Tourism front-liners tell real story on Super Bowl's impact

August 23, 2011
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I’m not here to proclaim that hosting a Super Bowl or even having a National Football League team is going to cure all of a city’s economic woes. Obviously, it won’t.

But for those who doubt the big-time economic benefit of hosting a Super Bowl, I recommend spending a few days on the phone with operators of local hotels, restaurants and meeting space.

I spent the last two weeks calling and visiting people on the tourism industry’s front line, those who feel the economic benefit of such events first. Most of you who read this blog regularly know I can be somewhat cynical and skeptical of the various spin doctors that inevitably come my way.

And after covering the convention and tourism beat for more than seven years for IBJ, I have discovered that hoteliers and restaurateurs are the last people to pull punches. They generally tell it like it is.

If the economic impact figures thrown around for the Super Bowl—$250 million to $450 million—are a sham, I knew these people who often work long hours and are used to relatively thin margins would tell me so.

I was amazed at what I heard. Without exception, of the 17 people I called for the story that appeared in this week’s IBJ print edition, everyone said they expect the week of the Super Bowl, which is to be played Feb. 5, will be the largest on record for Indianapolis from a financial standpoint. And they expect it to be so by a wide margin.

It’s important to differentiate economic impact from direct visitor spending. Direct visitor spending is the amount of money the event directly generates. Economic impact uses a multiplier effect where, for instance, a waitress makes 50 percent more in wages and tips during the Super Bowl and goes down to the corner store and buys some clothes or other goods. The owner of that store in turn spends the money somewhere else in town.

After reporting my story, I have no problem saying the economic impact for the Super Bowl in Indianapolis will easily surpass $250 million. And I’d say that direct visitor spending might actually approach that number.

If there’s anywhere near $250 million in direct visitor spending, there’s little doubt the total economic impact is at least $450 million. After all, all that money earned isn’t getting buried in backyards.

It’s true that some of that money goes to conglomerate hotel owners and out-of-state restaurant chains, and some of that profit is funneled out of Indiana.

Still, there are plenty of local restaurant owners like Jeff Dunaway who operates a spot on the east edge of downtown who expect to bring in a mid six-figure sum for the week. Locally owned Jillian’s restaurant, on Meridian Street in the heart of downtown, expects to bring in $1 million.

Kahn’s Catering expects to keep 208 employees as busy as they’ve ever been during the Super Bowl week.

I was told by various sources—and my four-function calculator—that the average catering bill for the 130 or so parties surrounding the Super Bowl will be $35,000. Some catering tabs will be six-figures. Some parties will run up $300,000-plus tabs for food and beverage, party space, music and other niceties.

Dunaway said the groups looking for party space for the Super Bowl aren’t even asking about price. He expects to get a 20-percent plus premium for his space, which seats 190 indoors, for the week of Feb. 5.

A conservative revenue number for hotels during the Super Bowl week is $50 million. Very conservative.

Another $15 million to $20 million will be spent on the NFL-sanctioned and unsanctioned parties and events in the week leading up to the Super Bowl.

According to my sources and calculations, another $15 million will be spent at area restaurants. Actually, more than that, but there’s some overlap with parties, so I scaled it down. If you don’t believe my numbers, ask St. Elmo Steakhouse owner Craig Huse. He said he got his first call for a reservation for the 2012 Super Bowl in 2008. He expects walk-up waits of three hours for a table at his restaurant during Super Bowl week.

Not surprisingly, Dunaway and Huse are planning extended hours that week.

That’s a thumb nail sketch of the impact. And the vast majority of this money comes from people outside of Indiana, new dollars this region never would have seen otherwise.

I haven’t talked about revenue from airlines, limousines, taxis, car and tour bus rental, retail shopping or myriad other factors. Still, very quickly, the direct visitor spending from the three things I picked is $85 million. Using a conservative multiplier ratio, the economic impact of those few things I picked would be $212.5 million. Again, a conservative estimate.

And that’s before the game even starts.
 

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  • Super Bowl impact
    There is no doubt the Super Bowl will have a tremendously positive impact for certain businesses and many in the community will enjoy the festivities. And, IPS is to benefit with the addition of the sports complex. From a strict financial analysis the unresolved question is what is the total cost to the City, State & taxpayers, and is the net a gain or loss. To obtain an accurate accounting all the typical expenditures of the weekend should be subtracted from the projected revenues, because all those dollars would be spent anyway. Boosters usually add all the regular revenue generated over the course of the event into the projected gross economic impact in order to reach a whopping big number. That is vodoo economics.
  • Wider impact
    Don't forget that many of the locals won't be spending all the time that they may normally spend downtown that weekend but my normal dining spots in fountain square, mass ave or business district will give way to me eating at other restraunts around the edge or middle of the city, thus providing another impact to businesses not in the downtown.
  • Direct Spending Minus Direct Costs Equals Real Profit or Loss
    Thank you for making the distinction between "direct spending" and "economic impact".

    The only thing missing is the recently uncovered information by local bloggers that taxpayers will have significant unexpected "direct costs" and that our Superbowl committee didn't actually secure the $25 million in private contributions to throw this party.

    Remember real profit or loss for the city is determined by direct cash revenue minus direct cash expenses.

    We do know that the CIB will spend at least $8 million in Superbowl direct costs for police overtime among other things, then subtract the rent free convention center/football stadium/party venue space covered by taxpayers, then subtract the sales/hospitality tax exemptions given to the NFL/Colts, then subtract the state/city parking revenue given to the NFL/Colts.

