NEWS

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November 3, 2003

Sanderson studies economic impact of stadiums

A senior lecturer in the economics department and a colleague of his at Stanford have been working to predict the revenue of the 2008 Superbowl set in Phoenix as part of their larger theory on the economics of sport contests, hypothesizing that the actual monetary income will be just a small fraction of the $350 million projected.

The study is a part of Allen R. Sanderson's larger economic position on sports stadiums: that while they have a strong positive influence on businesses located near the venue, their overall impact on the home city's economy remains minimal.

Sanderso has written a number of articles on the economics of sports and has advised several cities on sports issues, questioning the magnitude of the economic benefit of having a sports stadium in a city.

Sanderson argues that that even though local area sports bars, restaurants, and similar businesses in areas such as Wrigleyville generate a great deal of revenue, they ultimately have a negligible effect on a major city such as Chicago. He likens this relationship to a "hole in the donut" around a place like Wrigley Field—the "hole" around Wrigley Field may benefit greatly, but in the end there is little gain for the "donut."

Although Sanderson's "donut" may not be that affected by a sports team, there is evidence that the "hole" is reliant on major stadiums.

"There is a direct correlation between how the Cubs do and we do-—when they're doing well we're doing well, when they're not, we're not," said Brad King, manager of Wrigleyville's Cubby Bear sports bar. "We benefitted a great deal this summer and fall from having the Cubs in the postseason because normally that would be a slump time for business."

Paul Kousis, manager of Bertucci's near U.S. Cellular Field and Soldier Field, agreed, saying that "when the Sox and Bears are in town it helps business tremendously, but when they are away there is probably a 50-60 percent drop in business."

Sanderson also noted that sporting events could have negative effects. Sometimes, if a team is doing particularly well—like the Cubs on their recent winning streak—revenue will funnel off from Loop businesses to the sports market.

He added that when there is a big event such as a Bears home game, not only does this attract more people to Soldier Field rather than the downtown area, but also the glut of traffic provides a disincentive for people to go to the Loop on these days.

The manager of Greektown's Santorini near the United Center said that the Cubs' winning streak interrupted the restaurant's business, causing many of its customers to move toward Wrigleyville.

Major cities incur a large amount of physical damage as well, Sanderson said, citing events like the vandalism that occurred when the Chicago Bulls won the Championship. Sanderson said that cities that host the Olympics are lucky if they simply break even.

Such reasoning is more accurately applied to major cities such as New York or Chicago than to smaller cities. Sanderson remarked that while Chicago may not be affected that much by a Cubs winning streak, a smaller city might experience a great benefit from hosting major sporting events.

"The Cubs, for example, are nice for non-economic reasons, but do I think they added much economic benefit to the local community and city? No," Sanderson said.