Superbowl 2022: Financial Impact on the Host City

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
Bidding Process
Infrastructure
Economic Impact
Post-Event Impact
Event Planning
Recommendations
Conclusion
References

Introduction

It is important to note that hosting major sporting events of nationwide popularity is a serious investment, which requires a thorough analysis of its financial and economic impacts. The given assessment will primarily focus on The National Football League (NFL) Super Bowl 2022, which was hosted at SoFi Stadium in Inglewood, Los Angeles, California. The Super Bowl is the largest sporting event in the United States; thus, being a host city or even state is a massive resource-intensive expense due to infrastructure needs and other resources. There are no economic gains to the event itself both during and after it, and the capital influx does not reach the communities needing it the most. In addition, building infrastructure with tax subsidies does not justify the losses. After the Super Bowl, many added costs linger for longer than needed, such as policing. The small gains are solely isolated to a few firms, businesses, and already well-off communities. Thus, the Super Bowl 2022 had a negative economic and financial impact on the host city of Los Angeles due to losses through tax subsidies, policing expenses, and infrastructure building.

Bidding Process

The bidding process for hosting the Super Bowl is a complex and intricate decision-making procedure. Since the given sporting event is in high demand by the cities and states, every November, the organization issues a bid book for all cities seeking to become a host (Kelly, Berri, & Matheson, 2020). By April, the bids are made, and thus, the next step involves selecting one of the bidders as the host. It is conducted through a voting process by 32 owners of the NFL (Horrigan, 2019). The key baseline requirements include five major standards, which need to be present in each city. Firstly, the core infrastructure services, ambulance, fire services, and law enforcement, must be provided by the host without incurring any expense to the NFL itself (Horrigan, 2019). Secondly, during the week of the game, the daily temperate needs to be around 50 degrees Fahrenheit on average or higher (Kelly et al., 2020). Alternatively, an indoor facility must be provided with a climate control capability to create a desirable temperature.

Thirdly, the hosting city must be able to provide spaces, facilities, and places to live for the essential crew of the NFL. The latter includes the NFL Tailgate Party, the NFL Experience, media representatives, and accreditation and media employees (Horrigan, 2019). Fourthly, the city must ensure that there are at least 19000 hotel rooms available for four-night stays for the organization personnel as well as the player teams (Kelly et al., 2020). Lastly and most importantly, the host city must have a stadium with 70000 seats or be able to expand in capacity to have this number of people (Kelly et al., 2020). In other words, the bidding process is strict and standardized with minimum benchmarks, which means that not all cities can ensure these requirements are provided. In the case of Los Angeles, California, the host city’s SoFi Stadium had the necessary seat numbers, infrastructure services, living spaces, and rooms. The NFL owners mostly voted for Los Angeles as a desirable location to host the event, which led to the city’s victory in the bidding process.

Infrastructure

It should be noted that SoFi Stadium was the key infrastructure built for the event. The construction of the project began after the NFL approved the city’s bid to host the Super Bowl in 2016 (Hayduk, 2022). It was completed in 2020 when it was officially opened in September (Kelly et al., 2020). It was initially estimated to cost $2.7 billion, but its real cost was just below $5 billion, making it the most expensive stadium ever built (Hayduk, 2022). However, one should be aware that the sports venue was funded privately through loans and league assistance, which means that no public funds and taxes were directly used (Kelly et al., 2020). The indirect use of taxes was the result of tax breaks demanded by the developer. When it comes to other infrastructure services, the city was responsible for providing firefighters, policemen, and medical professionals, which were not significantly weighed against additional jobs, parking earnings, and other revenue streams.

Economic Impact

Hosting the Super Bowl is an exceptional privilege and a potentially lucrative event for a host city. Such was the case of Los Angeles, which is why it is critical to understand its economic impact. It is stated that “boosters of the Super Bowl assert that the league’s Championship game generates as much as $700 million for host cities” (Hayduk, 2022, p. 90). However, the given optimistic expectation of the organization was reduced. A report by the NFL and Minneapolis Host Committee stated that “Super Bowl LII would generate $343 million for the region” (Hayduk, 2022, p. 90). Academic economists provide even lower figures, where each municipality gains only $30 million, and the city creates 537 new jobs as a result (Hayduk, 2022). Experts additionally claim that in the host’s hospitality industry, the newly added income is situational at best (Hayduk, 2022). In other words, the NFL’s proclaimed and marketed numbers are rather deceptive and not backed by evidence when looked across various Super Bowl events.

When the event comes close to its date of occurrence, the host city’s market experience a market shock. This manifests in an increased lending opportunity as well as demand spiked. However, most businesses and entrepreneurs do not capitalize on such shocks due to the short-lived nature of the Super Bowl. It is stated that “the consensus from this investigation was that sports properties tend to be constructed in areas where the business formation is already quite high and where jobs are already plentiful” (Hayduk, 2022, p. 91). Thus, the Super Bowl tends to be hosted in areas where its promised developments and improvements are not necessarily needed. Even in the case of Los Angeles, the areas with greater poverty rates were not visited by sports fans due to safety concerns. The businesses did not benefit as well in these neighborhoods, which means that the capital gains are predominantly in already well-off areas.

