Pre-Event Estimate of the Economic Impact of Super Bowl LII on Minneapolis-St

Pre-Event Estimate of the Economic Impact of Super Bowl LII on Minneapolis-St. Paul

Net Contribution to Jobs, GDP, Wages, & Tax Receipts

Kenneth McGill Managing Director, Rockport Analytics Prepared for: Chief Economist, Global Business Travel Association (GBTA) Minneapolis Super Bowl Host Committee [email protected] +1 (610) 213-2558 April 2016

Agenda

• Super Bowl Economic Impact: Caught Between a Rock and Hard Place • How Will SBLII Benefit the MSP Economy? • SBLII Economic & Fiscal Impacts • Super Bowl LII Impact in Perspective • About Rockport Analytics

Increasingly, sponsors, partners, citizens, businesses, & government authorities ask the question, “is it worth it?” • What are total hosting costs? Operations? Capital? Displacement? • How will these funds be raised? Private or public? • And how will local businesses, citizens, and governments benefit? • Are there ongoing benefit streams created or is it once and done?

Meanwhile, past estimates have been criticized as extremely overinflated, inaccurate, even purposely misrepresented… • Gross SB spending is interchanged with economic impact • Resident spending, game ticket sales, air transportation are included • Displaced regular tourism spending is not subtracted • NFL and other organization exemptions are not subtracted • “Softer” benefits are questionably quantified and included –e.g. unearned media, halo effects on future meeting bookings, city brand • Inappropriate and inflated “multipliers” are used to translate spending into jobs, paid wages, tax receipts, and contributions to local GDP

Super Bowl Economic Impact 1989-2015  “The Super Bowl's economic $750 Phoenix impact: Super-hype? “ CBS Moneywatch, January 2015 $650 New York  “Is Hosting the Super Bowl Worth It?” U.S. New & World $550 Report, Jan 2016 New Orleans Miami Miami  “Your City Will Never Get Rich Miami $450 New Orleans Hosting the Super Bowl”, Mother San Diego Jones, February 2016 San Diego Tempe New Orleans Phoenix $350 Miami  “Super Bowl host cities always Atlanta Houston Indianapolis Miami lose the money game”, Pasadena New Tampa Detroit in millions of $ of Total Economic Impact (GDP) Impact Economic $ ofTotal of millionsin $250 MarketWatch, February 2016 Dallas Tampa Jacksonville  “The NFL’s Super Bowl Con: Atlanta $150 Hosting the Big Game Isn’t an 1988 1993 1998 2003 2008 2013 2018 Economic Score For Cities”, Daily Source: University of New Orleans, Coates and Humphreys, UCLA/LA Sports Council, Price waterhouse Coopers, Depken and Wilson, Rishe, Greater Miami Convention and Visitors Bureau, San Diego Citizen’s Task Force, Rockport Analytics Beast, Jan 2014 Houston SBLI and Minneapolis SBLII are pre-event estimates. Source: Rockport Analytics  …

Copyright © 2015 Rockport Analytics, LLC. All Rights Reserved. 4 Use an Approach That Stands Up to Scrutiny • Purposely conservative (If in doubt, leave it out…) : Only non-resident local spending, local operations, broadcast, advertising, and T&E spending. Avoid double counting and outside reimbursed costs/ spending • Use actual spending rather than budgeted estimates wherever possible • Triangulate: always sanity check “demand” side estimates with supply side capacity figures (e.g. # hotel rooms, rental car inventory, air lift, etc.) • Check estimates against published benchmarks (e.g. S&L tax collections) • Treat softer benefits such as media exposure, halo effects as “below the line items”. Calculate it, yes, but leave it out of the headline numbers • Displaced Tourism: Estimate the normal level of tourism activity (leisure & business) for the late-Jan/early-Feb period, assume 100% displacement, and subtract it from the “gross” impact • Highlight strengths & weaknesses in data sources, models, methodology early/often and upfront - no appendix burials. • No black boxes: all data, model solutions, and interim work product belong to the Host Committee. Results should be easily replicated by others

Super Bowl LII –February 2018

How Will SBLII Benefit the MSP Economy?

