It's Super Bowl weekend, and the city of Houston is hosting the country's biggest annual sporting event. The Super Bowl is a tremendous spectacle and an unqualified commercial success, certainly from the perspective of the National Football League.
Tickets are selling in the secondary market for a king's ransom. Seats in the lower bowl of Reliant Stadium are on offer for $5,000 each. $2,500 will gain you entrance to the upper deck. If that's still too much, you can go to any number of pre-game parties or tailgates, and rub elbows with NFL players and celebrities by forking over $300 to $700.
Plenty of money will be changing hands in Houston this weekend and at sports books across the globe as well. The Nevada Gaming Control Board reported that $116 million was wagered on the Super Bowl last year, an amount dwarfed by the $4 billion bet elsewhere, much of it with offshore bookmakers.
As big as the game is on the ground, it's even bigger as a television broadcast. More viewers tune in to the Super Bowl broadcast than any other television show, more than 110 million in each of the last three years. In defiance of cord-cutters, the price for Super Bowl commercials continues to rise, seemingly without limit. Business reporter Sapna Maheshwari of the New York Times reports that the going rate for a thirty second spot is an even $5 million, up from a record $4.8 million last year. The Super Bowl broadcast is the hottest property on television.
It is thus hard to over-state the economic juggernaut that is the Super Bowl, but somehow the NFL manages to do just that.
Like other purveyors of what sports economists refer to as mega-events, the NFL has a habit of over-promoting the economic impact of its games on local economies.
The worst recent examples come from the International Olympic Committee, which sets up an auction every few years to become the host of the Winter and Summer Olympic Games. Countries seeking the global sports spotlight for a two-week period promise the IOC lavish accommodations, facilities, and infrastructure investment. The high bidder wins, and the proverbial winners curse has struck particularly hard in recent times.
Brazil invested more than $4 billion in stadiums, sports facilities, and infrastructure in order to host the 2016 Olympics. There is no sign of the hoped-for economic boost. Brazil's economy remains in recession, and once-shiny new facilities are already degraded, lacking funds for basic maintenance and security. The famed Maracana Stadium sits idle with broken windows, damaged doors, stolen tv monitors and seats, its soccer pitch "invaded by worms" according to a CNN report.
Unfortunately, we have seen this movie before. As a FiveThirtyEight article said during the Rio Olympics, replete with references to systematic research on the costs and (lack of) economic impact over the years, "hosting the Olympics is a terrible investment."
The NFL markets its franchises, and the rights to host the Super Bowl, in much the same way as the IOC. Two franchises are currently on the auction block, the Chargers and the Raiders. These teams, to the chagrin of their fans in San Diego and Oakland, are seeking upgraded, subsidized stadiums in whichever locale promises them the most, with the full support of the NFL.
Houston went through this process in the late 1990s, when the infamous Bud Adams moved the Oilers to Tennessee because the new market offered him more. Houston was awarded a new franchise, the Houston Texans, by the NFL in 2002. But that was only after Los Angeles, then without a team, failed to provide tax dollars to subsidize a new stadium.
The award of a Super Bowl to a host city is typically accompanied by estimates of economic impact provided by professional consultants. The numbers are invariably large, with the Houston Super Bowl Committee projecting $350 million in economic impact, and $31 million in state and local tax revenue.
While these numbers sound plausible, they leave something important out of the equation: the unseen impact of bringing the show to town. Mega-events displace other economic activity, business visitors, conventions, and other travel to the host city that would have taken place but go elsewhere during Super Bowl week. That's why there's not a single published academic study — and there have been numerous attempts — which finds a measurable uptick in local economic activity or tax revenue of any Super Bowl in the history of the NFL.
This will be the second Super Bowl hosted by the Houston Texans. Just like the last time, it is unlikely that any lasting impact will be felt by Houstonians once the circus leaves town. The Super Bowl manages to throw off hundreds of millions in cash to the NFL, a few hundred million in vigorish to bookmakers, and millions again to the creative geniuses on Madison Avenue. This all happens every year, no matter where the game is played. For residents of the host city, however, only a small minority will notice an impact on their wallets. For those who go to the game, it could take a while to pay the bill.
The Super Bowl is a America's greatest, most valuable sports event. Sometimes the game itself lives up to the hype. When it comes to the economic impact on local economies, however, the hype far exceeds the reality.
Raymond Sauer (@skipsauer) is a contributor to the Washington Examiner's Beltway Confidential blog. He is an economics professor at Clemson University and founder of The Sports Economist blog.
If you would like to write an op-ed for the Washington Examiner, please read our guidelines on submissions here.