The Business of Super Bowl: An Inside Look at the Economics of America’s Biggest Sporting Event
Super Bowl is more than a grand cultural sports event in the USA. America’s biggest event is also about big profits for host cities. For several reasons, analysts, hosting committees, and NFL claim it to be an economic powerhouse with the potential to create income worth $300 to $500 million. Is it a reality for every annual championship host, or just a bubble?
Let’s dig deep into the economic impact of the Super Bowl on the host cities.
Taxation – Loss or Revenue?
Several host cities levy additional taxes on the citizens to build better infrastructure and improve security systems. According to the Rockport Analytics report, Houston collected around $24 million in tax to host Super Bowl LI. It covered approximately $5.5 million for security, police, and transportation service costs. However, Houston Super Bowl Host Committee reimbursed this cost later.
While evaluating the cost for the long run is challenging, some stats show the game week brings big money for the hosts. Direct spending by visitors adds to the financial benefits of the locals by creating a tax revenue stream. The gross tax revenue can cover ticket, sales, property, and occupancy tax.
Further, civic bodies and NFL consider tax hikes as an investment leading to future economic growth. This mega event opens doors for various local businesses to gain exposure and make more profits. It includes the hospitality, retail, and transportation sectors. This business growth also creates demand for more workforce during the championship league in the city.
The fourth-time host, Arizona hosting committee also estimates over $500 million in revenue with Super Bowl LVII.
However, the actual revenue figures are far-fetched from what National Football League claims. Based on the individual analysis, Super Bowl events generated revenue between $90 and 130 million on average for previous host cities.
However, the taxes earned overpowers the tax paid to manage the mega event. Thus, the substantial tax collected for upgrading the cities benefits the region during and after Super Bowl.
Every year the week-long NFL event facilitates local businesses of the host cities in various ways. Let’s take the use case of the eighth Super Bowl in L.A. The local business owners in this city received a much-needed financial boost after the pandemic. Microeconomics Economic Research and Consulting anticipates L.A. County made around $477.5 million worth of revenue in that season.
According to recent reports, over 200 local business owners got an invitation to join Super Bowl 2024 in Las Vegas. Besides, NFL encourages female-led, veteran, LGBTQ+, and minority-owned ventures through its Business Connect program. It ensures both exposure and revenue to various vendors, if not all. Moreover, the initiative helps create inclusive work culture.
Local Tourism Boom
The Super Bowl attracts thousands of NFL fans to watch the season live in the stadium. The influx of tourists creates a revenue-generating source for local hotels, motels, restaurants, retail businesses, and entertainment venues. For instance, an average room cost at the Dream Hollywood hotel was around $445 per night during Super Bowl LVI.
According to Williams College, visitors spent more than twice that of the average tourist in the peak season during the 1999 annual championship event in South Florida.
On the contrary, some economists argue against the boost in tourism in the local economy. Victor Matheson from the College of Holy Cross said that the unavailability of hotel rooms during the event neglects other casual and business travelers to the city.
Nevertheless, the fiscal contributions help host cities recover from the economic downfall. City officials and economists believe the host cities earn hundreds of millions in economic activity with the arrival of Super Bowl fans.
Advertising and Sponsorships
Every brand evaluates the benefits and costs of ad campaigning during Super Bowl. So are advertising and sponsorships worth it?
Every year, nearly 100 million viewers from the U.S. tune in to watch the final matchup and halftime show. The super-sized T.V. audience made the Super Bowl a suitable medium for brands to launch new marketing campaigns. Hence, several brands willingly pay a premium to sponsor their products during the mega event.
Generally, the companies pay more than $5 million for just 30 seconds of ad slots on broadcasting channels. For instance, Reuters reported CBS sold out all its ad slots for $5.6 million during Super Bowl LV.
From snacks, beverages, and cars to crypto brands, every industry leverage through Super Bowl season. The sponsorship campaigns run across broadcast, audio, social, and digital channels.
Indeed, the magnitude of brand exposure is the primary reason varieties of companies invest in advertising and sponsorship during the big game. As per the Hive and Elevate study, NFL sponsors like Pepsi and Nike generated around $170 million through in-game exposure in Super Bowl 2022.
Nowhere can the brands earn hundreds of millions through sponsorship than in the NFL championship league. Hence, they don’t hesitate to invest an enormous amount in marketing.
Betting Market Trends
The betting market is growing exponentially after legalization in various U.S. states. Several e-sportsbook operators witness unmatched demand for Super Bowl betting events. The American Gaming Association reported an ever-increasing number of bettors are wagering during the NFL championship league after legalizations in 10 U.S. states.
Both legal and offshore sports betting sites receive wagers worth a million dollars during the big game. According to reports, the Arizona betting market presumably made revenue of around $120 million with last year’s debut in Super Bowl gambling. The industry will only continue to grow.
This year won’t be any different for Super Bowl LVII bookies. With myriad bet options available, betting enthusiasts can wager their hearts out. Moreover, experts anticipate an increase in bets during the super bowl halftime show.
While fans look forward to cheering for their favorite team, host cities aim for economic growth during Super Bowl. Simply put, locals experience a boost in the economy, but not substantially. However, economists also believe that hosting the annual championship has a positive, long-lasting impact on the future of the hosting city.