For Immediate Release, February 1, 2006
Contact: Scott D. Watkins, Consultant, or Patrick L. Anderson, Principal
Super Bowl to Bring Significant Boost to Detroit Area Economy
Though many impact estimates exaggerate benefit, Super Bowl still expected to generate millions in new economic activity.
$49 million benefit compares with 2004 Ryder Cup.
A report released today by Anderson Economic Group shows that the Detroit area economy will certainly benefit from hosting Super Bowl XL. The report pegs the event’s economic impact at $49 million, which exceeds the estimated economic impact of the six-day Ryder Cup hosted in the area in 2004. The $49 million estimate, however, stands in contrast with many other estimates of the event’s economic impact— one of which pegs the impact at over $302 million.
“Hosting the Super Bowl is definitely a positive for Detroit” said Patrick L. Anderson, principal with Anderson Economic Group, “but an economic impact of $302 million is beyond wishful thinking.” Scott Watkins, consultant with AEG, further notes that “$302 million is more than some states see generated in Gross State Product by entire tourism related industries.”
Likely Economic Impact Estimate
Our estimate is that the Super Bowl will have an economic impact of $49 million on the Metro Detroit area. This includes direct benefits of $32.9 million that arise from visitor spending, sponsorship revenues, and a local share of ticket sales, including scalper profits. We off set this direct benefit by $2 million to account for civic expenditures that are not likely to be offset by additional tax revenues. Thus, the net direct economic impact of the event comes to $30.9 million.
We assume that the indirect economic impact of Super Bowl XL on the Detroit area will be $18.5 million. This equates to $0.60 of additional economic activity being generated by every $1 of direct economic impact.
Why the Disparity
Unfortunately, many “economic impact” studies do not properly account for the shifting and substitution of economic activity, and use excessive “multipliers” which results in overstated indirect benefits. These reports provide exaggerated impact figures that are useful only in public relations.
To illustrate how a failure to account for the shifting of economic activity can exaggerate an economic impact, consider the following. The expenditures of a family from Southfield attending the “NFL Experience” at Cobo Arena are not having an economic impact on the area; their expenditures are simply a shift in economic activity away from another local activity, like seeing a movie or going to a Pistons game.
About Anderson Economic Group
Anderson Economic Group, LLC, based in East Lansing, Michigan, is a consulting firm with expertise in economics, finance, market research and public policy. Our work in these fields is based on our core values of professionalism, integrity, and expertise. Since our founding in 1996, we have assisted clients including private firms, publicly traded companies, state & local governments, and non-profit organizations. Our experience includes markets throughout the continental United States, Alaska, Canada, Mexico, and the Caribbean.
AEG has completed a number of other impact assessments, which often are recognized afterwards as the most reliable and timely available. The basis for this methodology is stated in the book Business Economics and Finance, written by AEG Principal Patrick Anderson.