Textbook: Financial Management in the Sport Industry (second edition)
Chapter 12 Case Analysis
10. What is the total economic impact?
What is the difference between induced an indirect economic impact? Can a person be both a casual visitor and a time-switcher for the same event? Under what conditions should spending by local residents be counted in a calculation of economic impact? In measuring the economic impact of a sport team, is it correct to count both the spending by fans inside the stadium and the spending by the team (in running its operations) in the community? All else being equal, does increasing the size of the geographic area of impact raise, lower, or have no effect on the capture rate? How would one determine the extent to which locals are reverse time-switchers for a particular event? What are some of the causes of overestimating the economic impact of a sport event? Of underestimating? Review the following description of an economic impact study and answer the questions that follow. When you have finished, you will have measured the economic impact of a large sport event. You have been commissioned to analyze the economic impact on the city of Cincinnati of the MLB All-Star Game. Specifically, the community wants to know the direct spending impact, the indirect spending impact, and the fiscal/tax impact. Cincinnati officials want to know whether it would be profitable to fund and bid for similar future events for the city. This event cost the City about $8 million to host. You created a survey (Exhibit 12.14) and administered it to 342 people around Great American Ball Park during the game making an effort to obtain a random sample. Only 325 of the surveys were usable because of various errors by the respondents. You entered the data into a spreadsheet and are now ready to analyze the economic impact. To allow you to do this analysis, your instructor will provide you with an Excel file containing two spreadsheets: Survey 1 and Key. Survey 1 is the spreadsheet in which the data have been entered, and the key spreadsheet describes an explains each column of data. Be sure to measure economic impact for all visitors, not just those who responded to the survey. (A survey is a sample of the target population.) Based on discussions with the local organizing committee and Cincinnati government officials, you determine that: Great American Ball Park seats 42, 059. The game was sold out. The city sales tax is 6.5% and is collected on all goods and services except hotels. The city hotel occupancy tax is 10.5%. Hotel capacity in the city is 35,000 rooms. The typical occupancy rate is 83%. The average number of persons per room for large events such as this 2.4. Total spending by the local organizing committee was $4.5 million, with 60% of that amount coming from organizations outside of the city. This is in addition to the amount the City itself spent. Sponsors spent $1 million in town activating their sponsorships. The spending multiplier for the city of Cincinnati is 1.6 (based on information from MIG, Inc.) Of spending inside Great American Ball Park (including tickets) for this event, 20% went to the city government (fiscal impact.) What is the difference between induced an indirect economic impact? Can a person be both a casual visitor and a time-switcher for the same event? Under what conditions should spending by local residents be counted in a calculation of economic impact? In measuring the economic impact of a sport team, is it correct to count both the spending by fans inside the stadium and the spending by the team (in running its operations) in the community? All else being equal, does increasing the size of the geographic area of impact raise, lower, or have no effect on the capture rate? How would one determine the extent to which locals are reverse time-switchers for a particular event? What are some of the causes of overestimating the economic impact of a sport event? Of underestimating? Review the following description of an economic impact study and answer the questions that follow. When you have finished, you will have measured the economic impact of a large sport event. You have been commissioned to analyze the economic impact on the city of Cincinnati of the MLB All-Star Game. Specifically, the community wants to know the direct spending impact, the indirect spending impact, and the fiscal/tax impact. Cincinnati officials want to know whether it would be profitable to fund and bid for similar future events for the city. This event cost the City about $8 million to host. You created a survey (Exhibit 12.14) and administered it to 342 people around Great American Ball Park during the game making an effort to obtain a random sample. Only 325 of the surveys were usable because of various errors by the respondents. You entered the data into a spreadsheet and are now ready to analyze the economic impact. To allow you to do this analysis, your instructor will provide you with an Excel file containing two spreadsheets: Survey 1 and Key. Survey 1 is the spreadsheet in which the data have been entered, and the key spreadsheet describes an explains each column of data. Be sure to measure economic impact for all visitors, not just those who responded to the survey. (A survey is a sample of the target population.) Based on discussions with the local organizing committee and Cincinnati government officials, you determine that: Great American Ball Park seats 42, 059. The game was sold out. The city sales tax is 6.5% and is collected on all goods and services except hotels. The city hotel occupancy tax is 10.5%. Hotel capacity in the city is 35,000 rooms. The typical occupancy rate is 83%. The average number of persons per room for large events such as this 2.4. Total spending by the local organizing committee was $4.5 million, with 60% of that amount coming from organizations outside of the city. This is in addition to the amount the City itself spent. Sponsors spent $1 million in town activating their sponsorships. The spending multiplier for the city of Cincinnati is 1.6 (based on information from MIG, Inc.) Of spending inside Great American Ball Park (including tickets) for this event, 20% went to the city government (fiscal impact.)
