotel-casino in Las Vegas told LVSportsBiz.com that Las Vegas has to study the pros and cons of hosting a Super Bowl to determine whether it’s worth the investment. One issue to analyze: if the NFL names Las Vegas as a city to host a Super Bowl, how many Super Bowl visitors in Las Vegas that year would simply be displacing visitors who would be here anyway for Super Bowl weekend?

Here are six economic spending reports supplied by the NFL’s McCarthy, followed by Matheson and Noll responding to the NFL commissioner’s $500 million economic impact comment.

Super Bowl 52 in Minneapolis on Feb. 4, 2018. Consultant Rockport Analytics said gross spending eclipsed the $450 million level. From that report:

Super Bowl 51 in Houston on Feb. 5, 2017. The Houston Super Bowl Host Committee hired Rockport Analytics, which said this Super Bowl “brought in an incremental $347 million of new spending to Greater Houston.”

Super Bowl 47 in New Orleans on Feb. 3, 2013.  A University of New Orleans study said this Super Bowl generated $480 million in “net impact on the region.”

Super Bowl 42 in Glendale, AZ on Feb. 3, 2008. W.P. Carey School of Business at Arizona State University measured this Super Bowl’s economic impact, using students in the Sports Business MBA program who found $500.6 million in direct and indirect spending by visitors and organizations who came to Arizona for the Super Bowl.

Super Bowl 49 in February 2015 and the 2015 Pro Bowl in Arizona also produced a gross economic impact of $719.4 million in the region, according to the Seidman Research Institute at the W.P. Carey School of Business at Arizona State University. The report was commissioned by the Arizona Commerce Authority in partnership with the Arizona Super Bowl Host Committee and focused on the nine-day period from Jan. 24-Feb. 1, 2015, which coincided with the Pro Bowl and Super Bowl played at University of Phoenix Stadium on Jan. 25 and Feb. 1, respectively.

Super Bowl 41 at Dolphin Stadium on Feb. 4, 2007.  The Sport Management Research Institute of West Palm Beach, Florida said this Super Bowl created $463 million in economic impact in South Florida. Highlights here:

Responding to Goodell’s statement that the Super Bowl economic impact is about $500 million for a host city is Holy Cross’ Matheson, who does about 100 media interviews a year on the topic, and Noll, a sports economist who often publicly discusses economic impacts of sports in the media.

Victor Matheson of Holy Cross

Matheson: “Goodell has a vested interest in convincing Las Vegas that the Super Bowl will bring record profits to the city because Goodell is going to personally ask for somewhere between $20 million and $50 million in handouts from the city in exchange for the rights to host the game. There was a bid book from the Minneapolis Super Bowl leaked a couple of years ago (and it is still online if you do a quick search) that contained the phrase “at no cost to the NFL” roughly 100 times. They are going to ask for huge tax exemptions, free stadium space, free parking lots, free hotels, free convention space, etc., all paid by the local host committee (which often includes local government).

