College Football Playoff Will Bring DFW $300 Million -- Carried on the Backs of Unicorns

As it does every single time a big sporting event rolls into town, The Dallas Morning News took the time Friday morning to run an estimate of that event's economic impact on the region. According to the paper, Monday night's College Football Playoff championship game between Oregon and Ohio State will "create a $308.6 million ripple in the economy."

At best, that number is dubious. Calculations like the one used by the Morning News fail to account for the substitution effect -- that many of the hotel rooms booked for the game would be booked even if it wasn't here, for example -- and the fact that every dollar spent will not stay in the region. As Dave Berri, former president of the North American Association of Sports Economists, points out in the article, money spent on tickets won't stay here, nor will the money spent at national chains.

In a post by Neil deMause for the website SportsOnEarth, Holy Cross professor Victor Matheson, who's studied the economic impact of Super Bowls on host cities, pegs the biggest of all one-off U.S. sporting events as, at best, creating $120 million of economic activity for the host city. That activity, Matheson said, has little effect on the local economy.

"Imagine an airplane landing at an airport and everyone gets out and gives each other a million bucks, then gets back on the plane. That's $200 million in economic activity, but it's not any benefit to the local economy," he said.

Berri is even less charitable.

"Sports do not generate economic growth; they don't really generate jobs," he says. "There's a reason why an event doesn't do that. If you think about hosting a major event in a town, you bring in these tourists who come in. The problem is, when they show up, a whole bunch of other people who were probably going to be spending money that weekend or that day, they're not going to come that day. There's going to be a ton of traffic and they're all going to stay home."

When actual research has been done, when people have looked at GDP and job numbers in a city after the event, Berri says, the measured effect is either very small or non-existent.

"People who argue for these events claim impacts that just don't show up in the data," he says. "The people who make the claims that there are huge impacts never come back after the event and do another study to see whether what they projected actually turned out to be true."

The Cotton Bowl's economic impact is projected by its organizers to be $30 million. The championship game is a college football game being held at the same stadium less than two weeks later and, sure, it has things like the fan fest at the convention center and a series of concerts, but it's hard to imagine it generating 10 times the revenue of a similarly attended game at the same location. Grand as it may be, Jerryworld still only holds a finite amount of people.

Taking things a step farther, $300 million, in the grand scheme of things, just doesn't mean much to an economy as big as DFW's. 2014 data from the Census Bureau estimates the region's GDP at over $447 billion. That means that even if you accept the most grandiose projections, the championship game would give the area's economy a .067 percent bump.

"I think that's something that's missed in all of these discussions," Berri says. "Even if you are accurate, which you're not, people never have any idea how big their local economy is. People have no idea how incredibly wealthy their economy is, if you tell people $300 million they think, 'Wow, if I had $300 million that'd be pretty cool."

Because the projections are made without context and accountability, entities that want the events in a given city can say whatever they wish, Berri says.

"Nobody's going to check on this, so make up any number you'd like, I guess. No one is going to check on whether it's true or not, so what difference does it make? As long as you're making up stuff, why don't you go for the whole gusto, say it's $800 billion? As long as we're making up stuff, let's go all-in. We're living in fantasy land anyway," he says.

Berri hosts a meeting each summer for sports economists from around the country to gather and present papers. Each year, he says, the question about the impact of big events comes up. Every year, the same answer is given.

"The story is identical every time it's presented: There's no impact. We feel like saying, 'Can we just say there is no impact and go to lunch?'" he says.

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Stephen Young has written about Dallas news for the Observer since 2014. He's a Dallas native and a graduate of the University of North Texas.
Contact: Stephen Young