Super Bowl tourists drove away usual visitors to South Bay, just as economists predicted

It’s been a month since Santa Clara welcomed the Super Bowl to the San Francisco 49ersslippery turf, so how did the South Bay make out in terms of that $800 million in economic impact that the NFL projected? Take it away, Team San Jose, the tourism bureau with the instantly dated name:

Even with room rates falling below astronomical predictions, they were still high enough above normal to make the three-day Super Bowl weekend “the best weekend of hotel performance in San Jose history,” said Ben Roschke, Team San Jose’s director of business development.

Sounds great! And what are the actual numbers?

Instead of selling out every single room during Super Bowl week, as the city projected, San Jose hotels actually welcomed fewer guests than the same week last year, preliminary figures released Monday show.

With three out of every 10 rooms vacant, the city won’t reap the nearly $1.9 million in additional hotel taxes it forecast Super Bowl week would deliver. Instead, a report submitted by Smith Travel Research shows the city will likely receive about $600,000 in extra hotel taxes, said Victor Matheson, an economist at College of the Holy Cross, who studies the economics of Super Bowls.

That’s not enough to offset the $1.25 million in costs mostly for police services during Super Bowl week.

How could hotel occupancy rates be both above normal and below normal? The trick is in what timespan you look at: For Super Bowl weekend, even sky-high hotel rates weren’t enough to keep people away, which makes sense given that if you’re already dropping obscene amounts of money on Super Bowl tickets, getting gouged on a hotel stay isn’t that big a deal. However, for the entire week before the game, occupancy rates were down 9% from the same week last year, presumably because business travelers steered clear of the hiked room fees (by 64%, according to the Smith Travel report), while football fans didn’t show up until closer to game time.

This is probably fine for the hotels, since they ended up making more money from the increased room rates, even if they hosted fewer people overall. In terms of overall local economic impact, though, it’s terrible, because it means for the first half of Super Bowl week, there were far fewer hotel visitors knocking around San Jose and spending their luscious out-of-town dollars elsewhere in town, something that gamegoers couldn’t make up for during their relatively short stays. (Sales tax receipt figures for Super Bowl week haven’t been released yet, but anecdotal reports from San Jose business owners were that Super Bowl week was “kind of a letdown” and “wasn’t too much different from a normal week.”)

If all that sounds familiar, it should, because economists like Phil Porter have been noting this trend for more than 15 years already. Matheson ended up telling the San Jose Mercury News that the Bay Area as a whole could break even on its Super Bowl hosting costs, which is nice, but isn’t exactly an $800 million windfall.

 


34 comments on “Super Bowl tourists drove away usual visitors to South Bay, just as economists predicted

  1. Meanwhile in SF the hotel & convention association is claiming that the city took in an additional $5 million in hotel taxes — which might cover the city’s costs, or might not: http://www.sfgate.com/bayarea/article/Super-Bowl-generates-8-2-million-in-city-hotel-6866587.php

    SFO also saw increased revenue, which I guess is great for those restaurant and store owners: http://www.sfgate.com/politics/article/Super-Bowl-sends-an-extra-4-6-million-SFO-s-way-6875874.php

    Anecdotally a number of restaurants and shops in the city saw decreased business:
    http://abc7news.com/business/some-sf-businesses-posting-losses-following-super-bowl-50/1191680/
    http://hoodline.com/2016/02/some-downtown-businesses-saw-super-bowl-surge-but-many-left-out
    http://hoodline.com/2016/02/in-survey-soma-businesses-report-revenue-losses-across-the-board-during-super-bowl-city

  2. On the (small) upside, the San Jose airport made (a little) more money. http://www.bizjournals.com/sanjose/news/2016/03/07/heres-what-super-bowl-travel-produced-at-san-jose.html

  3. I’m not going to go out there and make any claim the Super Bowl was a boon, but your theory seems a little off in a way.

