Economic impact of the Hall of Fame vote?

January 9, 2013

Across the country there are people who are holding their breath waiting to see what happens with this year’s Hall of Fame vote.  Many believe that this may be the first time that no players who currently eligible under normal standards will be elected (others could still be elected such as broadcasters, owners, older players who are no longer eligible).  If no players are elected, this could mean that there is not as much interest in the Hall of Fame this year, and could lead to decreased attendance at the induction ceremonies which occur in the summer.

Already many articles are pointing at the potential economic impact that this may have for Cooperstown, where the Hall of Fame is located.  The LA Times notes that some stores do about 15% of their annual sales during the induction weekend.  Professor McDonnell in this article of Forbes discusses the tie between Cooperstown and the Hall of Fame:

The village of Cooperstown is just as anxious to hear the Hall of Fame results as the candidates themselves. Cooperstown’s hospitality and tourism industries are inextricably tied to the Hall of Fame’s fortunes. They can ill afford to have a half empty dais on Hall of Fame weekend due in part to protest or lack of interest. Likewise, they need Main Street to be bustling with visitors who are spending their disposable income at the local restaurants, shops, motels and inns. A summer without a single living member of the Class of 2013 or a boycott of any kind by fans or current Hall of Famers could be detrimental to business owners that rely heavily on the allure of baseball’s history.

I understand that there is a good deal of business in hospitality and tourism that revolves around the Hall of Fame, but the Hall of Fame itself has been losing money over the last several years.  While it is a big deal for many local businesses, I begin to wonder how much we should be worried about the economic impact of the Hall of Fame vote.  Yes, some individuals and businesses will be affected, but at the same time, one has to question whether Cooperstown has literally put all of its eggs into one basket.  Furthermore, if we are talking about the vote mattering for the economy, then will not some writers feel more pressured to vote yes for individuals they think shouldn’t be in the HoF, all for the sake of propping up some businesses that have a great dependence on a event for a few days every year.

I hate to sound like I am not sympathetic, but at the same time I have to shake my head when I hear all this talk of the economic impact of the Hall of Fame vote.  It wasn’t like people knew this problem, I think better business planning and strategies needed to be created to try and offset some of these issues.


Running for the Wrong Reasons? (New York City Marathon Edition)

November 2, 2012

Hurricane Sandy has had a big impact on lives all across the Eastern coast of the United States.  One of the prime areas hit by the hurricane was New York City, leading to many deaths, large amounts of damage, flooding, and residents still without power in large areas.  While the airports are operational again, much of New York City’s mass transportation system is still down, the subways are flooded, and the bus lines are said to be overwhelmed.  With this in mind, the NBA cancelled the season opener between the Brooklyn Nets and New York Knicks, a move that seems quite smart as it seemed to be rather difficult to get people to come to, and actually care about a basketball game at this point in time.

The NBA seems to be a bit more aware of what is going on than the City of New York, who has decided to hold the New York Marathon this Sunday.  There are lots of arguments for why the race should be held: it will inspire people in this time of tragedy, it will show how resilient residents and the City of New York, and that it will help businesses that were hurt by the storm and create an economic impact for the city.

Earlier this morning on my drive to work, I listened to a guest on the Colin Cowherd show discuss how the New York Marathon is the sporting event which brings the biggest economic impact to the city.  The individual who was someone important in the track and field/running world said that the event will bring around $300 to $400 million economic impact to New York City.  Readers of this blog will note that the skepticism of the economic impact studies that are conducted by consultants, but to claim that a race needs to go on because of its economic impact is really a step in the wrong direction.  Sensitivity aside, the supposed economic impact that comes from a sporting event is from visitors to the location spending money in hotels, restaurants, shopping, and so forth.  With full flight schedules just starting this morning at airports in the area, it is already hard for visitors to be able to get into town for the marathon.  Additionally, fuel supplies are so low in the area we have seen several hour lines for gas, even airplanes flying into New York are taking on extra fuel because of shortages.  So travel to the area is going to be difficult, and that means the number of visitors who come for the marathon will probably go down.

Then there are other factors, like many businesses that would normally profit from marathons like sporting good stores having to close down locations because of lack of power, employees unable to get to work, or stores/merchandise being damaged and destroyed.  The owner of Modell sporting goods stores was on CBS this morning, and he noted that all his stores in the area are closed, and two of them are destroyed.  How is his business, and others facing similar issues going to benefit from holding a marathon?  Not at all.  If they are closed, there will not be people spending their money there.  And now local hotels are now starting to say that they will refuse to evict locals for marathon runners coming to town.  If we consider all the people who live within driving distance of the race, they may have lower discretionary income because they are dealing with bills for fixing damage to homes, property, vehicles and so forth, that they may come to run the race, but they might just not spend.

