Indianapolis has been awarded the 2012 Super Bowl and the city is ecstatic and rightfully so - it is a big “Get” for a middle market like Indy. However one of the biggest arguments for going after the big game was and is based on the economic impact that the city could possibly receive from hosting the game. I don’t like to rain on parades, I really don’t, it’s just that I don’t like it when the sporting world tries to sell the public on something with faulty logic or numbers.

The NFL, the city, and others have thrown about $300-$400 million of economic gain from hosting the event, a number that the team and city officials have been very liberal in plastering in the media and other places when talking about the advantages of hosting the game.

Just as teams and cities oversell the impact a new stadium can have, I’ve always felt that the NFL oversells the event and what it means in terms of an economic standpoint. I think there are incentives for those doing the selling and the public is readily enticed into believing the big numbers. In doing some research I came across an interesting FastCompany article called The Business of Hosting the Super Bowl, which seemed to support some of my beliefs.

I followed up with Professor Victor Matheson an economics professor at the College of Holy Cross. Mr. Matheson has researched this topic and was quoted in the above article. I wanted to ask him some questions about the economics of hosting the Super Bowl and how it relates to Indy.

LoS: What is a good estimate a city can reasonably expect to make during a Super Bowl, in terms of economic impact and net revenue - I have seen some estimates from you and others that the real benefit is $30-$90 million is this still accurate?

Looking at data from cities that have actually hosted the Super Bowl, I have performed several studies that have identified a positive economic impact of $30-$90 million, or roughly 1/4 to 1/10 the figures touted by the NFL.

LoS: Are small market teams, like Indianapolis, more or less likely to see a large economic impact - why?

Based on the city’s size alone, I would guess the impact would be lower. Indy’s tourist industry is more likely to hit capacity constraints than that of Los Angeles, Miami, or other larger cities. In addition, if guests don’t have enough to do while in town, as happened when Jacksonville hosted the game several years ago, the city’s reputation will not receive any enhancement from hosting the event.

LoS: Could the impact be more than expected - based on Indy not being a big tourist attraction in January like a Miami or Arizona?

The general state of Indy’s tourist industry in early February definitely plays in its favor. The Super Bowl is very likely to crowd out regular visitors in warm weather destinations like New Orleans or Miami. Indy’s hotels are probably not normally at the same occupancy rates as those of the usual Super Bowl hosts in the middle of winter. Thus, the Super Bowl is less likely to crowd out other activity in Indy.

LoS: Does the “free publicity”/notoriety of holding the event truly have an impact or are there capacity restraints (how many events Indy could really hold vs how many they currently hold, actual costs of recruiting businesses to the area etc)?

I don’t know of any people or businesses that have ever relocated to a city because of the city hosting a mega-event like the Super Bowl. In fact, I have never even heard anecdotal evidence of such a thing happening. Furthermore, one must remember that not all of the publicity a city receives during a big sporting event is necessarilyl positive. Beyond the case of Jacksonville previously noted, does anyone think the Olympic Games in Munich with the Israeli athlete deaths improved the image of the city? How about Salt Lake City and the bribery scandal during the Winter Olympics or the rioting that occurred after the NBA championships in Detroit in the early 1990s (ok, so Detroit’s reputation probably didn’t have that far to fall, but you get my point).

LoS: What is the relationship of money spent on building a stadium (Indy’s is roughly $750 million) and the economic impact of hosting the Super Bowl? I.E. is the money spent by the public to build the stadium more or less than the expected Super Bowl revenue and can it, from an economic standpoint, be argued that there is truly a net gain or loss from the two?

There seems to be a curiously close connection between the average public contribution to an NFL stadium of roughly $300 to 400 million and the NFL’s claims of a $300 to $400 million benefit from hosting the game. Essentially, the NFL is saying, build a stadium with $400 million of taxpayer money and we’ll give you a $400 million Super Bowl. It’s like getting a stadium for free. Of course, trying to get large taxpayer handouts is exactly the reason that the NFL comes up with exaggerated economic impact estimates.

I certainly don’t believe that the taxpayer money Indy put into the stadium was money well spent, but now that the decision has been made to subsidize the stadium, the more events that you can host, the better. The city will certainly be somewhat better off economically due to the Super Bowl, but it won’t come close to covering the cost of the new stadium despite the numbers touted by the league.