    I’ve spent most of my adult life either being a business traveler who had to come to the South Bay frequently or living in the Bay Area and having business travelers visit me frequently. This is the reality as I see it:

    Business travelers aren’t especially pushed off by price. $300/night for a South Bay hotel is not unusual and isn’t quite as bad as the $600/night a decent room on a busy week in New York will cost you. The same $300 room at the Hyatt will cost you $89 on Saturday but the guy there on Saturday is paying out of his own pocket. When I’m staying in the South Bay, it’s going straight to the expense report.

    If price isn’t the thing that will impact my trip, the one thing that will is convenience. The last thing a business traveler who is doing a 12-hour day followed by a work dinner wants is even more hassle. “The Super Bowl is in town? Can we reschedule for next week?”

    Which gets to the point. What you’re observing isn’t price sensitivity driving down occupancy. What you’re observing is business meetings being rescheduled to avoid the Super Bowl. Because the Super Bowl happened doesn’t mean I don’t need to meet my team or a client. It just means the money will spent this week instead of a month ago.

  4. I agree with you on the inconvenience vs price equation – it’s the same thing that happened during the London Olympics when everyone, including Londoners, steered as far clear of town as possible unless they were there for the games.

    I’m not sure that the economic activity is just shifted, though – if that were the case you’d expect to see activity rise over the whole month, or the whole quarter, and you don’t. There may be a fair bit of “oh, crap, it’s the Super Bowl, let’s find somewhere else to go for our vacation/business conference.”

  5. I know lots of people who go on vacation to London. I’ve yet to find anyone who goes on vacation to San Jose. “On your left you will see the Google office park and if you look on your right you will see the Facebook office park.”

    I suppose convention business might be impacted. However, convention business is a bit of a special animal in the South Bay too. It’s not a general convention business. You don’t find a housewares convention or a radiology convention. It’s essentially 100% tech industry and not even big industry conferences (which are usually in SF, Las Vegas or Orlando–please don’t make me go to Las Vegas or Orlando again). It basically is conferences where you need a lot of local folks. You hold your conference in San Jose because you don’t want to fly the 100 engineers, marketing people, sales leaders, whatever that live in the Bay Area somewhere else. It is all about minimizing the number of people who have to travel, which is why when I lived anywhere but here no one ever came to visit me.

  6. We’d need to see if anyone has tracked sales tax receipts for spending during major South Bay events, then. (Have there been any before this? The Grateful Dead shows?) I’ll ask the usual suspects.

  7. Somwhere in the near future i have to believe cities will no longer be interested in hosting the Super Bowl or the Olympics.

  8. I’d say the comments above are accurate and thoughtful but in some ways miss the point.

    There is a whole chain of public policy decisions made on the assumption that having the Super Bowl is not just a fun thing to have, but a wildly profitable event. This, among other things, leads cities to decide to spend public dollars (in various forms) on stadiums “worthy” of the Super Bowl. And again, this is justified that the “business” it brings in (largely) offsets the public cost.

    If you change the bargain and say “well, the Super Bowl won’t lose much or might break even” that may answer some of the mail but certainly not the civic outlays on the arenas and tax breaks required to get the event. On the other hand, if a community says–we’re rich and that’s fine, we just want to have a big party–such things are certainly justifiable.

    No one hopes to “break even” financially on a dinner party, after all.

  9. I partially agree with Shawn.

    In the future cities won’t be interested in paying what the Olympics and super bowl are asking right now.

    I believe stories like this and Glendale last SB will be the start of citizens increasing the pressure to not host these events at the prices asked.

  10. San Jose hotel operators, and businesses, hedged on Super Bowl 50 and lost. It was a foregone conclusion most of the activities leading up to the game were going to be held in San Francisco.

  11. jcpardell: How did hotel operators “hedge” on the Super Bowl?

    Occupancy rates in San Jose / Santa Clara in recent years have been extremely during the week. It’s really hard to get a hotel room and rates are high. That’s a function of the tech boom.

    Occupancy rates are very low on the weekends and rates plummet.