    No doubt other extra costs such as police/fire and many other things are being quietly funneled the city/county budgets of various agencies and other potential revenue for the city is quietly given away or forgone to the NFL/Colts.

    Taxpayers just want a fair accounting of Superbowl direct spending/costs to see if we are really making a profit or loss.

    Remember hosting this event was intended as a reward to taxpayers for building the Colts a new $750 million retractable roof football stadium of which all revenue goes to Jim Irsay and all expenses go to taxpayers.

    Guess the CIB president Ann Lathrop forgot that when she stated, "Right now we are looking at a net loss of roughly $800,000. Lathrop said the goal of the CIB wasn't to make money off the Super Bowl but to help the city facilitate an event expected to generate millions in economic impact."

    • $25M
      I'm pretty sure the $25M was secured. It was secured (pledged) the first bid, then we had a few companies back out, and those lost pledges were replaced by new ones in the following bid. The year we won it. I can say with almost certanity that this pledged amount was reached and received. The firm I work for contributed more than $2M for the cause. The company my spouse works for $1.5M. Our firms have been engaged in the planning and most of the leaders of the subcommittees are partners and directors from the firms that provided this amount. Would like to see some information otherwise that this amount wasn't reached.
    • preconceived
      Real Money, there's nothing quite like coming in with a preconceived notion that helps us all get at the real truth. Thank you bloggers everywhere for uncovering the real truth about the Super Bowl. I'm a taxpayer just like you, and you'd have to be pretty foolish not to think the upside of hosting a Super Bowl far, far outweighs any expenses the city incurs. And remember, most of those expenses come in the form of wages paid to Hoosier workers. Perhaps you can all point us to a good study of the financial validity of hosting the 1987 Pan Am Games or of constructing the Hoosier Dome. As for the $25 million to host the 2012 Super Bowl, the list of companies that donated that money has been online for months. And if you know anything about the NFL, I mean anything at all, you know there's no way this city wins the bid for the game without that money being secured. Again, thank you bloggers for setting us all straight. Your broad minded vision has really made life better for all of us.
      • Trust But Verify
        MikeW,

        Let's stop guessing and start looking at solid independant analyses.

        The blogs "had enough indy" and "advance Indiana" have looked at the tax returns of the non-profit SB2012, CIB, and city budget trying to figure out the truth. They uncovered several interesting facts.

        The truth is no one is really trying to manage overall direct costs by taxpayers for this event and certainly they are not making an effort to fully disclose the finances to the public.

        The SB2012 group is claiming they are a private organization exempting them from public disclosure, while the cities quasi-public corporations like the Sports Corp, Indianapolis Downtown, & CIB costs are not being totaled up by the City County Council or Mayors office.

        Honestly I think they just have blind faith that the taxpayers will have a positive return on investment, yet no one is making sure those projections come true.

        Don't expect accountability without serious research by our local media.

        Don't expect the Star to take this on.

        Don't expect any local TV or Radio station to look into it since it would take more than 30 seconds to explain.

        Our only hope is the IBJ will step up and explain this to us after doing interviews and looking over financials.




      • $25 Million Question
        The Indianapolis Superbowl Committee has a long list of "donors" on its website, yet "cash donors","in kind services", and just "volunteers" are not disclosed.

        Most major events have different levels of sponsorships with clearly disclosed participants in each level associated with a specific dollar amount.

        I suspect that some of these "donors" are actually "fully compensated vendors and subcontractors".

        Did they really raise $25 million in cash?

        How are they spending the $25 million?

      • Check The Numbers Out
        Anthony, I'm disappointed you didn't bother to look to a truly independent analysis of the economic impact of a Super Bowl. You would have found that the true economic impact is about $40 to $50 million. It's unlikely the impact will be as great for Indianapolis as it is for winter destination spots where people will be inclined to stick around longer than the weekend. Yes, a few hotels, restaurants, caterers and transportation folks will see a one-time big impact, but it's a very short-lived impact. Anyone that is being objective could tell you the real impact is nothing like the numbers you and the local economic development folks have forecasted. I would also ask that you tell us what the lost revenues are. The State is giving an unprecedented tax exemption from state and local taxes to the NFL for the Super Bowl, taxes that would be paid for other events hosted in our city. Every day we keep learning of various give-aways, including free convention center space for the NFL, foregone parking revenues on state and city-owned parking garages and lots that are being given up to the NFL, foregone admissions taxes, and tens of millions in public funds that are being expended for this one-time event. That's not counting the blocked out time our convention center was unable to host conventions, which was expanded due to the uncertainty of the collective bargaining talks. It's unlikely the void for that blocked out time will be filled on such short notice since conventions are planned more than a year in advance. I also recall that local hotels are required to abide by a billing arrangement with the NFL whereby they are required to pay a percent of their hotel bookings to the NFL. That arrangement is unique to the Super Bowl. Craig Huse will do more business than he has ever done before. So will a few other top restaurants in town. Most will have no impact. I'm also wondering about the people who work downtown. There is some talk that people will be encouraged to work from home the week of the Super Bowl because of the green zone being established for security purposes downtown and the difficulty that will be presented in getting in and out of the area to park to get to downtown office buildings. If office workers avoid the downtown, that will displace revenues that are normally spent downtown at restaurants and stores. No doubt there will be a net positive economic impact if you look at it in isolation, but we could have never hosted it if we hadn't built Lucas Oil Stadium at a cost of $750 million. Somebody's paying for that. Think about it a little harder next time before you jump on the bandwagon.

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