Sports Means Business: Is It a Win for Our Economy?

by J. Rentilly

cover-storyWhen the Arizona Diamondbacks played its first game in Phoenix 15 years ago, it entered an already crowded National League West Division where many locals carried with them baseball traditions linked to other franchises, according to Derrick Hall, president and CEO. “In some markets, all they have to do to sell tickets is put out a pocket schedule and open up the gates,” says Hall. “In Arizona, we’ve had to earn every single fan, and it’s been really fulfilling to see the number of D-backs jerseys increase exponentially in the stands in recent years.” The team, which last won the World Series in 2001, is now a part of what is arguably a very sports-focused community.

On the heels of a particularly harsh economic cycle, sports — at the professional, collegiate, high school, amateur and youth levels — has provided a sunny side up to the Arizona economy, richly impacting revenue and employment in a variety of markets and fields at a time when both have been sorely needed.

“The Arizona economy is supported in a lot of ways by tourism, and sports really brings people into the state,” says Judy Bernas, member of the board of directors of the Arizona Sports and Tourism Authority. “Sports is a leisure activity, but it’s also an enormous economic driver for us, both by way of revenue and employment.”

Extended Impact of Revenue and Jobs

So the economic impact of sports is not limited strictly to the $500 million the Super Bowl is estimated to have brought to Phoenix in 2008, or the $65 million the NBA All-Star Game inspired, or the hundreds of millions the Waste Management Phoenix Open pumps into the economy annually ($222 million from the 2012 Phoenix Open) but extends also to employment in such obvious arenas as players, coaches and management, and also wider ranging such as accountants, marketers, personal trainers, ticket takers, promotions, construction, parking, uniforms and stadium furniture, hoteliers, wait staff, transportation, food services (like that provided by local companies Shamrock Foods and Stern Produce) and more. In fact, Jonathan Robins, owner of Tempe’s Jonathan Robins Bakery, makes a pretty penny providing football-shaped cheesecakes and other “fine bakery items” to a number of professional and college sporting events in Arizona, enjoying a taste of the $1.5-$2 billion the state’s sports business annually generates. “The large events are great,” says Robins, who also serves a number of regional hospitals and hotels.

“It’s possible that everyone in Arizona knows someone who works in the sports industry, however tangentially, even if that person never picks up a ball,” says Bernas. “It’s enormous, the number of people in the state who work in the industry.”

“No matter what’s going on with the economy, the appetite for sports doesn’t change,” says Brian Smith, Ph.D., dean of Grand Canyon University’s recently launched Colangelo School of Sports Business. “It’s almost recession-proof, and this has been hugely meaningful for Arizona, where the economy has been really up and down. If you take away the sports industry in Arizona, you’re looking at major losses — revenue, employment, morale. Sports is integral to the overall health of the state’s economy and landscape.”

With such facts and figures in mind, many in the state have mobilized to capitalize on the state’s pitch-perfect weather and tourist appeal by building new, state-of-the-art facilities and actively recruiting regional, national and international sporting events to complement the four major professional sports franchises (MLB, NBA, NFL and NHL) that already call Arizona home base. “We play everything in Arizona,” says Dr. Smith. “And that’s only increased in the last decade or so.”

The renaissance of sports in Arizona occurred when the Phoenix Suns landed in 1968, but the addition of other pro sports franchises in the last 40 years, as well as a burgeoning youth market, has seen a market on an almost continuous upward trend. This has been key to the state’s tourist economy. “I remember when tumbleweeds would blow down the street at 5:30, Downtown, because anybody who worked there had gone home and no one else ever went there,” says Ray Artigue, a Phoenix native, owner and president of Artigue Agency, a full-service marketing and communications firm specializing in the sports industry. “But you bring the Suns downtown, bring the Diamondbacks downtown, and the dominos start to fall. You get a fully developed downtown, restaurants, retail, residential, tall office buildings. Can the Suns and Diamondbacks take complete responsibility for that? Of course not. But they were seeds planted 20 years ago, and the ripple effect has been really significant to the economy.”

We Built It and They Came

When Proposition 302 passed in 2000, it allowed public money to be employed toward the construction and renovation of nearly a dozen key stadiums in the state. Though many were skeptical of taxing Joe Q Public to expand the state’s sports market, the move has proven more than savvy. Much of the money, overseen by AZSTA, has been used to revitalize the region’s Cactus League and sports training facilities, which now house 15 of Major League Baseball’s 30 teams, and is used virtually year-round. “At AZSTA, we take very seriously our stewardship of public money,” says Bernas. “Are we getting a good return on the investment? Are we making a difference? The return is always higher than the tax dollars by four to seven times. So, yes, I think this is going well.”