    Getting people into rooms before or after the game filled rooms that otherwise would have been empty and involved essentially zero incremental cost. They already built the hotel long before there was a stadium there. Where’s the cost?

  12. Scola,

    Most business travelers have a budget for any given area. For example, a budget for the South Bay area would not include $300 per night. Even if it did, you better have a pretty good explanation as to why you spent that money and the only reason I can think of doing so is to get a merger started.

    Regardless, it was likely stupid for South Bay hotels to raise rates for a full week instead of raising rates for the weekend before the game including the stay right after the game. As others said, most events were in San Francisco, attended by locals, and kept the tourists out of the area. If I wanted to attend a game in the Super Bowl area, I would choose before or after the game. In this case, it would have been the Cowboys this coming season.

  13. The hotel operators in San Jose increased their prices for Super Bowl 50 just like most others in the Bay Area. With that, they likely brought in extra staff to accommodate the expected overflow of guests who were going to stay at the hotel, park in their garages and eat at their restaurants. The problem is the numbers didn’t materialize. Sure, the hotels were already there. However, I’m certain they had budgeted Super Bowl 50 into their operations and the greater probability is they were expecting far greater revenue streams resulting from the game.

  14. Jessy S: If you aren’t budgeted for $300/night in the South Bay on a weeknight you are probably staying in a dump. 10 years ago you could get a room for $150/night but those days are long gone and any tech business knows that.

    jcpardell: Staffing costs are minimal and most parking is surface parking, some of it free. There’s very little incremental cost. A couple of maids and maybe some check in staff and an extra bartender at most.

  15. Scola. Let’s not forget the direct material costs such as additional food & beverages, were part of the what they budgeted. In addition, you have to factor how much each hotel spent on marketing and promotions.

  16. jcpardell: South Bay hotels are mostly chains. The Super Bowl being in Santa Clara instead of Miami or Phoenix or Houston makes absolutely zero impact on the marketing budget of Hilton, Hyatt or Marriott.

    As for food and drink, again minimal. Drink doesn’t spoil and much of food doesn’t either and I imagine the likes of Sysco and Sodexo make it fairly easy to handle inventory. Plus the margins on food and drink are huge for hotels but the percent of income is small.

    Restaurants maybe, but again, little of this applies to the hotel business.

  17. Scola: Regardless, a loss is a loss. That’s like stating the annual federal budget deficit represents a small portion of the nation’s GDP. Therefore, its irrelevant to the size of our economy.

  18. jcpardell: What loss? Again, you buy a bottle of booze. It doesn’t sell on Sunday. You sell it on Thursday and don’t order another.

    I realize you have a fanatical hatred to the Santa Clara stadium but it is hard to argue an event like the Super Bowl (or WWDC, Dreamforce, Oracle Open World, etc.) is financially bad for the people who aren’t paying for it.

    Now, the $5M the City of San Francisco had to pay, that was a travesty. San Francisco taxpayers got screwed. The Santa Jose Hilton, not so much.

  19. Aside from being a stupid taxpayer investment, I have no hatred towards Levi’s Stadium. It has no impact on my life.

    The reality is many South Bay entities incorrectly speculated how much money would be generated from Super Bowl 50. Many of them didn’t earn what was expected. That is a fact.

  20. jcpardell: I don’t disagree with that and never argued against that.

    What I said is given the cost structure and demand patterns of South Bay hotels, there’s really no downside for the hotels. That doesn’t mean it was a boon or met their expectations but a weekend event, which happens when the local hotels that cater almost exclusively to tech industry business travelers are normally empty, is by definition going to yield some incremental revenue.

    I mean, heck, try getting a room on a 49ers home game weekend at the Santa Clara Hilton (where I was once such a regular the bartender started making my drink before I reached the bar) and then try a non-game weekend. Unless there is a game, it’s a ghost town.

