• Slug: Sports-Financial Impact, Super Bowl Arizona, 1,700 words.
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By Alex Wakefield
Cronkite News

PHOENIX – On Feb. 12, State Farm Stadium in Glendale hosted its third Super Bowl in 15 years, a thrilling 38-35 Kansas City Chiefs victory over the Philadelphia Eagles.

Nearly eight months later and 13 miles southeast of the stadium, at downtown Phoenix’s Herberger Theater, David Rousseau, chairman of the Arizona Super Bowl Host Committee, announced that the event had generated $1.3 billion in total economic output for Arizona and contributed $726.1 million to Arizona’s gross domestic product.

These numbers, which come from an analysis performed by the Seidman Research Institute at Arizona State University’s W.P. Carey School of Business, have been touted as the highest economic impact of any event in Arizona’s history, and the biggest impact of any previous Super Bowl for which economic impact statistics are publicly available.

Some economists, however, disagree over the true impact of an event of the Super Bowl’s magnitude.

“When it comes to the economic impact of mega events like the Super Bowl, that is something that economists have studied quite extensively,” J.C. Bradbury, a professor of Economics at Kennesaw State University, told Cronkite News. “And the general result is that the economic impact of these events are actually quite small – far less than numbers that are claimed.”

Dr. Anthony Evans, a staff director and senior researcher at the Seidman Institute who assisted with the Super Bowl impact report, told Cronkite News that the $1.3 billion headline number is “not a good number,” as it measures total gross output, rather than contributions to gross domestic product.

In an email, Evans said gross output “has been used in prior economic impact studies for the Super Bowl nationwide,” but that it is “acknowledged by the U.S. Bureau of Economic Analysis to be an upward biased estimate of the effect of an economic activity on local area income.”

Evans said the number to focus on was the claimed $726.1 million in total contribution to Arizona’s GDP.

To Victor Matheson, an economics professor at College of the Holy Cross who specializes in the economic impacts of sports, even that GDP contribution number is far too high.

“This type of economic impact claim is pretty common, but it has been debunked again and again,” Matheson said.

Over 1,400 usable surveys of visitors throughout the Valley were used by the Seidman Institute to determine the nature of tourist activity throughout the festivities surrounding the Super Bowl along with the game itself. It includes such factors as length of stay, how much money tourists spent and what they spent it on during their time in the Valley.

Locations surveyed included the Phoenix Convention Center, Old Town Scottsdale, Glendale’s Westgate Entertainment District near State Farm Stadium and a music festival that was held at Margaret T. Hance Park in downtown Phoenix.

Those calculations were then added to estimates of money spent by the NFL, the host committee, television companies, credentialed media and events associated with the game, allowing the Institute to approximate the total amount of money injected into the economy by the event.

“All of that type of expenditure, we put all that into one big pot,” Evans said. “Then we assign it to the different parts of the economy where we believe it is spent, and we estimate the indirect and induced – or ripple – effects of that expenditure locally within a commercially licensed impact model.”

Matheson said that rather than trying to estimate how many tourists came to the event and how much money they spent, analysts should instead compare the months that a city hosts an event against those when it does not.

“The data does not seem to match these billion-dollar claims that proponents of this come up with,” Matheson said.

Between $50 and $150 million could be reasonably expected as an economic impact of a mega-event like the Super Bowl, according to Matheson. Bradbury thought $20 million was more plausible.

Matheson identified three primary reasons for what he saw as the disparity between the economic impact of events estimated by groups like the Seidman Institute and the event’s true impact.

First is the “substitution effect” in which money that would have been spent in the Valley, regardless of the Super Bowl’s presence, is counted as economic activity generated by the event. If a Scottsdale hotel is at 90% capacity during Super Bowl week, for example, every guest is counted as Super Bowl-related activity regardless of the hotel’s usual occupancy rate.

“You can’t say that every hotel room that was filled during the Super Bowl would have gone empty without the Super Bowl,” Bradbury said.

Second is the concept of “crowding out,” in which an influx of people due to the Super Bowl prevents some economic activity that would have otherwise occurred that weekend, such as non-Super Bowl visitors or money that would normally be spent by locals.

Evans called these critiques “fair,” but said that because the Valley experiences several weeks of optimal weather conditions before and after the game, tourists looking to avoid crowds had a plethora of other options. Additionally, Evans said, the hotels often doubled their rates or more, proving that Super Bowl-related economic activity provided more of a bump than non-game-related tourism would.