So when New York mayor Michael Bloomberg says the race will go on because of the economic impact, the city doesn’t really seem to be very understanding of the reality they are in.  Not to mention that at a time like this, there will be a demand on infrastructure and government manpower (emergency services, police, security, etc) to host such an event.  While the organization that is in charge of the marathon says they are using more outside contractors to help with these areas than before, there will be public money and costs to the city for holding the marathon.  Honestly, I think this isn’t the right time to hold the marathon, and the economic impact argument is a very weak one to back it up.

Los Angeles will get a football stadium, but will they get a team?

September 29, 2012

Los Angeles City Council has given approval for Anschutz Entertainment Group (AEG) to build a $1.2 billion football stadium in downtown LA, next to the Staples Center which is also owned by AEG.  What is interesting in this whole process is that I just discussed about a week or two ago that AEG was selling off all of its Los Angeles based business, and this would surely include the football stadium which will be called “Farmer’s Field”.  This may mean that the price for AEG’s Los Angeles operations just went up by several hundred million (or maybe even more than a billion).  As noted in the article listed above, there were many interested parties at the City Council vote, including individuals from Staples Center with “Farmer’s Field” t-shirts, some fans wearing the colors of the old Los Angeles Rams, and other potential interested parties.

Deadspin notes that the San Diego Chargers could have been the ones to move to LA, if the deal had been done sooner, but that is no longer a possibility.  Likewise, the Oakland Raiders are said to not be favored, as the state would not want to fund such a big project just to move a team from one part of the state to another.  That would indicate that the new stadium will be looking for an NFL team from outside of the state.  The Vikings and Jaguars look to be stuck in their current cities for quite a while, so the next choice falls down to the St. Louis Rams and Buffalo Bills.  Both teams have had troubles drawing fans to games in recent years, and Stanley Kronke (owner of the Rams and Arsenal) would certainly have to consider the possibility of moving the Rams to one of the major markets in the U.S. if St. Louis doesn’t start to helps the Rams out some more.  I’d say Kronke is in a good position to hold St. Louis hostage for some tax money, as he’ll simply just say he will pack the bags and move off to LA if they don’t.

He would not be the first owner to make this threat, and he certainly will not be the last.

I’ve started to get the questions about the economic impact the new stadium will have on Los Angeles.  The answer is a complicated one.  Research shows that facilities don’t necessarily bring big gains to the economies of local regions.  That said, stadiums do bring fans and business to local restaurants, bars, and hotels that are located near a sport facility.  A good discussion of this can be found in the San Jose Mercury News, were professors Roger Noll and Dan Rascher (both very prominent sports economists) discuss the economic impact of the NHL lockout.  Dr. Noll notes that this local business will probably suffer, but not the economy as a whole.  Dr. Rascher adds on that there is some impact for the San Jose with the Sharks not playing, because only 28 percent of those who come to Sharks games live in San Jose.  Considering the size and scope of the Los Angeles area, it is quite possible that you would see similar percentages of out-of-town visitors for Los Angeles NFL games.

So for now, the answer is: we shall see.

Let the (economic impact) games begin!

July 24, 2012

We are just days from the opening ceremony of the 2012 London Summer Olympic Games, and as we lead up to the Games there has been a great deal of discussion about the economic impact of the games.  Over at NPR, they have blogged about the economic impact of the games, with Goldman Sachs noting that a large number of Olympic Games have made a profit.  They do have a footnote which says:

“In accounting for the cost of hosting an Olympics, most countries (including the UK) have treated the cost of constructing facilities and infrastructure, together with security and other ancillary costs, as being separate from the cost of running the Games themselves. The London Games are expected to make a profit (in the sense that revenues will exceed the cost of running the Games) but this will still leave the government with a significant (£8-9bn) bill from construction, security and other costs.”

Yeah, so if we don’t include costs, there is a profit.  I’m sure there are a lot of companies which wish they could get away with such a spin.  Others have been getting into the debate, I may be one of the few Americans who watches C-SPAN where they play the Prime Minister’s questions from the UK on television every week (which I encourage everyone to watch, if you love spirited debates), but many have known current Prime Minister David Cameron for his focus on trying to cut costs in the UK government.  Yet, he has come out and said the Olympic Games:

They should be great for our economy. We shouldn’t see them as some sort of expensive luxury in tough times.

The PM is noting that i may bring a $20 billion boost the UK economy.  Many disagree, with some analysts noting that the construction phase has been completed, and that sector of the economy doesn’t seem to be doing too well with the games about to begin.  Not to mention the cost will be approximately about $200 per person just to host the Olympic Games in London this year.

The back and forth about the economic impact of the London Games has begun, my guess would be from past research and what we are seeing in terms of costs, that this will be another games that will not be bringing positive economic impact to London or the UK.

Economic impact of the NBA Lockout?

November 4, 2011

There is always that question of the economic impact sport has, and the common answer given by economists is that there is little/no economic impact from sport on a region.  The research done in peer reviewed journals backs this up, and it has been something which has been discussed here any number of times.

