Thursday, September 17, 2009

Are YOU Ready for Some FOOTBALL? The Inside Scoop on the Economic Impact of Sporting Events!

Greetings Readers!

I don’t know a thing about football, so please read this at your own risk!

As the excitement continues about the thought of the Super Bowl coming to Indianapolis, many people are asking about the economic impact such a game might have on our fair city. Let’s see . . . there are how many innings in a game? Never mind, let me start with something I know about - the multiplier effect . . . what? What is this and what does this have to do with football? Where are my Hospitality & Restaurant Management Program students? Ask one of them and I’m sure they’ll be able to explain . . .

Go with me on a journey through time . . . the date is January 6, 2011 . . .
Hotel Desk Clerk: “Good afternoon, thank you for calling the Hillerton Hotel Plaza Indianapolis. This is Julia speaking, how may I assist you?”

Super Bowl Fan: “Yeah, this is Eric and I need to make a reservation for next year’s Super Bowl! I’m staying the whole weekend. Please tell me you have rooms and that you are near all of the action.”

Hotel Desk Clerk: “You have certainly called the right place Mr. Eric. Let’s first start with making your room reservation and then we’ll discuss where ‘all of the action’ is in relation to our hotel!”

Super Bowl Fan: “Cool, I want the best room you have at the cheapest price you have!”

Hotel Desk Clerk: “Well Mr. Eric I’m going to need to be honest with you, the Super Bowl is a very important event for our city and we, the city that is, are already close to being sold out. I have one master deluxe concierge floor ocean view best room in the house suite available; but, it won’t be cheap. In fact, nothing is cheap during the Super Bowl! May I make that reservation for you now?”
Sporting events have long been associated with increased hotel rates and high restaurant traffic in the area in which the event is being held. In anticipation of an event, business owners hike up the prices in an effort to capture top dollar on all business coming into town. We call this skimming. “The objective with skimming is to ‘skim’ off customers who are willing to pay more to have the product sooner.” What visitors don’t know is that this is done to offset the practice we call penetration pricing. “Prices are lowered later when demand falls and we have an opportunity to capture a large share of the market.” Businesses can’t do one of these practices without the other. Meaning, during slow times, a business may not be able to discount if they haven’t maximized their revenues during peak times.

It is pretty clear to see how the revenue from ticket prices and stadium concessions may benefit a city and its people. But, there is so much more! This so much more occurs when our fan Eric eats at a different restaurant each night of his visit, drinks at the local bar with his fellow fans, shops for gifts (expensive gifts) for his wife and kids whom he’s left behind at home, perhaps rented a car at the airport or purchased gas for his own vehicle before he hits the road going home, buys midnight snacks, a camera & film at a store around the corner from the hotel, splurged on a buffet breakfast one morning, and purchased underwear when he realized he did his packing and not his wife! Then, he raves about the Hillerton Hotel Plaza and his friends & family spend their next vacation there for years to come. In order to accommodate all of this extra activity, restaurants hire extra staff, stores order & stock more goods, and employees at these locations treat their families to a movie with their overtime pay. This is a result of the multiplier effect. This concept “refers to new money that is brought into a community to pay for hotel rooms, restaurant meals, and other aspects of leisure,” as defined in our Introduction to Hospitality textbooks. The economic impact of major event’s multiply throughout a community bringing benefits and business.

I would be remiss if I didn’t at least touch upon the downside of the multiplier effect. So, here goes . . . studies show that along with all of this good business there is a downside. We open our community up to an increase in crime, vandalism, panhandling, and overcrowding. While it is temporary, every town should develop a plan on how to minimize these negative aspects of a major event.

The date is January 6, 2015 . . .
Hotel Desk Clerk: “Good afternoon, thank you for calling the Hillerton Hotel Plaza Indianapolis. This is Julia speaking, how may I assist you?”

Super Bowl Fan: “Hey Julia, this is your biggest fan, Eric. I just called to say, thank you for being honest with me all those years ago when I first came to Indy for the Super Bowl! Now I come to your city for just your city! Thanks again. I am still set for my anniversary in May, right? Oh yeah, don’t forget to try and snag me some Indy 500 tickets!”
To summarize, the economic impact of a sporting event is this –

Educating visitors on the reality of pricing during this time . . . 15 minutes.
Increase in crime, vandalism, panhandling, and overcrowding . . . temporary.
More jobs, families going out together, years of continued business . . . priceless.

I hope you’re ready Indianapolis for some football!

Jokima Hiller, MBA, Hospitality & Restaurant
Management Program Coordinator
Faculty Advisor, Travel & Tour Club

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