Calculating Those NFL Draft Economic Benefits

“All that glitters is not gold,” goes the aphorism made most famous by William Shakespeare in his “The Merchant of Venice.” And a researcher at the Allegheny Institute for Public Policy says we should keep that phrase in mind when it comes to the claimed economic impact Pittsburgh can expect from next April’s NFL Draft.

“No doubt that optimism stems from the economic impact studies for cities that have hosted the draft in recent years,” says Jake Haulk, president-emeritus of the Pittsburgh think tank (in Policy Brief Vol. 25, No. 17).

While those studies claim sizable economic boosts for host cities, the Ph.D. economist reminds that all these impact studies are from local visitor bureaus and/or sports commissions.

And given that such studies tend to inflate the multiplier effect that also increases the claimed economic benefits, he poses this elephant-in-the room question: “(A)re there major issues with the methodology of the impact studies that have been carried out in the past?”

To be sure, Haulk says there will be large numbers of people in the city during the three-day event.

“Recent attendance figures for other cities can lead to no other conclusion,” he says. “The draft has become a big event and a major attendance draw. … (T)here are studies that claim large expenditures by visitors to cities and surrounding areas in terms of revenue from hotel stays, restaurant spending, parking and other expenditures associated with visitors.”

But – and it is very big but – how those economic impacts are calculated is paramount to accuracy.

To wit, “Spending by locals has to be treated carefully in the sense that outlays by people from the city, or nearby communities, is money not spent at other venues in the same or nearby communities,” Haulk cautions. “Only spending by actual visitors to the region are truly net contributors to increased spending in the host city and county.”

Then there’s hotel revenues, which Haulk says are typically the largest net contributors to increased spending (followed by meals, souvenirs, etc.).

“(I)t must be remembered that using 100 percent occupied hotels for three days to calculate the impact of visitors is not correct,” the think tank scholar reminds. “The correct measure of impact is to look at the increase in occupancy necessary to reach 100 percent occupancy for the three days (of the NFL Draft).”

Haulk says recent data show the annual occupancy in Allegheny County’s estimated 18,700 rooms to be 64 percent. “That means, on average, only 36 percent of the rooms are available. So, even if the draft visitors take all the rooms for three days, they represent only a net increase in visitors of 36 percent, not 100 percent.”

Haulk also reminds that there are costs to the local economy for hosting such a large event – “significant local outlays,” he says – that must be subtracted from any economic gains. He cites such things as security, traffic control, trash clean-up and providing sanitary facilities.

“In short, there are many monetary and non-monetary costs” — think traffic congestion and delays, among other things – “that will occur when tens of thousands of extra visitors arrive to attend the draft proceedings,” Haulk says. He notes such things are rarely mentioned by  promoters touting only the benefits.

All this said, Haulk also details data that show little or no real post-draft employment gains for host cities and regions.

“In sum, there is no evidence in the job-growth data to suggest that hosting the NFL Draft has anything more than a momentary three-day impact on city economies,” Haulk concludes.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy ([email protected]).