Thursday, March 25, 1999

Final Four's financial impact hard to gauge

Knight Ridder News Service

        SAN JOSE, Calif. — When the NCAA women's college basketball Final Four was played in Cincinnati two years ago, the event's organizers estimated it brought an economic windfall of $7 million to the economy there.

        Now, less than a week before the three-day tournament championship arrives at the San Jose Arena, the official estimate of its impact is more than four times Cincinnati's amount: $32,213,360.

        Roger Noll, a Stanford University economics professor, looks at the same event and comes up with a different number.


        The disparity in estimates shows how difficult and politically charged is the task of putting a price tag on the economic benefits of sporting events. Thousands of people are expected to travel to San Jose this week for the games, and they will spend millions of dollars that would not have been spent otherwise. But several economists and development veterans think San Jose's official estimate is too high.

        “My sense is that the number would be more reliable down in the low 20s rather than in the low 30s,” said Andrew Zimbalist, an economist at Smith College who studies the economics of sports.

        Dean Munro, executive director of the San Jose Sports Authority, says his group plans a study to test his initial $32.2 million estimate. That analysis will be based on surveys of visitors conducted during the weekend.

        Munro is confident it will support his projection, which, he insists, is “conservative.”

        To get his official estimate, Munro calculated that the women's basketball tournament would create about $18 million in direct spending. He projected that a typical visitor will spend $232 per day on hotels, drinks, meals and souvenirs, with a visit averaging 4.2 days.

        He thinks the spending will come from:

        • 15,400 spectators from outside California who will spend $15 million on hotels, drinks, dinners and souvenirs;

        • 1,600 local spectators who will spend $227,000;

        • 2,000 people, who would not have tickets to the games but still would add $1.8 million in purchases of lodging, food, beverages and other basketball-related events;

        • 25,000 local residents, who also do not have tickets, will visit the accompanying attractions downtown and spend $925,000.

        Then, Munro says, there is the indirect impact. For every dollar a fan spends, it's assumed that another 80 cents will be spent by those who get paid. So the waiter at the Fairmont may use Friday night's tips to see a movie at Century Theaters or buy groceries at Zanotto's.

        Such indirect spending, Munro says, totals just over $14 million.

        On top of this, there are other indirect effects. San Jose will get money from its 10 percent tax on hotels and its one-percentage-point share in the sales tax, and the city will benefit from the value of the television time — 2.7 million households tuned in to last year's final on ESPN.

        “The San Jose urban area wants to be perceived as a major city, and what better vehicle than a nationwide broadcast of this scale?” Munro asked. “Every major daily in the country is sending reporters here who will be filing stories with San Jose datelines. It's immeasurable but significant.”

        Some say Munro's estimate should be lower. They say San Jose should count only the 15,400 ticketed visitors as new money; that the estimate should consider the visitors who canceled trips because of the games; that the multiplier Munro used to estimate the indirect spending is too high.

        Noll, the Stanford economist, argues that the Final Four simply will displace other events that would have brought in the same amount of money.

        “The more effort you put into finding out what the impacts are,” he said, “the more you find out that they don't matter much at all.”

        Don Schumacher, the former executive director of the Greater Cincinnati Sports and Events Commission, said that when he calculated the economic impact of the 1997 Final Four tournament in his city he did not include the spending by any local people. “Our feeling is that the dollars that those people were going to spend on entertainment and food was going to happen anyway,” he said.

        His estimate came to only $7 million, lower than San Jose's. Cincinnati's estimate was also influenced by the increased popularity of women's basketball, the higher cost of living in San Jose and the greater capacity of San Jose's arena as compared with Cincinnati's Crown (now Firstar Center).

        “Some people say the impact of the 1997 Final Four was considerably more than $7 million — perhaps they're right — but we feel more comfortable with our point of view,” he said. “We really think we do a disservice to our own city and cause ourselves trouble if we brag too much.”