By the time Super Bowl LIII has been decided on the evening of Feb. 3, the host city of Atlanta will have reaped a windfall of some $400 million from the event.
Or maybe it’s $205 million. Or maybe it’s $40 million. Or $20 million.
Or zero.
Welcome to the mysterious, highly malleable world of economic-impact studies. Every major sports event or new arena comes with assurances that local residents, who are sometimes expected to cough up eight- and nine-figure tax subsidies, will be repaid with interest as fans stream into their cities to watch big events.
Super Bowl LIII is no different. America’s biggest sporting event will be held at 2-year-old Mercedes-Benz Stadium, built with more than $700 million in public funding, which includes hotel tax revenues earmarked for debt service and future maintenance.
In the run-up to the game, the Metro Atlanta Chamber of Commerce projected a $400 million windfall. A Georgia State University economist came in at $205 million.
Robert Baade, who has been studying the economic impact of sports events and arenas for more than three decades, said he consistently finds the economic projections rarely match reality. When Baade, an economics professor at Lake Forest University in Illinois, studies the data after games have been played, he typically finds “the impact on the economy is not statistically significant.”
Baade said sports economists have a rule of thumb: “If you moved that decimal point one place to the left, then you’re more likely to provide a better measurement of the impact.” So that $400 million estimate becomes $40 million.
Victor Matheson, a sports economist at College of the Holy Cross, said he “tends to get numbers between $30 million and $130 million” when researching the impact of Super Bowls.
“That’s not nothing, but it’s a fraction of what’s being claimed,” Matheson explained. “Even the $130 million is hard to find in a huge economy. It’s like looking for a needle in a haystack.”
The main problem with economic-impact studies is that they measure gross, rather than net, economic activity. The math goes like this: Estimate the number of people coming to the game, how many nights they’ll stay, how much they’ll spend daily, and factor in a multiplier because the money they spend will be re-spent.
Economists see several problems with this formula, including the “crowding-out effect.” Many of those football fans headed to Atlanta are simply displacing normal economic activity. Hotel occupancy rates will rise, “but that is not quite as big as you might think,” according to Matheson.
But wait, you say. Everyone will be rolling in cash from the higher room rates paid by fans attending the Super Bowl, right?
Not exactly, thanks to what economists call “leakages.” Simply put, what happens in Atlanta on Super Bowl weekend won’t necessarily stay in Atlanta. Room rates might triple, but hotel desk clerks and maintenance workers won’t get a cut of that action. “That money’s not sticking in Atlanta. It’s going to corporate headquarters and into shareholders’ pockets,” Matheson said.
Even anecdotally, he can point to service workers — everyone from Uber drivers to exotic dancers — who flock to the Super Bowl host city for game week, then leave when it’s over, taking with them the money they’ve earned.
These dubious impact studies are prevalent throughout the sports industry. For example, the 65,000-seat football stadium that will be the new home of the itinerant Oakland Raiders starting in 2020 will produce an annual economic impact of $620 million, according to the Southern Nevada Tourism Infrastructure Committee. That figure helped justify $750 million in public financing.
“Six hundred million [dollars] of economic impact from an NFL team moving to Vegas is almost certainly absurd and relies on massive assumptions,” Matheson explained. A major assumption is that tens of thousands of out-of-towners will visit for NFL games and other events. Even if that happens, they would generate greater economic impact elsewhere.
“To the extent that people are in Vegas and spend five hours in a football stadium instead of five hours in the casinos, that’s a huge loss for Vegas.”
Baade takes an even dimmer view of stadium subsidies. He notes that the biggest beneficiaries are team owners and athletes, who often live elsewhere most of the year. And the subsidies inefficiently create low-wage, seasonal service jobs.
“We kept finding that adding a team or an arena to a metropolitan economy didn’t really have any effect at all,” Baade said. “In fact, it could actually contribute negatively to a metropolitan economy.”
Baade and Matheson have long argued that local politicians would be on firmer ground arguing that hosting a Super Bowl or building a new stadium inspires civic pride.
“We actually have evidence that’s true,” Matheson provided. The problem, he said, is that civic pride isn’t enough “to squeeze $750 million out of people.”
Martin Kaufmann has covered sports for more than two decades, including the past 16 years as senior editor at Golfweek.
