Economic Impact of Sports Events

Abstract

Introduction Major sports events undeniably bring with them large crowds of fans and media. The Super Bowl, Major League Baseball's (MLB's) All-Star Game, the Masters Golf Tournament, and big home football games in College Station, Auburn, Tallahassee, and Clemson all attract hordes of people and an apparent burst of economic activity. Thousands of people flock to these events, and they spend plenty of money in the local area. In addition to their spending at the event (tickets, concessions, and souvenirs), these fans spend substantial sums at local hotels and motels, car rental agencies, bars and restaurants, gas stations, T-shirt shops, and so on. This first round of spending provides income to residents in the local community, which results in subsequent rounds of spending. There is a multiplied effect of the initial spending, which is the economic impact of the sports event. Sports leagues and organizations often grossly exaggerate this economic impact for their own purposes. The National Football League (NFL), for example, claims that the impact of the Super Bowl is hundreds of millions of dollars. As we will see, however, such claims are dubious. In this chapter, we examine the fundamentals of economic impact analysis. We begin with a simple multiplier model and explain why the impact of an event is not as large as some leagues and organizations would have us believe. We also review and evaluate some empirical studies that have been conducted to test the reliability of some claimed impacts.