Bloomberg Línea — Arnold Schwarzenegger playing Zeus promoting a BMW electric car on a golf course. The image may sound far-fetched, but not when you realize it’s part of a Super Bowl commercial. The National Football League (NFL) final, the 56th edition of which will be played between the Cincinnati Bengals and Los Angeles Rams, is not only one of the most anticipated sporting events in the U.S., but also an economic powerhouse, as companies strive to make an impact with the most original advertising and the host city seeks to reap in profits.
This time the final will return to where it began, as Los Angeles hosted the first Super Bowl in 1967. This Sunday’s game will be played at SoFi Stadium in Inglewood, and the event is expected to move rivers of dollars. The Super Bowl host committee hired the firm Micronomics Economic Research and Consulting to study the economic benefits of the game, and which estimated that it could move up to $447 million.
The report, which claims to have made “conservative estimates”, found that between 2,200 and 4,700 jobs will be created by the event, many of them in the production and hospitality sector, while Los Angeles will be left with between $12 million and $22 million in tax revenues.
Adam Burke, CEO of the Los Angeles Tourism & Convention Board, told Bloomberg Línea that he hopes the game can be a turning point in the region’s post-pandemic economic recovery, especially for small businesses and industries that have been most affected by Covid-19, such as restaurants and hotels.
“Not only are we seeing football fans from around the world flock to Los Angeles for the big game, but Super Bowl LVI will also continue to drive tourism in Los Angeles well beyond this Sunday, as the national and global exposure will impact tourism and economic activity for years to come,” Burke said.
Not All that Glitters is Gold
For some analysts, however, the estimates may be overstated. Without referring specifically to the Micronomics study, Victor Matheson, professor of sports economics at the College of the Holy Cross, said $400 million is a fairly high estimate. “Super Bowl tourists crowd out many other economic activities that would normally take place in Los Angeles this weekend. While many of the hotels will be full of football fans, they will be displacing other leisure and business travelers,” he told Bloomberg Línea.
The professor, who has published studies estimating the impact of the sporting event, added that “a lot” of the money spent in Los Angeles will not stay in the city. “For example, hotel room rates may be two or three times higher than usual, but the salaries of local hotel employees and room cleaners will not be multiplied by two or three, so all that extra money will go back to corporate headquarters and shareholders around the world,” he explained.
In addition, there will likely be fewer travelers in town from other parts of the country because the Los Angeles Rams will be playing at home. According to Matheson, independent economists unrelated to the NFL, who have analyzed cities that have hosted the Super Bowl, have seen an economic boost from the game, but say it typically ranges from $30 million to $130 million.
Nola Agha, a professor in the Sports Management Program at the University of San Francisco, agrees, saying the methodological assumptions are “too generous” with the event. For example, they “assume that all spending by Super Bowl attendees is new money in the economy, when locals probably would have spent that money anyway” and that the predictions “often ignore displacement effects. This means that hotels in the area would normally have been full with regular visitors to Los Angeles”.
Major events like the Super Bowl have a significant economic impact on all sectors of the Los Angeles economy. That said, we anticipate the largest increases to occur in four key sectors: hotels and motels, passenger ground transportation, personal care services, and full- and limited-service restaurants.Adam Burke, CEO of the Los Angeles Tourism & Convention Board
For Agha, who has also worked as a sports industry consultant and has carried out economic impact studies for clients in the MLB and NBA, it must also be taken into account that the event involves financial costs for the host city, such as additional policing expenses or road services, and that in the contract the city signs with the NFL there are many expenses that the league receives tax-free.
“Overall, there is some economic benefit from the Super Bowl, although it is much less than pre-event estimates,” Agha said.
Nevertheless, Burke says that revenue per available hotel room, one of the key indicators of the hotel industry’s recovery, is expected to “reach the second highest level for any Super Bowl weekend on record”.
Matheson’s estimates indicate that the NFL will sell close to $100 million worth of tickets to the game, and which can be as high as $10,000 on platforms such as SeatGeek.
In fact, according to ticketing company TickPick, tickets for Sunday’s game are the most expensive on record, averaging $7,542 on February 9. Prices have been at all-time highs, but the average cost has risen persistently over the past five years. The current average price is more than double that of the 2017 season final, and remains strong even after the winter surge of the Omicron variant of Covid-19.
Anticipated Ad Revenues
Beyond the discussion on the quantitative effect, the Micronomics analysis also highlighted what it calls ‘qualitative benefits’, which include the more than 100 million viewers who could potentially watch the event on TV, the 43 million interactions on social networks and the cost of a 30-second TV commercial, which last year was estimated at $5.6 million.
Like tickets, the figure for commercials this year is also up. In total, NBCUniversal, the company that holds the Super Bowl broadcasting rights, announced that it sold 70 30-second advertising spots at $7 million each, such as the BMW ad featuring Schwarzenegger and Salma Hayek.
The Comcast division (CMCSA) had already sold 85% of its advertising inventory in the game by last July and has said that the total audience is expected to exceed 100 million viewers, after last year’s 14-year low of 96.4 million.
There will be 30 new advertisers this year, including cryptocurrency companies such as Crypto.com and FTX. The industries with the highest growth in advertising compared to last year are automotive, technology and travel, but in the new group of advertisers, categories such as financial, pharmaceutical, entertainment and approved sports betting operators stand out.
And betting is another of the economic effects of the NFL finals. According to the American Gaming Association (AGA), individuals will wager an estimated $7.61 billion on this year’s championship game, an increase of $3.33 billion (78%) over last year.
According to the AGA report, 18.2 million U.S. adults will place traditional sports bets online, at a retail betting office or with a bookmaker, 78% more than last year.
The event also has the attraction of the traditional halftime show, which this year will feature Dr. Dre, Eminem, Kendrick Lamar, Snoop Dogg and Mary J. Blige with an appearance that will last between 13 and 15 minutes, and for which they will not charge anything, as the visibility that artists garner usually translates into increased sales of their music. A similar expectation to that of the organizers in Los Angeles, who expect the county’s revenues to go up as a result of the exposure brought by the sporting spectacle.