The Superbowl and local economics

The Miami Insider has a comment on who makes money today, and who benefits in the longer run. Reprinted with permission from the author.

Daniel Honan writes, quote:

The Economic Impact: Can Super Bowl XLIV Live Up To The Hype?

When Plum posed this question to both the Super Bowl Host Committee and a number of skeptical economists, we found about as much consensus as if we had asked Saints and Colts fans which team would win the game.

While some Super Bowl boosters have forecast an economic impact as high as $500 million, several professors who study the economics of sports say the impact is likely to be negligible.

Andrew Zimbalist, Professor of Economics at Smith College, argues that football fans will simply displace other visitors. According to Zimbalist, “A lot of people will say ‘Let’s not go to Miami this year because it will be crazy. Let’s find some place else to play golf this year.’”

Representatives from the hotel industry in Miami tell a different story: they are reaping the benefits of higher rates and booking requirements that mandate a minimum stay of anywhere from three to six nights. Maria Elena Rubio, General Manager of the Mondrian South Beach—which opened in 2008—is eagerly anticipating her hotel’s first Super Bowl. She told Plum, “I think what we are seeing is perhaps a higher average rate that is commanded because you call around and different hotels are sold out already.”

But the profit from the higher average hotel rates doesn’t necessarily stay in Miami, says Phil Porter, Associate Professor of Economics at the University of South Florida. According to Porter, the increased profit “flows out of your community immediately and gets deposited in Paris Hilton’s bank account in Los Angeles.”

The bottom line.

The South Florida Super Bowl Host Committee is an organization that was formed to bolster local business development around the Super Bowl. According to Committee Chairman Rodney Barreto, the committee commissioned an economic impact study in 2007, when the Super Bowl was last held at Dolphin Stadium in Miami Gardens. According to Barreto, the study showed a $463 million impact on the region. Barreto predicts this year will be no different. “This is going to be a big shot in the arm,” he said.

Some economists dispute the $463 million amount. According to Professor Dario Moreno of Florida International University, the real number is “from $136 million to $156 million.”

So what accounts for the discrepancy? Professor Phil Porter says the studies commissioned by the host committee are missing key data. Porter points to a report by the State of Florida’s Department of Revenue. In February 2007, taxable sales for Miami-Dade County were actually down from the previous February, when there was no Super Bowl.

February 2006: 3,318,227,640

February 2007 (Super Bowl): 3,307,835,960

While these numbers are certainly hard to argue with, another contentious issue is the cost to taxpayers of hosting the Super Bowl. According to Porter, “most of those expenditures are hidden in a budget,” such as police overtime or other necessary community enhancements. “A conservative estimate is you pay $20 million to host a Super Bowl,” says Porter.

It is likely that additional enhancements will be required at the newly renamed Sun Life Stadium if Miami hopes to be competitive in its quest to add to its record of hosting 10 Super Bowls. Despite $250 million worth of improvements undergone in 2007, NFL commissioner Roger Goodell told the Associated Press in December, 2009 that Sun Life Stadium is falling behind other “state of the art” facilities around the country. Further enhancements are sure to be an expensive proposition, perhaps to the tune of another $250 million.

According to Bloomberg News, it is highly unlikely that Florida taxpayers will foot the bill for expensive upgrades such as a partial roof and new lighting for high-definition television broadcasts at Sun Life Stadium.

If any kind of public-funded stadium improvement plan is to have a chance, the Super Bowl must deliver on its promise to boost the local economy this year. So far, the jury is still out.

“Every major city in America wishes they had a Pro Bowl and Super Bowl in their books in 2010,” says Super Bowl Host Committee Chairman Rodney Barreto.

Professor Phil Porter disagrees: “The bottom line is that the Super Bowl certainly doesn’t warrant building $200-500 million palaces.”