Thus, I was pleased when I came across this post at NBC’s ProBasketballTalk blog today.  They note that there is no economic impact of the NBA lockout, as the discretionary income used to buy tickets will go to other goods and services in the community.  However, they do note a group that is hurting from the lockout, workers at Orlando’s Amway Center where the magic play.  The article states:

(Community Food & Outreach Center director, pastor Scott) George estimated that between 40 and 75 game-night workers have used the Community Food & Outreach Center’s services over the last few weeks. He said he’s unsure of the exact number because some game-night workers are afraid that if they say something, they might not be able to go back to their jobs when the lockout ends.

While this is less than ten percent of the workers for the Amway Center, and we don’t know how many of these workers already go to the Food and Outreach Center in the first place, it does highlight that it is the little guy/business that is often affected negatively by the lack of games.

I remember earlier this year THE SAME author at NBC’s ProBasketballTalk posted an article making the claim that the Lakers losing early in the playoffs would cost the Los Angeles economy $70 million.  This all traces deeper to the words of an economist, who actually notes that the loss could cost downtown business near the Staples Center around $70 million.  Of course, this doesn’t mean that LA is losing $70 million, but that the spending might be redistributed among other parts of the city/region.  Again, those who would be hurt would most likely be those business such as bars and restaurants that depend upon game traffic and large numbers of fans to help boost business.

I’m hoping that more of those in the media are paying more attention to what the academics have to say about economic impact and sport, though I’ll keep watching to see if NBC is keeping a new consistent message.

If Mizzou leaves the Big 12, will there be a financial/economic impact on Kansas City?

October 8, 2011

Today the Kansas City Sport Commission and Convention and Visitor’s Bureau published an open letter to Chancellor Deaton of the University of Missouri to not move away from the Big 12.  The letter basically notes a number of impacts that Mizzou moving away would have on the Kansas City area, including potential financial and economic ramifications.  A link to the full letter can be found: here.

Some snippets from the letter (published on NBC Sports College Football Talk):

“We know that many factors must be considered, including the academic, financial, and alumni relations implications of your decision. And, of course, the history and future of your University’s athletic program.

“That program, as you know, has Midwestern roots more than a century old… We cannot imagine the University of Missouri’s athletics tilting away from this region and the athletic history to which they have contributed so mightily.”

Again, the often visited debate of whether sport has an economic impact on a region.  In this case, it is a curious question.  What economic impact does Mizzou athletics have on Kansas City, a metropolitan area about 2 hours drive from the main campus in Columbia, MO.  In reality, Missouri plays only a few games a year in Kansas City, the big one being the annual rivalry game against Kansas at Arrowhead University.  There is also the Big 12 basketball championships which is about 2-3 days long.  In other words, the Kansas City Sport Commission and CVB believe that Mizzou being in town for least than one week of the year has such a large impact on the city that they shouldn’t leave.  I can buy the arguments about tradition and history to some extent, but I can’t say that Mizzou really has that big of an economic impact on Kansas City to be honest.  Really, the KC Sports Commission should be trying to find a tenant to play sports in the Sprint Center in downtown, which sits pretty much unused except for Arena Football, concerts, and some of the conference championships games for the Big 12.

Another thought is, even if Mizzou leaves the Big 12 for another conference, it doesn’t mean they have to stop the rivalry game between Missouri and Kansas.  In fact, Mizzou has played long time rivalry series with Illinois for many years (though they didn’t play in football this year for the first time in a decade), so it isn’t like leaving the conference means that the rivalry just has to die.

I understand Kansas City’s worries, but I don’t buy the economic/financial argument.

From World Cup to the Olympics

June 23, 2010

South African President Jacob Zuma is riding the high of the World Cup, and has come out with a public statement that South Africa is capable of hosting the Olympic Games.  In this article, it is noted that not only is Durban considered a candidate for the 2020 Olympic Games, IOC President Jacques Rogge says he would support having “a credible African candidate” to host the games.  One big question is whether South Africa is really a good candidate for the Summer Games, as this World Cup has proved to be rather cold, and I’m not sure that some of the events will go down very well being held in the South African winter.

While South Africa has posted improved tourist numbers into the country, the question of whether this is providing a big economic boost is debatable.   I noticed this opinion piece in the Global Times of China, which had a pretty decent breakdown of the World Cup’s potential economic impact.  They noted that the effect of hosting the World Cup will boost the national economy of South Africa by about half a percent.  Considering the breakdown of this article and other journalistic pieces which have looked directly to economists to discuss the potential impact of the World Cup, it seems that the games will really do very little for South Africa’s economy.  When looking at the massive unemployment rate, the number of social issues, and the high costs of hosting an Olympics, I’m not sure if South Africa is really ready to host the Olympic Games.  Hopefully, there will be some more thought and examination of the feasibility of hosting the events in a country where over 50% of the residents live in poverty…