1. Estimate SBLII-initiated game attendee/visitor spending 2. Gather/estimate SBLII MSP game, event & broadcast operations spending 3. Translate incremental spending into economic impact for MSP & MN 4. Calculate SBLII-initiated state & local taxes 5. Estimate displaced tourism impact & subtract it from gross SBLII impact 6. Derive and monetize “softer” benefits of SBLII –value of media, convention/meetings lift, return visitation, etc.

Copyright © 2015 Rockport Analytics, LLC. All Rights Reserved. 7 Pre-Event Economic Impact of SB LII: Executive Summary • Super Bowl LII will bring an estimated $407 Super Bowl LII Bottom Line million in new spending to the MSP metro area. For the Minneapolis-St. Paul SB LII Net* This will come from both the local travel spending of MSA: Incremental 125,000 expected visitors and an estimated $122 in millions of $ unless otherwise noted Contribution million of local game/event operations Total SB LII-initiated Spending $338.4 expenditures. About $68 million in regular tourism activity will be displaced by the event, however, Total Economic Impact: resulting in net incremental spending of $338 million. Contribution to MSP GDP $342.6

• Given the direct, upstream, and downstream impacts Jobs Supported (# FTEs) 5,000 of that spending, MSP will realize a net new Wages Paid $241.5 contribution to the regional economy of $343 Total Tax Receipts $95.4 million, during which over 5,000 jobs will be Net Federal $51.3 Net State & Local $28.7 supported at an array of local businesses paying Source: Rockport Analytics FTEs=Full Time Equivalents wages of $242 million. * After removing displaced tourism typical for 10-day period in late January-early February • SB LII-initiated state & local tax receipts will result in an estimated net windfall of over $29 million for state and MSP municipal governments.

Super Bowl LII Will Bring Substantial New • An estimated 125,400 non-resident visitors will come to Minnesota for SB LII Spending to Minnesota in millions of $ % • About 48% will stay overnight for slightly over 4 nights generating over 230,000 room nights at Game Attendee/Visitor $284.9 70% area hotels Events Operations $ 13.5 3% • SB LII visitors will spend an average of about Game, Broadcast Operations $ 102.3 25% $620 per day in the MSP metro area. Typical and Promotion MSP tourism spending averages slightly over Other $ 6.0 1% $118/day Total SB LII-Initiated Spending $ 406.6 100% Game Attendee /

Non-Resident Visitor Spending Super Bowl LII Non-Resident Visitor $285 million Spending Ground Spending Other (in thousands) Transportation 6% Retail & Shopping $63,854 (ex Rental Car) Entertainment 5% Hotel $70,954 10% Retail & Food & Beverage $62,833 Shopping Rental Car & Commercial Vehicle $28,130 Rental Car 22% Entertainment $26,908 6% Other Ground Transportation $15,470 Food & Hotel Other –e.g. travel arrangement, Beverage 25% $16,735 laundry, other personal services 22%

Total Attendee/Visitor Spending $284,884

Total Super Total Expenditures Bowl LII Spending $407 million

Economic Jobs Value to MSP Impact Supported Economy $404 million 6,000 FTEs

Impact on Direct Impact Indirect & MSP Induced Impact $206 million Businesses $198 million Industries directly providing goods and services to MSP Industries providing goods and visitors services to front-line businesses e.g. Restaurants e.g Food Distribution

2018 SB LII Gross Economic Impact Summary Super Bowl LII Economic Direct Indirect (Supply Induced Total Impact Metric Chain) (Income)

Total Spending (in thous $) - - - $ 406,643 Value-Added (GDP) (in thous $) $ 206,230 $ 88,519 $ 108,945 $ 403,694 Wages (in thous $) $ 152,142 $ 58,898 $ 52,148 $ 280,561 Jobs (# Full Time Equivalents) 3,800 900 1,300 6,000 Tax Receipts (in thous $) $ 113,188 Federal Taxes $ 60,401 State Taxes $ 33,045 Local Taxes $ 19,742

• Direct Impact –accrues to those MSP businesses that directly serve SB LII game attendees, visitors, and out-of-town staff; plus businesses directly involved with hosting the game and its many related events. • Indirect Impact –benefit to the many local upstream businesses that populate the supply chain of SB LII direct businesses • Induced Impact –both direct and supply chain businesses pay wages to their workers. Much of these local wages will be spent in the MSP area at business that provide a broad range of consumer goods and services.