The third point Matheson outlined was “leakages,” or money “spent locally that doesn’t stick locally.”

Hotels, he noted, are a good example of this. Although hotel rooms may be more expensive during the weekend of the Super Bowl, much of the money visitors spend on them does not circulate into the local economy. Instead, it ends up with the companies that own and operate the hotels.

“In terms of how much all that spending helps the local economy in Phoenix, it’s much lower than you might think,” Matheson said.

Evans said that because the stadium was already built, rather than being constructed in anticipation of hosting the Super Bowl (like SoFi Stadium in Los Angeles and Allegiant Stadium in Las Vegas), this Super Bowl did not incur costs others often do.

He added, however, that host committee expenditures, which make up about 8% of the $726.1 million in GDP estimated by the analysis, as well as money spent on security forces could have impacted the final number.

“You could probably reduce that $726 million figure down a little bit, maybe by 10% at a push,” Evans said. “But that is still an infusion of around $650 million new dollars into the local economy.”

The Institute’s analysis has not been made public. Evans said there were some elements of the report he could not discuss in-depth due to NFL policy.

“This report is commissioned by the host committee on behalf of the NFL and the NFL, as a client, is quite protective over the breakdown of numbers,” Evans said.

Bradbury said it was “completely inappropriate” to release a report with a number that large without an explanation of the methodology or rigorous backing of the results.

“It’s no more reliable than tarot cards,” Bradbury said.

Although economic impact studies measure the Super Bowl’s impact on the entire Valley, Glendale – the city that hosts the game – has a complicated relationship with the event.

In comments that drew the ire of Arizona Cardinals president Michael Bidwill, Glendale mayor Jerry Weiers has said that the city lost more than $1 million while hosting the 2008 Super Bowl, and told ESPN the Magazine that he expected the city would lose even more money hosting the event again in 2015.

Glendale interim deputy city manager Rick St. John told Cronkite News that although the city “may not have made as much as some other people on the immediate,” he is “fairly confident that we’re going to demonstrate that the Super Bowl didn’t cost the city of Glendale any money.”

St. John said the city budgeted $3 million for hosting the event and believes the city ultimately only ended up spending about $2.7 million. He said he doesn’t have an answer as to why more of the hundreds of millions of dollars the Institute report said was added to the state’s GDP did not end up in Glendale’s coffers.

“How did the Super Bowl impact Glendale financially? I think you’re going to have to wait five to 10 years to see the true economic impact,” St. John said.

Rousseau said after the press conference that he did not have insight into whether Glendale made money on the event.

“I know that Glendale was thrilled with the weather and the performance, and it obviously ended up being a marquee game,” he said. “And so I think everybody was happy from that perspective. And they’ve been a great partner all the way through this game.”

Beyond an infusion of dollars into the state’s economy, Evans said there are also intangible positive benefits to hosting an event of the Super Bowl’s magnitude. He suggested one benefit is that the Super Bowl attracts industry leaders and C-suite executives and can encourage them to bring business to the state.

At the press conference, Bidwill touted a program designed by leaders in the state to woo companies and their CEOs to Arizona by hosting events during Super Bowl festivities where executives and state leaders can mingle, something Bidwill called a “secret sauce” that creates a “river of economic benefits.”

Arizona Auditor General Lindsey Perry published a report before the press conference that found the secret sauce cost the state over $2.4 million and involved lavish gifts and free Super Bowl tickets for members of the Governor’s staff. The Arizona Attorney General’s Office is investigating the matter.

Another intangible benefit mentioned by Evans was the ability to project an image of the Valley, which can bolster its reputation and lead to increased investment in the future.

“If you live in the Northeast seaboard in February, it’s probably going to be pretty cold,” he said. “You look down here, people are in shorts, sliders; you know, the sunshine and blue skies. That makes them think about Arizona as a tourism destination.”

St. John said that he did not know of another city similar in size to Glendale that receives the publicity that Glendale does. He even speculated that Glendale’s reputation, and that of State Farm Stadium, for being capable of playing host to Super Bowls might have played a role in bringing another mega-event to the city shortly afterward.

“I’ll point to one thing: Taylor Swift,” he said. “If we hadn’t hosted the Super Bowl, would she have started her tour here in the City of Glendale? Maybe. Maybe not.”

For more stories from Cronkite News, visit cronkitenews.azpbs.org.