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January 24, 2018

What's the economic impact of the Super Bowl on team cities?

Infrequently Asked Questions seeks the answer

Thrilling as it may be for a sports fan, the Philadelphia Eagles' march to the Super Bowl marks more than just an era of feel-goods for Birds fans--it holds tremendous potential for long-term economic gains for the city, slapping silly smiles on business owners and politicians alike.

Or, at least, that's a common assumption.

Curious to know just what kind of economic impact can be expected from the city awareness that comes from an event like the Super Bowl, we reached out to Daniel Funk, professor and Washburn Research Fellow at Temple University's School of Sport, Tourism and Hospitality Management, for an explanation. 

What kind of economic impact does the Super Bowl have on a participating team's city? Is it just more merchandise sales, or does it go beyond that? 

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The city will get a destination image bump when a team goes to the Super Bowl. The increased level of publicity and exposure along with related news coverage on the team and event will spillover and provide some destination branding for the city.  This can create interest in visiting the city at a later date which could bring new money into the local economy via tourism.  

There will certainly be a spike in merchandise sales for each team.

I think you could look at making the Super Bowl as a sort of advertising opportunity for a city; certainly, with a third of the country tuning in to the game, it's a huge opportunity to put a city like Philly on the radar of more Americans. Has the Super Bowl ever really transformed a city, in that sense?

A city that hosts the Super Bowl benefits greatly in terms of exposure, which translates into increased awareness. However, for major cities like Philly, New York City, Miami, Chicago, Dallas, and Los Angeles, the awareness level is already quite high.  Hence, this exposure effect would more beneficial for a city like Minneapolis. Yes, there have been studies that examine the number of times a city has received a media mention across various digital and physical platforms.  This is often quantified in terms of advertising rates that correspond to when the city appears in various platforms. Data analytics on digital platforms such as Google can also provide insight into search terms and what is trending.    

The "IAQ" Fast Facts:

• For cities that aren't hosting the Super Bowl but participate, they gain "destination branding" and an increased likelihood to be visited by viewers at a later date. 

• Economic impacts on host cities are enormous but inconsistent. Houston raked in $350 million when it hosted the Super Bowl, versus Santa Clara's $240 million

• "Psychic Income" may be the most significant trigger to economic benefits. Or, in other words, the city just feels good and wants to spend money. 

• Every participating city gets an awareness boost, but major cities like New York and Philadelphia are less likely to see as big a boost as, say, a small city like Minneapolis

• The economic impact process sort of goes like this: Someone orders from Chickie & Pete's; Chickie & Pete's then redistributes that extra cash flow into other local businesses; finally, the extra income shows up as additional wages--again, to be spent. 

Any specific examples of cities getting huge gains related to the Super Bowl, or any sporting event like it? Think: World Series, NBA finals, etc.

Hosting the Super Bowl does provide an increased economic activity for the host city, the metro region and state.  This largely comes from out-of-town visitors spending money on lodging, food and beverage, local transportation, tourist attractions, entertainment and recreation.  There is also a substantial economic activity that occurs from businesses, organizations and vendors that spend money at the event or to activate sponsorship, advertising, hospitality and the production of the event.  

Economic estimates for the Super Bowl vary quite a bit and can range from $200 million to $800 million. For example, the economic estimate for the 2017 Super Bowl in Houston was around $350 million, while the year before was $240 million for Santa Clara. Estimates can also consider the impact on the state. For example, when the Super Bowl was played in Glendale, Ariz., the gross economic impact was reported to be $720 million for the state of Arizona. In addition, there are also estimates of the effects on state and local tax revenue expected from the event as well as lodging occupancy taxes and rental car taxes. 

It is important to note that economic impact studies are not without criticism and should be used as estimates. 

How does mood play into this? Is it possible that people living there are just feeling better about life and more willing to throw down money?

Mood has an important role in understanding the impact of a major sporting event such as the Super Bowl. Economists use the term "Psychic Income" to describe one intangible benefit that residents receive from a high-profile sporting event or when a team competes for a championship. This represents the physiological and emotional benefits that residents of a city receive when their team competes and/or wins the Super Bowl; or hosts the event. This represents a social impact and suggests that city residents feel better about the city in which they live. It creates city pride which has important implications for the development of social networks and relationships as well as self-esteem. It’s hard to quantify Psychic Income or put an economic estimate on the value of improved city pride, but we can observe this benefit through the behavior of residents and businesses before, during and after the event, as well as media coverage that occurs.   

Philadelphia has never hosted a Super Bowl. Any idea why? Could our city handle it?

I’m not familiar with the bid process that is used for cities to host the Super Bowl. However, one concern would be weather. February can be somewhat cold in Philly, which makes the fan experience a bit challenging. If Philly can host the Pope and Democratic Convention, it would seem likely the city has the capacity and capabilities to host a big sporting event.

To what extent do these economic boosts last?

The economic benefit of hosting a major event can take some time to occur in a local economy and generally has three stages. The initial benefit is through direct spending of new money injected into the local economy that would not have occurred without the event (i.e., food and beverage, lodging, retail shopping, local transportation, tourist attractions, other entertainment and miscellaneous expenses). The second stage is indirect spending, which is a measure of additional expenditures that occur because of the initial injection of new money into the economy. 

A part of each dollar injected into the local economy will be re-spent locally, so that the total impact of visitor expenditures is greater than the direct spending (i.e., when a business re-spends part of the initial direct expenditure with other businesses or suppliers). 

The final stage is induced spending, which results from changes in household income attributable to direct expenditures. The induced economic impact refers to the household-level expenditures that result from the initial direct expenditures and subsequent re-spending of these dollars in the economy.