Super Bowl LII Bottom Line Displaced tourism is estimated using Super Bowl Meet Minnesota estimates of annual For the Minneapolis-St. Paul Super Bowl Displaced LII Net* visitor spending adjusted for a 10-day MSA: LII Gross Tourism Super Bowl period using average daily Incremental Contribution Offset hotel data (2007-2014) from Smith Travel in millions of $ unless otherwise noted Contribution Research and Indianapolis’ actual SB Total Gross Spending $406.6 ($68.3) $338.4 XLVI experience. It includes all displaced leisure and business trips. Total Economic Impact: Contribution to GDP $403.7 ($61.1) $342.6 Direct Impact $206.2 ($32.2) $174.0 Indirect Impact $88.5 ($13.5) $75.0 Includes both full and part-time Induced Impact $108.9 ($15.4) $93.6 workers converted to FTE using full- Jobs Supported (# FTEs) 6,000 (1,000) 5,000 time definition of 2,080 hours per year Contribution to Area Payrolls $280.6 ($39.1) $241.5

Total Tax Receipts $113.2 ($17.8) $95.4 Total estimated gross state & local taxes initiated by SB LII are reduced to Net Federal $51.3 account for tax receipts from typical Net State & Local taxes $28.7 tourism activity at that time of year that Source: Rockport Analytics, Minneapolis Super Bowl Host Committee will be displaced by the game and its * After removing displaced tourism typical for 10-day period in late January-early February events (middle column) FTEs=Full Time Equivalents

Minneapolis-St. Paul Super Bowl LII State & Local tax totals also include Tax Overview other tax types such as corporate in thousands of dollars income (state) and property (local). These are derived by the IMPLAN Federal Taxes Collected –Total Impact $ 60,401 economic model of MSP. State Taxes Collected –Total Impact $ 33,045 Sales $ 18,511 Rental Car $ 2,750 Transaction taxes are estimated Local Taxes Collected –Total Impact $ 19,742 using spending by category and Lodging + Entertainment $ 1,568 appropriate tax rates less any Restaurant + Liquor $ 1,617 exemptions (i.e. sales tax on grocery Hennepin County Sales $ 198 store food purchases) Minneapolis Sales $ 224 Transit Improvement $ 673 Normal tourism-initiated taxes Total Gross Super Bowl LII-Initiated Taxes $ 113,188 for a typical 10-day period in late January-early February. State and Local Taxes Analysis These receipts are assumed to Super Bowl LII S&L Gross Tax Receipts $ 52,787 be 100% displaced by Super Bowl LII Incremental Super Bowl LII-Initiated State and Local Taxes less displaced tourism and $28,666 Estimated by Rockport w/ input existing exemptions from Meet Minneapolis and the Minneapolis Super Bowl Host Committee

Copyright © 2015 Rockport Analytics, LLC. All Rights Reserved. 13 SBLII Estimated Impact In Range With Past Results Super Bowl Economic Impact 1989-2018 Why the Broad Range? $750 Phoenix • Different authors, methodologies, data integrity - some more conservative than others

• Estimates vs. Hard Data: Level of cooperation from NFL, Fox, CBS, ESPN, corporate sponsors, municipal $650 New York authorities, etc. • Time: inflation naturally lifts the value of all visitor & operations spending $550 • Relative Cost of Living -MSP’s cost of living is higher New Orleans than some other host cities (e.g. Dallas, Indianapolis) Miami Miami Miami • Minneapolis previously hosted Super Bowl XXVI in $450 New Orleans 1992 –economic impact estimated @ $176 million San Diego ($364 million in today’s dollars) San Diego Tempe New Orleans Phoenix MSP SBLII Economic $350 Miami Super Year Host City Impact Atlanta Indianapolis Bowl Miami Houston (in millions $) Pasadena New Tampa Detroit 2010 XLIV Miami $ 333

in millions of $ of Total Economic Impact (GDP) Impact Economic $ ofTotal of millionsin $250 Dallas 2011 XLV Dallas $ 200 Tampa Jacksonville 2012 XLVI Indianapolis $ 324 Atlanta 2013 XLVII New Orleans $ 480 $150 MSP SBXXVI 2014 XLVIII New York $ 600 1988 1993 1998 2003 2008 2013 2018 2015 XLIX Phoenix $ 719 Source: University of New Orleans, Coates and Humphreys, UCLA/LA Sports Council, Price Waterhouse Coopers, 2016 L San Francisco n/a Depken and Wilson, Rishe, Greater Miami Convention and Visitors Bureau, San Diego Citizen’s Task Force, Rockport Analytics 2017 LII Houston* tba * Houston SBLI and Minneapolis SBLII are pre-event estimates. Source: Rockport Analytics 2018 LII Minneapolis* $ 404

