Money for Nothin’

Posted by on Friday, February 1, 2019 in National Basketball Association.

Interview with Charlotte Biz Journal. L.A. All-Star Game Impact Study 2018.

I’m working on some stories about the NBA All-Star Game coming here this month and wanted to ask about a couple of items.

*The first is, the NBA estimates 150,000 visitors during the weekend of events. What do you think of that estimate given the venues are 19,000 seats and 8,000 seats for various games/competitions?

The estimate of 150K visitors by the NBA is probably three times the actual number of out of town visitors who will only attend the 2 weekend events. Because actual attendance is a zero-sum game, it is important to realize that the real estimate for economic impact on greater Charlotte should be derived from net expenditures after locals have been driven out-of-town out by the congestion of out-of-town NBA fans.

*There is a $100 million economic impact estimate and I’ve seen an LSU study from 2017 that pegged the New Orleans all-star direct spending at $45 million. What are your thoughts on each of those numbers?

The basic rule of thumb in judging cost-benefit analyses is to simply move the decimal point one place to the left to correct for the money-for-nothing self-promotion bias. The economic impact of the All-Star game last year (2018) in LA was estimated at $116 million: $90 million from new tourism and $26 million from local spending. The Big Easy economic impact from the year before (2017) came in at $82.7 million.

Both of these in-house estimates used a regional economic multiplier of about 2 times direct spending which assumes indirect economic spinoffs are equal to direct spending injections. Practical evidence suggests that direct spending in one part of Charlotte simply replaces spending someplace else (zero-sum game) and that indirect spending leaks out of the local economy like a sieve. All of this taken together suggests the net economic impact of the “NBA All-Star Week” in Charlotte will be much closer to a net $10 million than a gross $100 million. Nothing will be left for the Queen City but the congestion and the tab.

*Tourism and city government executives are saying the most important aspects of having the game are the publicity/public relations benefits and the likelihood of more major events coming to town based on seeing success of an event that’s run well. What’s your perspective on each of those views?

I basically agree. Ironically the only real benefit of hosting mega-events is the intangible water cooler effect that networks publicity and public relations for the host city. In the end it is probably better to simply admit the public relations value of the All-Star game for the host city/team than to spin its imaginary something for nothing economic impact.

Comments are closed.

Back Home   

Sports Econ Blog

V-Man Power Rankings

Chumpzilla Challenge

Sports Econ Publications

League Financials

Sports Econ Reference

Forbes Franchise Values

Salary Caps

Sports Econ Classics