Inside sports business
My eyes rolled when assigned something that typically sends sportswriters sprinting in the opposite direction: outlining the “economic impact” of next weekend’s NCAA men’s basketball tournament games at KeyArena.
Anybody with cursory sports business savvy knows such forecasts can be all over the map and rise in accordance with how close those citing numbers are to various organizing committees. For instance, organizers of last month’s Super Bowl in Glendale, Ariz. predicted a $500 million impact, while a heavyweight university economist suggested the real number was about one tenth that.
Given that range, what’s the point even writing about it?
Well, sports events aren’t going away and neither are these economic guesstimates used to build local support. The best we can do is to examine the breakdown and put up qualifiers.
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To be fair, host committees are getting more high-tech and detailed with forecasts.
For this event, which will see six NCAA second- and third-round games played here, the Seattle Sports Commission (SSC) is the host agency, while the University of Washington is the host institution.
The SSC used recently developed computer software to estimate $7.8 million in economic benefits and $957,000 in tax revenue for the greater Seattle area.
Four years ago, the global trade association Destination Marketing Association International (DMAI) devised a customizable event calculator to tally the benefits of conventions and trade shows for individual cities. A sports module version was introduced in July 2013 to gauge the impact of sporting events.
That sports calculator was used by SSC and its parent umbrella tourism association, Visit Seattle, to arrive at the $7.8 million figure. They input data points exclusive to Seattle along with guesses — subject to change — of which teams and fan bases would wind up coming here.
The calculator estimates 11,678 lodging “nights” booked, generating $1.9 million in benefits. After that, it shows $1.4 million generated for transportation, $1.3 million for food and beverage, $1.4 million for recreational activities, $1.3 million for retail, $173,000 in space rental and $100,000 for business services.
Right away, the hotel room projection raises some flags. Namely, it’s tough to know how many of those rooms would have otherwise been occupied by other travelers had there been no NCAA tournament.
Economists call this “displacement theory” and it’s often the reason for such huge gaps between projections by organizing committees and those by more independent voices. Displacement also occurs in shopping, restaurant and other spending associated with sports events.
If some hotel rooms were to be occupied nonetheless, how much of that shopping, or meal spending would have occurred anyway? It’s also possible some locals will avoid their usual shopping, fearing traffic congestion from the tournament.
Economists also question “benefits” associated with big hotel chains, since revenue largely winds up in headquarters outside the host city.
Now, nobody’s saying the organizers here are trying to fool people. It’s just best to keep all this in mind, especially in cases where numbers are used to justify adding expensive infrastructure.
Trust me, I grew up in Montreal, where the tax bill for the 1976 Summer Olympics lingered an extra 30 years.
But it’s also a little too easy to make economic counter arguments against staging any major sports event. Frankly, there should be more going on in a city than just trash collection.
There is something to be said for events generating local prestige and pride. As long as that’s all kept in proper perspective.
David Blandford, a spokesman for Visit Seattle, which worked closely with SSC on the benefits forecast, said the numbers don’t account for displacement theory. But Blandford added that no major conventions or events had otherwise been planned here in March.
Blandford said hotel occupancy for the same period last March ran at 80 to 85 percent on Friday and Saturday and 65 percent on Sunday. “There’s room for solid growth this year,’’ he said. “This is solid, incremental business.’’
SSC executive director Ralph Morton said a big reason for the bid was to revive KeyArena as a regular March Madness destination. The arena last hosted the tournament in 2004.
“It’s not just about filling hotel rooms up,’’ Morton said. “It’s bringing back this culture of March Madness and having Seattle’s name as one of the destinations. When you talk about the impact of sports on a community, it always goes well beyond the money.’’
And finding more uses for taxpayer-built KeyArena has to be viewed as positive.
In the end, a relatively modest $7.8 million projection isn’t a $500 million Super Bowl claim. It’s fair to envision Seattle exceeding that projection via future economic spinoffs, especially if the national exposure sends additional tourists our way.
This isn’t building football or baseball venues for billionaires. We aren’t adding Olympic-type infrastructure.
We’ll get the national sports spotlight for a weekend. And, who knows? Maybe, some bona fide economic impact.
Give or take a few million.