How Will SBLII Benefit MSP & Minnesota? By Promoting Minnesota Jobs SBLII will support 6,000 full time equivalent jobs in MSP paying an average wage equivalent of $47,000 per year By Contributing to the Health of the Public Education System SBLII-initiated net state & local tax revenue is estimated to be enough to educate 2,350 Minnesota public school students or hire more than 500 new classroom teachers* By Directly Benefiting Area Businesses SBLII will generate net incremental top-line revenue of over $338 million benefiting a broad array of Minnesota businesses in sectors far beyond just hotels and restaurants. By Building MSP Tourism SBLII’s $338 million in incremental spending will boost annual MSP tourism by an estimated 7% in 2018 -all in a 10-day period during tourism’s low season! Moreover, many visitors impressed with MSP and MN will return to build future tourism. By Helping to Relieve the Tax Burden of MSP Households SBLII will generate about $21 per MSP household in state & local tax receipts. Since no resident spending was included in the economic impact analysis, these tax receipts can be considered net new to state and municipal government budgets. By Capturing and Retaining Local Expenditures Made By SBLII Visitors For every $1 spent at SBLII, the MSP economy will retain 99₵. About 69₵ of that retained benefit will go towards paying Minnesota workers a total of $281 million in wages and salaries. And 13₵ of each SBLII dollar will go towards the payment of state and local taxes.

* Based upon National Education Association statistics for Minnesota, 2015

Task Methodology/Approach Data Sources • Indianapolis, Dallas, New Orleans, and San Past studies of game attendee/visitor spending were used to derive likely Diego studies MSP SB LII outlays on hotel, F&B, rental car, shopping, etc. Estimates of total Estimate SB- • Smith Travel Research expected SB visitor volume was derived using stadium capacity, past surveys initiated Visitor • Meet Minneapolis of game attendee-to-total visitor ratios, and MSP hotel room inventory. Spending • D.K. Shifflet & Associates (DKSA) Spending per diems were adjusted for: (a) cost-of-living differential between • US Census Bureau, BLS MSP and other host cities and (b) overall inflation by category to 2018. • Past NFL, Media, & Corporate expenses Estimate SB- Each major operations entity was estimated using two approaches: (1) • Indianapolis, Dallas, New Orleans’ studies initiated MSP imputing MSP using past SB data covering individual line item expenses and • Indianapolis, Dallas Host Committee Game & Event (2) direct input from Minneapolis Host Committee’s budget. Organizations reported expenses Operations include NFL, ESPN, various Corporate sponsors, municipal authorities, NBC, • Minneapolis Host Committee budget Spending local airport authorities, and local DMOs. Spending streams for visitors and operations by detailed category are Translate inputted into the latest (2013) IMPLAN economic model of the MSP spending into metropolitan statistical area. Contributions to GDP, jobs, wages, and taxes • IMPLAN (www.implan.com) economic impact are estimate by the model. IMPLAN is a non-proprietary model of the on MSP regional economy that is widely used by to assess the economic impact of public or private investments. Calculate Taxes directly applicable to visitor & operational transactions are calculated • Minnesota Department of Revenue Minnesota & MSP using the categorical spending described above alongside appropriate current • Meet Minneapolis collection of key tourism transactional tax rates. Exemptions for items identified in the tax law are also factored (e.g. taxes and rates taxes state sales tax on food & clothing)

SB LII will displace regularly occurring tourism during Jan-Feb 2018. This • Meet Minneapolis visitor profile and tourism Estimate tourism impact was estimated and subtracted from the gross SB LII impact spending estimates displaced tourism calculations mentioned above towards a net benefit. Displaced tourism was • DKSA MSP trip budget averages & calculate net SB estimated by prorating regular annual tourism spending for the winter season • STR daily hotel activity during SB XLVI LII impact and using past studies to derive the 10-day late Jan-early Feb portion of • IMPLAN model of MSP average spending.

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