Upon Further Review, Benefits of NJ Super Bowl May be Over-Stated

With great fanfare earlier this month, the New Meadowlands Stadium submitted a bid to the NFL to host Super Bowl XLVIII in 2014.

“Hosting the Super Bowl in the New York/New Jersey area will not only place the game of football on the largest stage it’s ever seen, but the positive economic impact for the region will be substantial,” Woody Johnson, Chairman and CEO of the New York Jets, said after the bid was submitted on Wednesday. “Studies have shown that the economic benefit would exceed $550 million, providing a major boost to this area on many levels.”

Johnson’s comments about the economic benefits of the big game were echoed by other leading figures from the world of sports, as well as state lawmakers promoting New Jersey’s efforts to host the contest. In addition, most news accounts of the bid submission reported that the host committee is projecting that a local Super Bowl will generate $550million for the region. Likewise, a Senate resolution supporting the proposal promises that “the economic benefits of a Super Bowl in this state would be substantial, generating hundreds of millions of dollars in economic activity.”

But you may not want to count that money too soon.

Several research studies conducted by economic experts show that the economic benefits predicted by proponents of hosting a major sporting event such as the Super Bowl are far from accurate.

“While sports boosters routinely claim large benefits from hosting mega-events, the overwhelming majority of independent academic studies of these events have shown that their economic impact appears to be limited,” Victor A. Matheson, an associate professor at the College of the Holy Cross, wrote in a paper titled Mega-Events: The effect of the world’s biggest sporting events on local, regional, and national economies.

“While the gross impact of these huge games and tournaments is undoubted large, attracting tens or hundreds of thousands of live spectators as well as television audiences that can reach the billions, the net impact of mega-events on real economic variables such as taxable sales, employment, personal income, and per capita personal income in host cities is negligible,” Matheson said.

Philip K. Porter, a professor at the University of South Florida, examined six Super Bowls that took place between 1979 and 1996 and saw little evidence that the games generated additional consumer spending.

“The results are shocking,” Porter wrote in “Mega-Sports Events as Municipal Investments: A Critique of Impact Analysis,” a chapter in The Economics of Sport. “For each of the six events studied in three different locations, there is no measurable impact on spending associated with the event. The projected spending and spillover benefits of regional impact models never materialize.”

In an article published in The Sport Journal, Matheson identified several reasons for the discrepancies between predicted economic benefits and actual dollar figures.

For starters, the higher numbers usually are provided by groups or individuals in support of hosting a major sporting event, so the objectivity of the projections is questionable. In addition, many of the hotels, restaurants and car rental agencies patronized by Super Bowl attendees are national chains, so the revenue they generate does not stay in the local economy.

The predictions also ignore what is known as the substitution effect. According to Matheson, “To the extent that attendees at a sporting event spend their money on that event instead of on other activities in the local economy, the sporting event simply results in reallocation of expenditures in the economy, rather than in real net increases in economic activity.”

Similarly, the economic experts argue that projections of additional revenue from hotels and restaurants in Super Bowl host cities fail to take into account the fact that these businesses often operate at near or full capacity anyway because most host cities are popular tourist attractions.

Lastly, hosting a Super Bowl requires additional expenses for the host community for traffic control, public safety, sanitation and other services.

Of course, the New York/New Jersey area is a unique market. In this case, the $550 million economic benefit being projected by the host committee could be more accurate than predictions for previous Super Bowls.

But a study conducted by Dennis Coates and Brad Humphreys at the University of Maryland suggests that there could be another way to generate revenue from a Super Bowl. Although the authors found that hosting a Super Bowl has “no measurable impact on real per capita income in the host city,” they did observe an economic benefit in the home city of the Super Bowl winner. Their research, published in the Journal of Sports Economics, suggests that “winning the Super Bowl increases real per capita income in the home city of the National Football League champion by about $140.”

So if New Jersey is hoping to capitalize on the Super Bowl, the state may want to reconsider its efforts to convince the NFL to play the game here. Instead of playing host; New Jersey may be better off investing in personnel for the Jets and Giants to help one of the teams that call the Meadowlands home to actually win an NFL championship.

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