The economic effects of hosting the Super Bowl in Los Angeles are no different from all the previous ones. A study found that “the net gain in rentals is considerably fewer than the gross number of rooms rented, and benefits are heterogeneous across cities” (Heller & Stephenson, 2020, p. 183). In other words, the evidence further substantiates the previous point on the unequal distribution of minuscule gains. The poor areas do not get visited, and their businesses do not gain more customers. An already prosperous segment of the city reaps the small benefits due to market shock, upon which many entrepreneurs do not capitalize due to the short-lived nature of the Super Bowl. It is stated that “nearly 90% of hotel room revenue gained is because of increased room rates which means concerns about leakages from host cities’ regional economies are salient” (Heller & Stephenson, 2020, p. 183). There is no wider demand increase except for the hotel rooms, and even the proximity of the stadium does not guarantee improvements (Heller & Stephenson, 2020). Therefore, it is safe to state that tourism and construction do not offer the gains the NFL advertises.

Moreover, the stadium itself does not lead to significant improvements for the host city, even if built privately and at no expense to a taxpayer. It is stated that “local governments often justify subsidizing sports stadiums as economic development projects that have positive returns on investment” (Bradbury, 2022, p. 219). However, “assessment values did not increase … following the stadiums’ announcement or opening, which is inconsistent with the stadium having a positive fiscal impact” (Bradbury, 2022, p. 219). In other words, the stadium does not create an environment for more economic opportunities and gains. Thus, “the large subsidies commonly devoted to constructing professional sports venues are not justified as worthwhile public investments” (Bradbury, Coates, & Humphreys, 2022, p. 1). This means that Los Angeles lost potential tax revenue from the stadium’s construction by providing it with a tax break, and SoFi Stadium did not yield a positive fiscal influence on the local communities.

Post-Event Impact

Another possible claim and justification for hosting the Super Bowl could be that there will be a positive impact after the event. In the case of Los Angeles as well as previous hosts, no significant change can be noted in terms of improvements, but rather losses. Any marginal gains were only isolated to real estate, insurance, and finance (Du & Zhang, 2021). Overall, for the post-event trends, it was found that “the Super Bowl, however, finds no further significant effect on the local economy” (Du & Zhang, 2021, p. 1). In other words, the Super Bowl 2022 in Los Angeles did not have a positive economic impact both during and after the event. However, a serious loss can be observed after the event was hosted, which is manifested in an increase in public spending on policing (Pyun, Humphreys, & Khalil, 2022). Evidence suggests that “police employment increases with the arrival and departure of an NFL team as well as with the number of postseason games played” (Pyun et al., 2022, p. 1). As a result, the poor neighborhoods with generally higher crime rates become policed more intensively after the Super Bowl since the budgetary allocations increase for law enforcement agencies.

Event Planning

On the basis of the evidence and data provided, it is safe to state that the Super Bowl 2022 did not bring any economic benefits to Los Angeles, where it needed such improvements. Only a small number of sectors and neighborhoods reap the gains from the Super Bowl. The mere proximity of Inglewood to the stadium did not bring economic capital influx as well, since the stadium location cannot be considered as a strong factor. Therefore, the event planning team could have done a better job of reflecting on past events to realize where the benefits of major sports events lie. The biggest and most valuable lesson can be learned from the Olympic Games, which does what its organizers claim. Hosting international events, such as the Olympics, has “positive effects on the economy and society of the host cities through the influx of tourists, infrastructure development, and image promotion of the country” (Amponsah, Ahmed, Kumar, & Adams, 2018, p. 324). In other words, the event plan organizers should have sought to host international mega-sporting events instead.

The Super Bowl’s bidding structure essentially eliminates the potential host cities and communities, which would greatly benefit from the hosting. In addition, it imposes a heavy burden on the hosts, which leads to unjustifiable expenses rendering the marginal gains insignificant. Therefore, the planning team should have treated the Super Bowl as what it truly is, which is a brand booster. It is stated that the greatest gains enabled by hosting the Super Bowl are intangible since it falls within the domain of marketing and brand management strategy (Puente-Díaz, 2018). The event organizers should have discounted any direct and indirect economic and capital gains from the assessment. Instead, the focus should have been whether or not Inglewood or Los Angeles needs a brand boost through the Super Bowl. If the costs of stadium building and organization do not justify the brand and reputation gains, then the process needs to be reconsidered, reevaluated, and reexamined.

Recommendations

In the future, any city that wants to host the Super Bowl must understand that there are no economic gains to the event itself, both during and after it. The capital influx does not reach the communities needing it the most, and building infrastructure with tax subsidies does not justify the losses. After the event, many added costs linger for longer than needed, such as policing. The marginal gains are only isolated to a few firms, businesses, and already well-off communities. The hospitality industry only benefits from price spikes, whereas other real estate properties gain even less.