“A typical city generally sees an increase in city GDP of roughly $30 million to $130 from the game – not nothing, but also not $500 million. Notice that Goodell is taking pretty much the most optimistic forecasts and saying Vegas will not only meet them but ‘blow them out of the water.’ As for Vegas specifically, it might turn out well and it might turn out poorly.
“On the one hand, Vegas is better off than pretty much any city in the country in terms of hotel capacity. One problem in most cities is that the Super Bowl crowds out all of the rest of the economic activity in the city during the Super Bowl week by filling up all of the available hotel rooms. With 170K rooms, that won’t happen as much in Vegas (compared to roughly 65K rooms in places like Phoenix and Houston).
“On the other hand, Vegas makes its real money by having people lose it in the casinos. Fill up a weekend with people who aren’t gamblers but instead spend their entire Sunday at the stadium and you might come out behind, especially considering the game might take place during Chinese New Year when Vegas counts on high-rollers from Asia.”
And here’s Noll: “By ‘economic impact,’ the NFL means the gross number of dollars spent by those who attend the Super Bowl.  The starting place is $2,000 or so per ticket times 70,000 fans ($140 million).  That goes to the NFL and, after costs, the excess is divided equally among the teams in the league. Of that $2,000, a few dollars goes to people in who are employed for a few hours to take tickets, provide security, and clean up.  All this adds up to less than $1 million net increase in local wages. The calculation also includes spending on concessions in the stadium, which adds $10 million-20 million.  Most of  the price of a beer is net revenue over cost, which also goes to the NFL.  A few percent will go to employees at concession stands and local suppliers of the stuff that is sold at the concession stands, adding, at most, another $1 million in increased local net income. The biggest part of the ‘impact’ is spending in hotels and restaurants.  Nearly all of the fans attending the game are from out of Las Vegas, plus some more visitors (like team personnel) who are not part of attendance.  But all of this will account for less than half of the hotel rooms in town (about 150,000).  Moreover, the weekend occupancy rate in Las Vegas in January and February is around 90 percent, so at most 15,000 of the visitors in Las Vegas will be a net gain.
Roger Noll of Stanford
“The ‘impact’ number will be, say, 75,000 times $4,000 ($300 million), but the net gain will be about $60 million. In addition, the hotels and restaurants often raise their prices, and this increment goes to the hotels in profits (it does not increase employment).  Thus, the beneficiaries will be the owners of the hotels and resorts, which is one reason that the local casino/resort industry supported building the stadium. he one place where the NFL numbers may be low is the impact on hotels/casinos because of gambling.  I do not know whether Super Bowl attendees are likely to spend more or less on gambling than other tourists do, but given the generally high incomes of people who attend Super Bowls, it is possible that gambling expenditures will go up substantially on Super Bowl weekend.  On the other hand, these visitors will not be primarily motivated by gambling to be in Vegas, so they might spend less.  A major unknown about the Raiders moving to Vegas is its effect on gambling – and the effect of close association with gambling on the NFL.  An interesting experiment!
“Of course, whatever the effect, they will mainly be on the profitability of the casinos. The bottom line is that hosting a Super Bowl provides a small net economic benefit to the community, but it is much less than the ‘impact’ numbers put out by the NFL, and almost all of the incremental income will be profits for the casinos and hotels.”
LVSportsBiz.com reached out to the Las Vegas Convention and Visitors Authority (LVCVA), the local public tourism agency. A spokeswoman, Lori Nelson-Kraft, commented, “We are not in the position to speculate over possible economic impact for an event that is yet to be hosted in the destination.”
Jeremy Aguero of Las Vegas-based Applied Analysis. Photo credit: Daniel Clark/LVSportsBiz.com
LVSportsBiz.com also reached out to Las Vegas economist and lawyer, Jeremy Aguero of Applied Analysis, who conducts economic impact reports and is the consultant who is guiding the public Las Vegas stadium authority board. Aguero said he believed Goodell was accurate in his $500 million economic impact number.  “I don’t know how to quantify the phrase ‘blown out of the water.’  That said, I think it will be higher, and it has the potential to be significantly so,” Aguero said.

There’s excitement in the public talk that Las Vegas might want to host the 2025 Super Bowl. But Goodell offered some sound advice: let’s get through the NFL Draft in Las Vegas from April 23-25.

 

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Tags: Jeremy AgueroLori Nelson-KraftRoger GoodellRoger NollVictor Matheson
Alan Snel: Alan Snel brings decades of sports-business reporting experience to LVSportsBiz.com. Snel covered the business side of sports for the South Florida (Fort Lauderdale) Sun-Sentinel, the Tampa Tribune and Las Vegas Review-Journal. As a city hall beat reporter, Snel also covered stadium deals in Denver and Seattle. In 2000, Snel launched a sport-business website for FoxSports.com called FoxSportsBiz.com. After reporting sports-business for the RJ, Snel wrote hard-hitting stories on the Raiders stadium for the Desert Companion magazine in Las Vegas and The Nevada Independent. Snel is also one of the top bicycle advocates in the country.
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