Butler's march could cost city businesses $7.5 million

March 29, 2010
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There’s lots to celebrate about Butler’s improbable run to this year’s Final Four at Lucas Oil Stadium.

It’s the first time a team will play a Final Four in its home city since UCLA played in Los Angeles in the early 1970s. The Bulldog nation is going hysterical, and for good reason.

Not only is this Butler’s first trip to the Final Four, it is already having a massive positive impact on the tiny, private liberal arts college nestled near Broad Ripple. Last week, Butler officials told IBJ that merchandise sales at the school’s book store is up 500 percent. Can you imagine the sales hike Butler will see this week?  And there are already indications that enrollment interest is up.

There’s no denying that the men’s NCAA basketball tournament is a powerful marketing tool. That’s one reason why even small schools like Butler pay out healthy six-figure salaries to their men’s basketball coaches.

But there’s also one other fact that can’t be denied. Butler’s mad march through this tournament likely will cost city businesses $5 million or more in direct visitor spending.

The economic impact for most tourism events and conventions is easy to calculate. Take the number of visitors, figure how many will be flying in versus driving, consider the demographics of the congregation and the history of the event and basically multiply the number of attendees against the computed X factor. OK, it’s a little more complicated than that, but not much.

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With an event like the NCAA basketball tournament, it’s a lot more complicated and unpredictable. (Same goes for an event like the Big Ten basketball tournament, as I pointed out earlier this month).

Yes, it’s better to have the event than not have it—in most cases. But it’s still a big gamble—when you consider the resources to host such an event.

The economic impact depends on which teams win and lose. Because you never know which teams will make the Final Four when you start out with 65 teams, it’s impossible to calculate (in advance) how those teams’ fan bases will travel, what the demographics will be and so on.

We know this, the economic impact for Indianapolis will be big. We just don’t know how big. In 2006, the city reaped $39.3 million in visitor spending from the men’s Final Four at the RCA Dome, which seated about 24,000 fewer people than Lucas Oil Stadium.

Sports economists have told me (prior to Butler’s run) visitor spending will likely swell to $50 million given the additional capacity. And yes, the event is already a virtual sell-out.

But when one-fourth of the field is from the city where the tournament takes place, a significant number of fans coming to the event suddenly don’t need transportation to and from the city and hotels rooms and are much less likely to eat meals out as those traveling from out of town. Butler fans will buy Final Four memorabilia, but they certainly won’t buy Indianapolis-centric souvenirs.

A conservative estimate is that direct visitor spending will decline 10 percent to 15 percent for the city due to Butler’s inclusion. That’s $5 million to $7.5 million. In any economy, that’s a lot of jack.

To compound matters, Butler eliminated Syracuse, which has a strong (both in terms of numbers and demographic profile) traveling fan base. Butler also eliminated Kansas State, which due to its proximity to Indianapolis and the fact that K-State hasn’t seen a Final Four in a blue moon, likely would have pushed a big traveling fan base to Indy.

Butler or no, downtown hotels and restaurants will still be packed. Local businesses feeling the hit the hardest from Butler’s triumph will be those on the periphery of the economic impact zone.

When visitor numbers swell, two things happen: restaurants and stores stay busier longer (lots longer) and visitor spending is pushed out farther from the center of the event. Suburban hotels, restaurants, drug stores, etc. simply won’t see the volumes of dollars flowing in that they would have with an all-out-of-town Final Four.

All that said, don’t expect to hear any city officials or business owners crying too loudly. First, if you root against the Dawgs, you’re going to be seen as a heretic. And that’s bad for business.

I mean, come on! Who could root against the Baby Faced Assassin anyway (for the uninitiated, that’s Brownsburg’s Gordon Hayward, a Butler player)? Besides, there's no price you can put on such a Cinderella story.

Secondly, the Final Four is a huge corporate event. And rebounding corporate spending, which for this year’s Final Four is running much stronger than anticipated, could off-set a chunk of what Butler’s run costs.

In a year where economists are predicting a 3 percent increase in corporate hospitality spending, the Final Four is seeing a much bigger rebound.

Officials for RazorGator, the NCAA's corporate hospitality partner, said demand for corporate tickets is up 60 percent this year over last, and corporate spending on hospitality packages is up 121 percent.

New NCAA sponsors like UPS and Capitol One are spending big this year, while existing NCAA sponsors such as AT&T, Coke and LG are ratcheting up their spending.

So is the Final Four a score for Indy no matter which schools make the show? Absolutely. And with the event now coming every five years through 2039, we can all let the madness begin.
 