Therefore, the recommendation for the planners of such events is to focus on international events, specifically Olympic Games and its similar variants. Foreign capital influx is much more significant in its impact compared to interstate exchanges. They should additionally consider avoiding tax subsidies and breaks for infrastructure projects, such as stadiums. Finally, the cost-benefit analysis should be solely based on the fact that the gain is reputational only, whereas losses are real and can linger for a long, especially for public money. The development of any sport and the increase in its popularity among the population is associated with the proper organization of competitions, and their entertainment, which ensures, first of all, the quality of the game. In team sports, and especially in football, it is important to build the work of a league that unites and organizes a system of competitions that attract world stars to the team of their league. In organizing the activities of the league in market conditions, the financial component is important, which in turn depends on the ability to attract sponsors and investors.

The Super Bowl should be viewed as a brand booster only, which can catalyze an already existing city or state branding strategy. It is important to identify the current state of the brand and form a vision for what state of the city’s brand is necessary, as well as an analysis of the development potential. The target audience is being formed for whom this brand will be created, that is, who will be interested in it in the first place. An important element of building a city and state brand is the definition of targets to be achieved based on the results of its promotion. This moment was missed in many projects to promote the brand of the territory in Los Angeles. It turned out that the brand of the city was created and promoted in order for it to exist, but it is important that the project of creating and promoting the brand has been targeted.

An increase in the number of investments attracted to the region, a decrease in the unemployment rate, an increase in the tax base, and an increase in the tourist flow to the city should be taken into account. These indicators will testify to the effectiveness of the project in creating and promoting the brand of the region. City attributes should carry clear and distinct associations with the region and the brand they represent. At the stage of promotion, channels for promoting the brand of the territory are formed, which include advertising in the media, social networks, television, and participation in exhibitions and presentations. A long-term brand promotion strategy is being formed, and its positioning is carried out in a general context, and not just a sports one.

Conclusion

In conclusion, the Super Bowl 2022, hosted in Los Angeles, California, led to no economic or financial improvements but only losses through tax breaks, infrastructure expenses, and long-lasting policing costs. Firstly, the requirements put forth by the NFL to the bidders are too demanding, eliminating any real benefit gained from the event. The core infrastructure services, ambulance, fire services, and law enforcement must be provided by the host without incurring any expense to the NFL itself, and the daily temperate needs to be around 50 degrees Fahrenheit. In addition, the hosting city must be able to provide spaces, facilities, and places to live for the essential crew of the NFL. The city must ensure that there are at least 19000 hotel rooms available for four-night stays for the organization personnel as well as the player teams, and the host must have a stadium with 70000 seats. Essentially, the communities and cities that would benefit from the Super Bowl hosting the most are eliminated from the pool of candidates.

The SoFi Stadium’s real cost was just below $5 billion, making it the most expensive stadium ever built, and the indirect use of taxes was the result of tax breaks demanded by the developer. The NFL’s proclaimed and marketed numbers are rather deceptive and not backed by evidence when looked across at various Super Bowl events, and most businesses and entrepreneurs do not capitalize on market shocks due to their short-lived nature. The Super Bowl tends to be hosted in areas where its promised developments and improvements are not necessarily needed, and tourism or construction does not offer the gains the NFL markets. A major loss can be observed after the event was hosted, which is manifested in an increase in public spending on policing. The event planning team could have done a better job of reflecting on past events to realize where the benefits of major sports events lie.

References

Amponsah, C. T., Ahmed, G., Kumar, M., & Adams, S. (2018) The business effects of mega-sporting events on host cities: An empirical view. Problems and Perspectives in Management, 16(3), 324-336.

Bradbury, J. C. (2022). Does hosting a professional sports team benefit the local community? Evidence from property assessments. Economics of Governance, 23, 219-252.

Bradbury, J. C., Coates, D., & Humphreys, B. R. (2022). The impact of professional sports franchises and venues on local economies: A comprehensive survey.Journal of Economic Surveys, 58, 1-88. Web.

Du, R., & Zhang, J. (2021). Super bowl participation and the local economy: Evidence from the stock market. Growth and Change, 1, 1-12.

Hayduk, T. (2022). The effect of hosting a Super Bowl on local debt capital markets. International Journal of Sport Finance, 17(1), 89-106. Web.

Heller, L. R., & Stephenson, E. F. (2020). How does the Super Bowl affect host city tourism? Journal of Sports Economics, 22(2), 183–201.

Horrigan, J. (2019). NFL century: The one-hundred-year rise of America’s greatest sports league. New York, NY: Penguin Random House.

Kelly, Y. J., Berri, D., & Matheson, V. A. (2020). The economics of the Super Bowl: Players, performers, and cities. New York, NY: Palgrave Macmillan.

Puente-Díaz, R. (2018). Using international sport events as part of a brand construction strategy: The case of the destination brand Mexico. International Journal of Sports Marketing and Sponsorship, 19(2), 147-159.

Pyun, H., Humphreys, B. R., & Khalil, U. (2022). Professional sports events and public spending: Evidence from municipal police budgets. Journal of Sports Economics, 1, 1-8.

Click Here To Order Now!