Final Four's Economic Impact on Atlanta: $0 -- or $70 Million

ATLANTA -- (WXIA) Atlanta Mayor Kasim Reed was beaming Sunday, thrilled the big party is going great -- ecstatic, he said, that the NCAA Men's Final Four weekend is turning out to be a huge economic windfall for Atlanta.

Or is it?

Mayor Reed projected, once again, that the Final Four is pouring, perhaps, more than $70 million into the Atlanta economy.

"I think that all of our hotels are full," he said. "The numbers that we're getting is that the economic impact will be between $65 million and $72 million. But all of the numbers have just been through the roof."

But independent economic studies have concluded that the cities that host major national and international sporting events do not come out ahead financially; they break even, at best.

Economics professor Victor Matheson of the College of the Holy Cross in Worcester, Mass., and economics professor Robert Baade, now with Lake Forest College near Chicago, analyzed the financials of big sporting events going back to 1970.

Consistently, Dr. Matheson said, the projections of a huge economic impact were far higher than the outcomes, on the order of 10 times higher.

"One handy rule of thumb that economists use is, take whatever the city or the promoters tell you, and just move the decimal place one point to the left," he said.

Matheson and Baade found, for example, that a lot of the money that pours into the host cities does not stay in the host cities; it goes to the out-of-state corporations that own the big hotels and restaurant chains.

"Certainly a hotel room in Atlanta this weekend is very expensive," Matheson said. "They're charging two and three times their normal rate. But they're not increasing the salaries of their desk clerks and their room cleaners by two or three times. So all of that money is just going back to the shareholders. It's going back to corporate headquarters in New York City. Not a lot of that money sticks in Atlanta" in the case of the 2013 Final Four.

And Matheson said that studies over time have found that the big sporting events end up simply replacing other comparably big conventions that wanted to come to those cities -- conventions that had to find other cities because there was no room for them during the big sporting events.

"There is no doubt that this is a fun weekend for Atlanta," Dr. Matheson said. "This is a great party, and we have good evidence that events like this make people in the host cities happier. But we just simply don't have much evidence that it makes people richer."

What about the long-term benefits of Atlanta enhancing its image and reputation through events like the Final Four, resulting in more conventions coming to town, and more corporations moving into town, and more people coming to visit, and more people moving here because they like what they see?

"There is no doubt that Atlanta is on everyone's mind this weekend. It's put on the map. But remember, Atlanta's one of the largest cities in the United States. It's already on most people's maps. And the real question is, do you get any long-term increase in convention business or other tourism business? And the evidence we see is that, there's not a whole lot of clear evidence that you do have a big increase in other types of tourism following big sporting events like the Final Four or, for example, the Olympics."

Mayor Reed pointed out that Atlanta is in the "big leagues" among U.S. host cities, and Atlanta will continue to compete for more huge events -- another Final Four, another Super Bowl, another Olympics -- because, he said, that's what Atlanta does. This is a convention and visitors city.

"We host major events as well as any city in America," Reed said. "We're going to compete. And we're going to be competing with a new stadium [to offer the sports leagues and teams].... Right now, the world's eyes are on the city of Atlanta. There are 200 countries, several million viewers every single night are watching the city of Atlanta, on display at its best."


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