  21. The article we are commenting on, is in regards to how hotels in the San Jose area didn’t achieve the expected returns from Super Bowl 50 being played at Levi’s Stadium. Now, I’m certain the Santa Clara Hilton and Hyatt hotels are busy during football season. They should be. Those hotels are located one block away from the stadium! However, I’m certain there are quite a few hotels located in Santa Clara which have not greatly benefited from Levi’s Stadium.
    If anything, Super Bowl 50 served as an externality for the Bay Area. The debate is which party did benefit the most. So far, it appears as if San Francisco was the greatest benefactor of the game. Although we’ll have to wait until all receipts have been calculated, the fact San Francisco didn’t spend one dime of taxpayer money on a new NFL stadium, is more than enough evidence to support any contention of as to which city received the lion’s share of benefits.

  22. Seriously? Surely as a local you were aware of the local controversy regarding the city’s Super Bowl spending. Supervisor Kim was particularly vocal.

    San Francisco paid $5M of taxpayer money to host the Super Bowl events. San Francisco is a major tourist destination so the Super Bowl just replaced the people who would have come anyways. San Francisco saw major disruption to the Financial District with several businesses (example: PG&E) unable to operate due to Super Bowl security.

    Your statement “So far, it appears as if San Francisco was the greatest benefactor of the game” is absolutely correct. However, the word “benefactor” means he who pays for something. I believe the word you meant was “beneficiary” and San Francisco was definitely not a beneficiary of the Super Bowl. We lost money on it and we’re none too happy about it.

  23. San Francisco lost money on Super Bowl 50? Do you have quantifiable data to support your contention? I did mean benefactor. I don’t believe anyone other entity shelled out more than $5 million to host the Super Bowl activities. However, in comparison to what Santa Clara taxpayers have spent on Levi’s Stadium, San Francisco is likely the greatest beneficiary of Super Bowl 50.

  24. What benefit did San Francisco get? We paid $5M and the whole experience was awful. All those office buildings that sat vacant, tourists who stayed home, the dry cleaner who had no business for days (that one was the human interest story), the restaurants that cater to the lunch crowd who lost a week of business, the list goes on and on. And we paid for it.

    Anyways, so far Santa Clara taxpayer haven’t spent a dime. If they can’t service the debt they might. The only people who spent actual taxpayer dollars so far are us saps here in the city whose mayor didn’t negotiate as well as the politicos down south. As I say we’re not happy about this.

    That said, we did get one benefit. The creative vandalization of the Super Bowl 50 signs that were dropped around the city was a fun local pass time. Nothing brings San Francisco together like hating hosting the Super Bowl.

  25. I’ll add as well, “Super Bowl City” was awful for another reason–it wasn’t part of the city. It was a cordoned off chunk of the Embarcadero. Once inside everyone could only buy from NFL sanctioned businesses and corporate sponsors. Local businesses got none of it. Plus, you couldn’t even get to the Ferry Building, so those merchants lost money too.

    I wish it was all done in a parking lot in Santa Clara. It would have lost nothing.

    Not to mention “Super Bowl City” displaced the homeless who then all were forced into the encampment across from Rainbow Grocery, which then became a public health hazard and we’re still dealing with the fallout.

    The Super Bowl was the gift that kept screwing over San Francisco.

    San Jose and Santa Clara were lucky. They spent nothing and it was a slight net positive for them. We paid the cost. The Super Bowl sucked.

  26. As you stated, Super Bowl City was confined to a small part of San Francisco. How did that have a detrimental impact on the Marina district or Golden Gate Park? I was at the Ferry Building on the Friday before the Super Bowl and it was as crowded as I’ve normally seen it. Now, if there weren’t significant sales or TOT tax revenues generated to cover the $5 million spent by the city, then it was not a fiscally positive event. Then again, how much tax revenues are generated from the Chinese New Year’s, and LGBT, parades and who pays for the city’s share of those events? And you believe Santa Clara taxpayers haven’t paid anything? The second they passed the measure to fund a new NFL stadium is when they began to pay for things. Discounting the debt service, the City of Santa Clara had to renegotiate Great America’s lease to mitigate their losses for activities related to Levi’s Stadium. That is just one example. However, I wouldn’t measure the success/failure of a project after less than two years of operations. Let’s see how Levi’s Stadium is doing five years from now.

