A study released in the Southern Economic Journal in 2008 said leagues, team owners and organizers need to provide high economic impact numbers to justify public subsidies. The study looked at the economic impact of professional sports.
With Super Bowl XLV less than 2 months away, this could call into question the validity of the high economic impact that the North Texas Super Bowl Committee has released. The committee said it estimates an economic impact of $600 million from the Super Bowl.
Dr. Joshua Price, an assistant professor of economics at the University of Texas at Arlington, said anything that might affect the economy is what is trying to be estimated with economic impact. He said there are several ways that different people think the impact should be determined.
“By looking at the Super Bowl, you have so many people coming to town, you can look at hotel rooms to see how many they are renting,” Price said. “You can look at sales tax revenue to see what they are purchasing as well as with jobs created.”
“You have all these different ways that might affect the economy in any way,” Price said. “It’s just a matter of trying to find which ones to account for.”
There are biases that need to be taken into account when coming up with these estimates.
The first bias is the substitution effect. He said that a local resident might spend $1,000 on the Super Bowl rather than doing something else.
“I would have spent that money either way here in the Dallas-Fort Worth area, but instead I’m spending it at the Super Bowl,” he said. “That’s what you think of for the substitution effect and you don’t want to count that towards the economic impact of the Super Bowl because you’re just substituting one activity for another.”
Another bias is crowding out. This occurs when locals are dissuaded from venturing out because of the congestion caused by a large event.
According to the study the “Super Bowl simply displaces other economic activity that would have occurred.”
A third bias is leakage. Leakage occurs when money earned during a large event leaves the local economy.
Price said an example of this would be local hotels don’t have it in their business models to hire more people for a one day event. But they may increase their prices. The staff will get paid the same, but the hotel was able to make more money. The extra money leaves the local economy and goes to the owners of the national chains.
“This is when this type of event benefits other people outside the Dallas Fort Worth area.”
Price said that the study looks at sales revenue in South Florida over a 25 year period. During this time, the area hosted several Super Bowl’s, All-Star games and other larger events.
“What they find is that this doesn’t really increase sales at all,” Price said. “Looking back on the event these numbers are very inflated and part of it is these 3 different biases that come in.”
Tony Fay, the director of communications for the host committee, said Texas requires an economic impact study to gain access to the Special Events Trust Fund. The state also gave guidelines on what needed to be tracked for the study.
With recommendations from the state comptroller’s office and the NFL, the host committee hired Marketing Information Masters of San Diego. Their numbers show the estimated economic impact could be $600 million.
“This is an estimate,” Fay said. “We don’t know what the actual numbers are.”
After the Super Bowl ends, the committee will conduct a post report to see the accuracy of the numbers. Fay said a post report is not required.
“We want to have this every four or five years so we need to know accurately what these numbers are,” Fay said.