Over 100 million Americans will turn their attention to Houston this weekend, as Tom Brady suits up against the Atlanta Falcons for his record seventh Super Bowl. But, according to the NFL, it’s not just the Patriots’ quarterback who will be looking to make it big in Houston. The real winner is supposedly the city itself, which stands to make hundreds of millions of dollars hosting the event. But while Tom Brady has turned around his season after sitting out a few early games for his role in “deflate-gate,” the league’s bigger scandal is “inflate-gate” – the league’s supporters promoting wildly inaccurate economic impact estimates of its business that are routinely off by hundreds of millions of dollars. Don’t hold your breath for a full NFL investigation.
Estimates of the economic impact of the Super Bowl routinely top $500 million; one 2015 study projected the impact of the game in Glendale, Arizona to top $719 million. If these studies are to be believed, “Super” is an apt description for the event.
At first blush, it’s easy to buy these estimates. You would have to be blind to ignore the sold-out hotels, packed restaurants, and busy sidewalk vendors surrounding the site of the big game. Unfortunately, there are significant difficulties in measuring the impact of “mega-events,” such as the Super Bowl, that are typically overlooked by most economic impact studies.
How the NFL Pads the Super Bowl’s Numbers
To begin with, estimates of the number of people visiting the host city because of the Super Bowl are often wildly optimistic. For example, when the Super Bowl was held at Metlife Stadium in 2014, some projected that 400,000 tourists would descend upon New York City for the game. Considering that the stadium only seats 80,000 spectators, apparently the idea was that over 300,000 fans would want to come to the Big Apple to watch the Super Bowl in the bar of an over-priced hotel, just so they could say they were in the same city as the big game (which, of course, they wouldn’t be, since Metlife Stadium is actually located across the Hudson River in New Jersey).
Even if the number of tourists is estimated properly, there are still major problems with most economic impact studies. First, money spent by Houston residents this weekend should not be counted as an economic benefit of the Super Bowl, since this doesn’t generate new economic activity for the region, but simply shifts spending from one part of the local economy to another.
Second, the Super Bowl will crowd out regular tourist and business travel to the city, as people seek to avoid congestion around the event. Certainly no one would schedule a convention in the host city during Super Bowl weekend, and other travelers may be turned away by sold-out hotels and high room prices. San Jose actually experienced a drop in hotel occupancy during last year’s Super Bowl in neighboring Santa Clara, as its normal business clientele fled the area in droves.
Finally, there is the issue of whether the money spent at the Super Bowl stays in the local economy. Much of the money spent by out-of-town visitors at the Super Bowl goes towards hotel rooms, rental cars, and restaurants. To the extent that these firms are national chains, profits earned during the event at these businesses do not increase the welfare of citizens in the local economy but rather accrue to stockholders around the country. And while hotels may double or triple their room prices during Super Bowl weekend, they don’t double or triple the wages of their desk clerks or room cleaners, the actual residents of Houston. Moreover, since the Super Bowl moves every year, the one-off boost in sales can’t conceivably have a long-term effect on local hiring or investment.
Many economists, including Phil Porter, Brad Humphreys, Dennis Coates, Robert Baade, Craig Depken, and Robert Baumann, have conducted studies designed to correct for these problems by looking at the actual economic performance of Super Bowl host cities after the big game. These studies look at a range of economic variables, including employment, taxable sales, personal income, and tourist arrivals, and generally find a positive net impact of the Super Bowl ranging from $30 million to $130 million — nothing to sneeze at, to be sure, but also a fraction of the $500 million to $700 million claimed by the game’s supporters.
Corporate Welfare for Billionaires
What’s wrong with the NFL throwing around a few exaggerated numbers if the real figure, though a lot smaller, is still positive? The answer is simple: the inflated impact numbers are used to extract massive subsidies from taxpayers, both to host the event and to build new stadiums for millionaire players and billionaire owners.
The NFL places huge demands on host cities that require local taxpayers to foot the bill for security, added transportation, weather contingencies, stadium rental, and convention space, while the NFL gets to collect all of the revenue for ticket sales, parking, and NFL vendors. Moreover, the NFL usually negotiates a complete exemption from most of the sales and use taxes for their hotel rooms, meeting space, and even Super Bowl tickets themselves. So, if any Houstonians want to avoid the Super Bowl crowds on Sunday and head to the local movie theater instead, they will pay more taxes on their $8 matinee tickets than football fans will pay on their $2,500 tickets to the big game.
An even bigger expense to local taxpayers lurks in the background. The NFL uses the Super Bowl as a carrot to persuade otherwise reluctant cities to build extravagant new stadiums at public expense. Seven of the nine Super Bowls scheduled between 2011 and 2019 were awarded to cities with stadiums less than five years old at the time of the game, and the seven “lucky” cities hosting Super Bowls in their shiny new stadiums averaged nearly $450 million each in public construction subsidies.
In effect, the NFL says, “Build a new stadium with $450 million in taxpayer money, and we will give you a football game worth $500 million in economic benefits. It’s like getting a stadium for free!” Of course, that is only true if the Super Bowl is truly worth $500 million, rather than a small fraction of that amount.
While the impact of the Super Bowl is not insignificant, it is nowhere near large enough to justify public expenditures on the order of the construction of a new stadium. Overall, academic studies have calculated an economic impact from the Super Bowl on the order of one fifth to one tenth the estimates reported by the NFL and various host committees. Cities would be wise to view these boosters’ studies with skepticism — it seems that a little extra padding is an essential element of the game, both on and off the field.