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link: http://www.inc.com/articles/20 06/01/fumble.html?partner=Nets cape From: Inc.com | January 27, 2006 By: Drew Armstrong Super Bowl Fumble? Like many cities that host the big game, Detroit is counting on a huge payday this year -- more than $300 million in extra revenue. But economists say that’s unlikely. How does $302 million sound? That’s what the City of Detroit expects Super Bowl XL will bring to town, through hotel and restaurant spending, increased tax revenue, and sales of at least a few pairs of mittens to fight the Michigan cold. Problem is, such rose-colored predictions often don’t materialize. Victor Matheson, an economics professor at the College of the Holy Cross in Worcester, Mass., has studied the economic impact of sporting events like the Super Bowl since 1973. According to Matheson, residents of the average Super Bowl host city gain between $30 million and $90 million in extra restaurant checks, merchandise sales, new construction, and other revenue streams. A nice boost to the local economy, perhaps, but not quite the heady amount predicted by Motor City officials for the Feb. 5 game. Such fat numbers, Matheson says, generally come from estimating how much money will be spent in the city, then multiplying the figure to account for how the money will re-circulate -- without taking into account where any of it actually ends up. In fact, in a study of the seven Super Bowls held in Florida since 1980, taxable sales in the host cities (Jacksonville, Tampa, and Miami) actually fell by an average of $30 million during January and February, when compared to non-Super Bowl years. Turns out, giant events can crowd out regular economic activity by locals -- a big concern for many small-business owners. “There’s plenty of activity that doesn’t occur because the Super Bowl is there,” Matheson says. And while hotel rates will be high and rooms will be full, much of that money may be heading out of town to “the people back at corporate headquarters in New York or Chicago,” he says. But Detroit officials and Super Bowl XL organizers are betting on a number of programs to keep the money from leaving town faster than the hometown Lions’ playoff hopes faded. The NFL’s Emerging Business Program, for example, offers seminars and workshops for Michigan-based, minority- and women-owned businesses on how to grab a piece of the pie. Of the 750 hospitality, event-planning, security, and even snow-removal businesses that registered with the program, 250 have won contracts related to the big game, totaling $5.8 million -- more than any previous Super Bowl host city in the program’s 12-year history. Detroit’s demographics make the program particularly important, says Stacie Clayton, the NFL’s spokeswoman for the Emerging Business Program in Detroit. “I think it means great things for a city like Detroit, considering that we have a large minority population.” Southfield, Mich.-based Graphic Expressions is one local business that has already benefited from the effort. Graphic Expressions helps organizations develop promotional merchandise -- “the right product for the right message,” CEO Sharon Mann says. “We would not have had an entrée to the NFL” without the Emerging Businesses Program, she says. “We’re decent-sized, but we’re not big enough to go to the NFL.” Mann says she first positioned her company for Super Bowl business with a bit of smart networking -- Graphic Expressions donated the knit caps for the press conference announcing the Super Bowl, and potential business contacts began accumulating. The company is producing Detroit’s “Team XL” shirts, for example. Through the Emerging Business Program, the company met and will partner with the Super Bowl’s official merchandise seller -- All-Pro Championships -- to run four of All-Pro’s 38 official merchandise booths. Graphic Expressions and All-Pro Championships will share revenue at the booths, an arrangement that Mann prefers over trying to open her own shop. And, Mann says, the success of a big projects like working with the NFL could pay dividends down the line. “The exposure… will make us more prepared for the NCAA Final Four,” which will visit Detroit in 2009. By promoting contracts with local businesses, Matheson says, the money from the Super Bowl will stay in town longer. However, he notes that as Detroit’s city center tries to stage a turnaround, the money spent to bring the event to town might have been better used on local development programs. “One weekend of visitors does very little to revitalize an area,” he says. City officials counter that the event gave them a “goalpost” to complete many projects. “The revitalization of the city has been taking place since the mid-’90s,” says Ken Kettenbeil, a Super Bowl XL spokesman. “The Super Bowl served as a deadline.” Like Matheson, University of Maryland economics professor Dennis Coates has studied the issue and found similarly lackluster -- and in some cases, negative -- results for host cities. But, he says, “The big advantage that Detroit may have is, who in the hell would go to Detroit in late January, early February, anyways?” While local businesses like Graphic Expressions have managed to score contracts, some locals are turning themselves into one-time real estate moguls by renting homes and apartments out to visitors using the popular internet classified ad site, Craigslist. On January 19, 95 of 100 posts on the “sublets and temporary housing” page were for Super Bowl weekend rentals. Prices range from a few hundred bucks a night to stay out in the suburbs, to several thousand for downtown condos with maid service and transportation thrown in. But the temporary landlords may have flooded the market -- most haven’t had much luck finding renters. Ara Howrani, a photographer renting out his studio for parties or housing said he thought the big rush was still to come. “We were told by a few realtors that it’s going to get slammed in the week before the Super Bowl.” Howrani had planned on charging about $10,000 to rent the luxury space for the week. He won’t be going to the game, though. “I didn’t even think about buying tickets,” he says. “I just assumed they were way too expensive.” And Detroit officials have decided to fight the exodus of locals that often comes when a major event rolls into town, with the Motown Winter Blast -- a downtown festival meant to turn the frigid weather into a selling point. “It’s going to be cold and snowing,” Kettenbeil says. “We’re not spinning anything. We’re embracing what we are.” Detroit did a test run of the Winter Blast in 2005 -- drawing some 200,000 attendees -- and this year they’ll triple the event in size for the Super Bowl. The Blast will feature ice carving, Ford Model T rides, food, music, a giant snow slide and even dog sledding, in hopes of generating dollars from both Detroit spenders and the out-of-town visitors. But if Motown really wants to give its economy a winning play, the best investment might just be in the Lions’ roster. Coates’ research found that cities with winning Super Bowl teams also score increased wages and productivity for their residents. “If Detroit really wanted a boost, they’d have to wait until they win the Super Bowl -- but that’s probably a long time coming.” |