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  • Butler Homecoming
    My dad and I are Butler fans, and we're coming in from PA for the game(s). He's an alum and we've never been back to Indy or campus before, but this is a perfect opportunity for him. He has a lot of buddies doing the same thing.
  • Don't Buy It
    I don't buy it at all. The fact is that the majority of the tickets have already been sold, and this is to people that wanted to come to the Final Four without even knowing who the teams were going to be. Sure, there are 660 tickets being sold to the Butler Nation now, but so what? I think you're totally underestimating the local crowd that will now be more interested in coming downtown to experience the hysteria, not to mention 4,500 students that are just 5 miles away that will more than likely be invading downtown. Hotels are booked. So, I'm not worried about that. This is just much ado about nothing
  • not exactly
    The tickets went to brokers who resell them to the fans of the teams that make it...
  • Everyone except hotels will profit
    I think what's more likely is that bars etc outside of Downtown are going to see more business than they normally do in a Final Four when all the teams are non-local. I predict that locals who don't normally go out to watch the game will do so this year, simply because Butler is in it. Bars in Broad Ripple and the Northside (plus north suburbs) are going to be uber-packed, and if they win, look for restaurants in the same area to be packed as well.

    I think the Downtown hoteliers will be the only ones crying in their beer, because they didn't make as much profit as they counted on.
  • Butler
    I think anything that puts Indy in the national spotlight in this way is a plus. Aside from the city-wide level of excitement (does the Dawgs' run remind anyone of two recent Super Bowls?), if one of the stories is the fact that a final four team's campus is 6 miles from Lucas Oil, all the better. Combine that with a chamber of commerce weather weekend, and the city should see many benefits. Maybe the predicted $ 7.5 million will be made up by new visitors who might not have otherwise visited our fine city.
  • long term
    Maybe the city loses a little this weekend. But look at the long-term impact of what making the final four did for George Mason (http://eagle.gmu.edu/newsroom/670/). I think Indy and certainly Butler are coming out ahead.
  • You may want to check with the downtown hotels, I am thinking most are booked solid and have been for months.

    I think any loss in having one less out of town school will be made up by not only the local alumni and student body, but the out of state as well. I know several friends who are coming to town to watch the game here and spend time on campus.

    The loss may have happened if it was a school like IUPUI with a shorter history and smaller alumni base, but Butler has over 100 years of grads, and they make very good money.

    I am betting there will be little loss. I am more concerned about MSU folks taking the final four for granted since this is their 6th in 12 years or whatever.

    Finally, there is the long term benefits from Butler being here. Increased enrollment from this means more long term financial and educational benefits.
  • LAME ARTICLE
    Go Bulldawgs!
  • problems in paradise
    The Dawgs are a great feel good story, but be that as it may, some hoteliers are already concerned and feeling the negative impact of Butler's unlikely run. It's a scenario no one foresaw and now they're scrambling to make sure all those rooms are filled.
  • not as it seems
    If this were IU and they had been to the last 3 final fours, I would believe this, but this is Butler in Indianapolis.

    Every Butler alum will be in town, including family of mine coming in from Arkansas.

    Plus, as was already pointed out, most hotel rooms have been bought up by brokers. Certainly all the downtown hotels will still fill up. Only the outskirts of town will feel any negative effect of having Butler in the Final Four.

    Also, whatever team loses saturday would have likely taken all there fans away that night anyway. so they would have lost any impact from that team as it was.
  • Yeah, right...
    It's about the money, not the sport, right?

    Articles, and a thought process like this are I just don't respect the media.

    Publishing an article like this takes away from the history that is being made by Butler's basketball team.
  • Ok Ok
    Yeah Ok
  • Agree with Michael
    Every living Butler alum will probably think about making the pilgrimage to see the Bulldogs play in Hinkle II (aka LOS). And they don't all live in Indy.

    Plus, Butler's presence in the Final Four just increases the Indy mentions and the local color associated with the event. That a team hasn't played in its home city in almost 40 years is a big deal...for the team and for the home city. That Butler's team has so many Indiana kids will be a plus.

    Afterward, the sports marketing geniuses will be telling us that Indianapolis got X million dollars worth of free airtime...money that will not have to be spent from the ICVA and hotels' marketing budgets.
  • Only in America
    ...would somebody write something this asinine, shallow and crass, as if the most important thing is how much money you can make off of any given activity...
  • In case you had not noticed, this is a blog in a BUSINESS newspaper? I am thinking the fact that the subject involves business and crass commercialization would encourage discussion on maximizing dollars spent in Indy.
  • In case you had not noticed, this is a blog in a BUSINESS newspaper? I am thinking the fact that the subject involves business and crass commercialization would encourage discussion on maximizing dollars spent in Indy.

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