  27. I would imagine Chinese New Year is paid for by their sponsors (Southwest Airlines, etc.) and same for LGBT (every company in the Bay Area).

    Yes, the Super Bowl likely didn’t have an impact in the Marina or anywhere but the Financial District. In fact I simply avoided everything east of Van Ness and barely was aware of it except for all the annoying, shall we say “public art”. However, the Financial District is a dense business district so that’s not insignificant.

    According to the San Francisco Travel Association the Super Bowl brought in $8.2M in taxes. However, when you go one level deeper, last year hotel taxes were $5.3M for the same weekend, so $2.9M incremental. If we accept their rosy numbers we only lost a net of $2.1M, so, yay?

  28. So, sales taxes have not been factored into that equation. Perhaps we should wait until information regarding those revenues are released to the public.
    The Chinese New Year’s and Pride parades require that Market Street be shut down from the Embarcadero to the Chinatown and Civic Center. That is far more of an inconvenience than having shut down a small portion of the financial district for Super Bowl City. All the while, I’m certain its far more costly and that the sponsors of those two events don’t provide enough revenues for the event planners to offset all of the security and clean up costs performed by the City & County of San Francisco.

  29. Said parades happen on the weekend when the financial district is empty. Super Bowl City was during the week. Apples and orangoutangs.

    The Super Bowl was a disaster in every way, financially and otherwise. Let’s never do that again. If the Bay Area wants a Super Bowl, let San Jose and Santa Clara deal with it. They negotiated a better deal than Ed Lee did.

  30. Its irrelevant to the costs of public safety and public works costs. If anything, its more expensive for the city to staff those components on the weekend.

    You haven’t proven that Super Bowl was a financial disaster. Your stating an opinion. So long as the the team continues to call themselves the “San Francisco 49ers” , the host city will be San Francisco. However, given that perhaps two new stadium may end up being built in Southern California, I expect it to be more than a decade before the NFL considers having another Super Bowl in the Bay Area.

  31. I couldn’t care what the team is called. Who cares? I just don’t want my tax dollars squandered on the NFL. That’s why I read Field of Schemes.

    This sort of “civic boosterism” believing “Yay! We subsidized the NFL! Our city is so great!” is the reason the NFL continues to rip cities off.

    We got ripped off. I cited real numbers and optimistic ones at that. The reality was much worse. It’s not just me. I would say I don’t know a single San Francisco resident who liked hosting the Super Bowl or who thought hosting these events in San Francisco was a good idea. I guess I now have encountered one.

    I for one hope there is never another Bay Area Super Bowl and if there is that all the events happen in a city that I don’t live. If they do host it in the city I live in, I would hope my elected leaders would negotiate a better deal. I don’t need to be ripped off again.

    I may have voted for Ed Lee and I may not be a big fan of Chuck Reed, but Chuck Reed negotiated a good deal and Ed Lee negotiated a terrible one. We got screwed.

  32. ““Santa Clara cut a better deal than San Francisco did, and I think we should acknowledge that we got it wrong, and let’s try to fix it.”

    -Supervisor Jane Kim, District 6, San Francisco

    The NFL argued “It’s apples and oranges. Santa Clara has a city ordinance prohibiting the use of city funds for sporting events, which begs the question “why don’t we?”

  33. Also, the Chinese-American and LGBT communities of San Francisco are regular San Francisco taxpayers having a not-for-profit events.

    The NFL is a giant profit-making enterprise with zero to do with San Francisco. Why are we subsidizing these billionaires? Talk about the great swindle.

    We have real needs: Affordable housing. Homelessness. Transit. And yet we handled our money to the NFL. As a San Francisco resident I find that shameful.

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