Ed Lotterman: Benefits of sports events are overhyped

May 30, 2014 

CRB Ed Lotterman

Ed Lotterman


The Super Bowl is coming to Minneapolis in 2016. In just a few days, soccer's World Cup is starting in Brazil. In two years that city will have the Olympics.

Of course, such international events are bigger than a one-shot football game or even the NCAA Final Four. But Twin Cities boosters are hyping a Super Bowl as a local economic windfall, as would boosters in whatever city hosted the game. But what do sports events really mean for the affected local economy as a whole? Are they really a financial bonanza for local businesses? Or is this effect as hyped as the big game itself?

More broadly, what are the economic effects of mega-events, such as soccer's World Cup or either summer or winter Olympic Games? Is it good for a city or country to land these mega-events? And within the area affected, who wins and who loses?

Evidence suggests that a much-hyped but one-time event such as the Super Bowl has moderate net economic benefits for the city chosen. These benefits seldom are as great as promoters claim, but probably are not a net loss. Moreover, there is no net gain to any broader overall economy - not holding the Super Bowl would not cause any measurable impact on U.S. GDP, just as abolishing the Olympics or World Cup would not reduce total global output.

The Olympics and World Cup tournaments probably were net economic pluses for the hosting venues, but over the past couple of decades they've grown to a grotesque scale and now are a net economic loss to whichever location "wins" them. These events can generate the benefits of national pride and international visibility, particularly for emerging nations such as South Africa, China and Brazil. Whether this is worth the economic cost is subjective. And as frequent news about corruption in preparation for the Sochi Winter Games or ineptitude in Brazil's organization of both the 2014 soccer championship and 2016 Summer Games shows, the "reputational effects" on a nation can be negative as well as positive.

The primary benefits of a major sports event to the hosting locale stem from spending by attendees and the army of media workers who come to town. Hotels fill more rooms, restaurants sell more meals, taxis have more fares and clubs and other providers of recreation see more business. Shoppers among the attendees may hit local stores.

There is an employment boost, although largely of temp workers for very short terms.

For one-off, multiday events such as the Olympics and World Cup, construction of new facilities is a major factor, one that has burgeoned in recent decades. These also present major opportunities for corruption. Construction is a minor factor for the Super Bowl or for Final Four-type playoffs.

Boosters, who usually include local elected officials, stadium operators and the hospitality industry, often make grand claims about the extent of the bonanza in both sales and employment. These claims often depend on projected "multiplier effects" of secondary spending and hiring. Such economic multipliers are real, but they are notoriously hard to quantify.

Moreover, boosters seldom subtract any lost business activity. People who otherwise might visit the venue city for nonsports activities are scared away by the prospect of crowds of gamegoers. Who is going to come to the Twin Cities that weekend or to Rio over periods of weeks for regular tourist or recreational activities if they know that the airport, restaurants and hotels all will be jammed with sports fans? Yes, extra sales by hospitality businesses net this out. But no one counts the slow weekend at theaters, museums and tourist attractions.

This was a particularly severe problem during the London Olympics in 2012, during which many traditional tourist businesses saw drops in traffic because of the prospect of dealing with Olympic crowds. The same was true to some extent for Sydney and Athens in 2000 and 2004.

There also are costs to local government, even for events that require little new construction. Overtime for policing and traffic control is one. Cleanup of trash near the venue is another.

Going back at least to Montreal in 1976, organizers often tout how new sports venues and Olympic Villages will be put to productive use once the games are over. Actual performance in this regard is dismal. A quick Internet search on "abandoned Olympic venues" will produce myriad photos of derelict infrastructure dating from Berlin in 1936 to Beijing in 2008.

Boosters also hail the intangible benefits of showcasing their cities to the rest of the nation or world. Not only will many move it to the top of their list for future tourism, but business owners will open new plants and offices. This effect may be real, but it usually is much smaller than touted. For every attendee who says, "Gee this is a great town, let's come back next summer," there are several who say "Well, now we have seen Gotham City and we can cross it off our list."

Unspoken but tangible political benefits may accrue to local leaders. Having a nationally or globally reported event in one's city generates excitement and local pride. This is true for the Super Bowl. But for mega-events, it is turning into a two-edged sword. The lavish public spending on World Cup and Olympics preparations have rankled many Brazilians.

Bringing the Super Bowl to our town simply diverts spending here from some other part of our nation. But there are local benefits. So as a Super Bowl site announcement is, on balance, good economic news for the city, the day after the game economic life will go on pretty much as before.

Write Ed Lotterman teaches at boise@edlotterman.com.

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