As part of its annual ritual, the NFL commissioned a study to tout the purported economic benefits to Detroit of Super Bowl XL. Not surprisingly, the claims were eye-popping. Among the claims: The game would generate an estimated $302 million in additional output and 5,650 jobs.
Not bad. With a few more good days like that, Detroit can cheerily bid farewell to the auto industry and the 30,000 layoffs announced last month by the Ford Motor Co.
The problems with the NFL study are manifold. To begin with, it was performed in 2004. Even its principle author, David Allardice, is running away from its conclusions.
Allardice now says that many of the assumptions in his study haven’t panned out. A few weeks ago, he told the press, “I have an idea of what the number [economic impact] would be today, but I don’t want to comment on that.”
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Super Bowl XL attracted a large audience, but
economic impact claims may have been inflated. |
Somehow the admittedly out-of-date character of the study didn’t stop the NFL from putting out a press release before the Super Bowl. But the problems run much deeper.
The study assumes, absent the Super Bowl, no one would travel to Detroit during Super Bowl week. Thus, all visitors for the game constitute net additions to the local economy. In fact, hotel occupancy rates in Detroit at this time of year are around 50 percent.
The study also assumes that the average visitor will stay in the city three to four days. While this may be true for Super Bowl games held in warm climes, it is very difficult to imagine that it would be true for Detroit.
And although its methodology is not laid out fully in the report, it appears that the study treats all spending as staying and recirculating in the Detroit economy. Not likely.
Without the Super Bowl, a typical hotel bill of $150 a night might resolve into $100 being paid to local service and maintenance personnel and materials, with $50 going to profits and debt service for the hotel chain owners.
During Super Bowl week, the bill might be $400 a night, again with the same $100 going to local inputs, but now $300 leaking out of the local economy in profits and debt service. So, the card swipe might be in Detroit, but the bulk of the spending goes elsewhere.
Phil Porter, an economist at the University of South Florida, has been systematically studying the economic impact of Super Bowls over the last decade.
Porter points out that after accounting for local economic growth, taxable sales in Jacksonville’s Duval County were in fact lower by $2.7 million during February 2005, the month it hosted Super Bowl XXXIX, than in February 2004.
With a 7 percent local sales tax rate in Jacksonville, the first fiscal impact of the game was to decrease tax collections by $200,000. The second fiscal impact is that the city had to spend an additional $15 million on infrastructure improvements, security and overtime for police, fire and EMS personnel. Net impact: minus $15.2 million.
In a more positive light, PKF Consulting did a study that looked at the impact of hosting the 1999 Super Bowl on the city of Miami. It found that hotel occupancy rates rose only 3 percentage points during Super Bowl week, up to 84 percent, implying an additional 5,525 people. Assuming that each person stayed for four days and spent $400 a day, the game’s direct impact on spending would be $8.8 million.
At the local sales tax rate of 6.5 percent, this additional spending would contribute $572,000 to the public coffers. But the additional fiscal costs associated with hosting the game were estimated at $4 million. Net impact: minus $3.4 million.
Forbes Magazine looked at the change in hotel occupancy rates for the Super Bowls in Tampa, New Orleans, San Diego, Atlanta, Houston and Tempe, Ariz. It then took the increment and assumed that each visitor stayed for four days, spending $400 a day.
It applied the local sales tax rate to the additional spending and deducted estimated costs from hosting the games. For these six cities, Forbes estimated an average negative fiscal impact of $3.6 million.
Cold-weather cities are, of course, different. Normal hotel occupancy rates are much lower in February, and tourism will receive a larger boost from hosting the game. Yet the length of stay by the typical visitor will be shorter.
The last cold-weather host was Minneapolis, in 1992. Forbes applied its methodology to this Super Bowl and estimated a fiscal impact of negative $3.7 million.
The foregoing illustrations do not track all the economic activity associated with the Super Bowl. Super Bowl XL may have provided a modest boost to Detroit’s battered economy. But the inflated claims of the NFL are out of bounds.
Andrew Zimbalist’s most recent book, “In the Best Interests of Baseball? The Revolutionary Reign of Bud Selig,” will be published by Wiley on March 1.