As example, Bernas cites the rousing success of Cactus League baseball. Perhaps the most lucrative perennial in Arizona, Cactus League is “arguably one of the most important tourism events in Arizona,” according to the Phoenix Regional Sports Commission. Although a recently reported analysis by The Arizona Republic showed that municipalities lose significant sums to maintain the facilities within their borders, the net effect to the community and the state’s economy is positive. The Cactus League and its partners — AZSTA, Arizona Commerce Authority and the Arizona Office of Tourism — last December released the results of a two-year-long study that showed the overall economic impact during and after the spring training season. The result: $632 million, including $422 million during the regular spring training season. The latter figure is a significant jump from a figure of $112 million five years ago, the previous time such a study was conducted. Additionally, attendance at spring training games increased 40 percent since 2007 to 1.7 million in 2012. Out-of-state visitors account for 56 percent of the fans attending games. According to the report, families visiting Arizona for spring training games stayed an average of 5.3 nights, a boon to local restaurants and hotels.

More than simply hotel stays and ticket sales, though, Cactus League is significantly impacting employment and new builds in the state. Sports construction has been a ray of sunshine in an otherwise grim Arizona market, says Bob Hart, executive VP and Western Division manager of Hunt Construction Group, the nation’s largest sports builder. “Though there are only a few pro sports facilities left to build ground-up in the region, we’ve seen a lot of renovation and refurbishment on stadiums built 10, 20, 30 years ago, and that’s been keeping us busy,” says Hart. “There’s also been a lot going on with college facilities and spring training stadiums.”

In the last three years, Hart has overseen several spring training facilities, including set-ups at Glendale, Goodyear and Talking Stick. The $100-million stadium Hunt Construction is building for the Chicago Cubs is well underway, set to open in 2015, employing about 2,000 craft workers, Hunt says, and utilizing “all local Arizona businesses, and about 22 percent of that from Mesa firms.” In addition to the stadiums themselves, Hart and company — which has built for 137 teams nationwide — is enjoying a lot of “collateral development” builds of beautification, retail or commercial use adjacent to the stadiums. “In Mesa, we’re improving a public park, adjacent to where the Cubs will play,” says Hart. “It’ll probably be the nicest park in Arizona.”

Power of Youth

AZSTA is also deeply invested in developing youth sports programs and tournaments, which draw tens of thousands of tourist competitors and families from around the world each year. “Arizona is becoming a hub for youth sports,” says Bernas. “Time and again, people from all over the country tell us we have the best facilities they’ve ever seen, and people love coming to Arizona.”

PRSC launched in 1988 with a mission “to enrich the community through sports.” According to Katie Brown, executive director, this means “bringing in sporting events to the Valley that bring tourism, economic development through spending in our community, and also offering youth in the area the opportunity to participate in great sporting events.” Since 2009, PRSC has brought in nearly $134 million in direct visitor spending, with 186,265 visitors to events it has produced or stewarded. (Estimated at $177 per day, though some estimate visitor spending at closer to $300 per day).

PRSC is, Brown says, especially devoted to serving high school-level competitions in the state, as well as sporting events “not as well-served by other markets and organizations,” on a statewide, national and international level. For events like the U.S. Youth Soccer 2012 Far West Regionals, which welcomed 4,600 players, coaches, families and tournament officials last June, an impact of $10 million of spending on hotels, restaurants and local businesses was estimated, while the National Hockey Festival was projected to generate an estimated $21 million for Phoenix businesses in 2010 and 2011. A high school volleyball tournament last summer brought more than 6,000 female youth athletes from 519 national teams, bringing $22.9 million to the area.

“People don’t realize how much money comes from the grass-roots sports — high school sports, youth sports, the lower profile sports,” says Brown. “But people come to these events from all over the country. They need to stay in hotels. They need to eat at restaurants. They often visit museums and other tourist attractions. There’s a lot of direct spending there, even if it’s not an all-star game or the Super Bowl. A four-day youth soccer tournament can make a huge economic impact on our community.”

Influx of Outside Dollars

For the record, when the Super Bowl rolls back into town in 2015, economic impact is expected to approach $600 million, with 85 percent of the 73,000 football fans expected from out of town, spending at least $2,000 per person. This generates that most-desired type of currency: “outside dollars,” money spent by out-of-towners.

Out-of-town dollars are especially meaningful to hoteliers like Mike Ehmann, general manager of Sheraton Phoenix Downtown, a 1,000-room luxury hotel. “Sports certainly has an impact on us,” says Ehmann. “For the biggest events, like the Super Bowl or the all-star games, we’re sold out for days, but we also get a lot of guests staying for tournament games and youth sports.”

Jobs and Good Works

Ehmann says Spring Training is also an enormous boost for the venue, with sports in general giving the Sheraton “nice peaks in business.” To accommodate the extra guest load, Ehmann will supplement his 300 full-time and 359 part-time employees with additional, temporary hires, stimulating the economy and aiming to exceed guest expectations. “It makes a positive difference not only to us, but to the entire community, to have these events. It’s been essential, absolutely, especially in the recent economy.”

When hotels are full, local restaurants and businesses tend to enjoy an uptick in business as well. “From my vantage point, these sports franchises deserve indirect credit for creating other jobs,” says Artigue. “Nobody puts a brand new restaurant in unless it’s well-placed. Well, cater-corner to U.S. Airways Center, you’ve got 45 Suns games feeding your establishment every year. That’s waiters, cooks, bus boys and all the rest. That’s good money.”

Educators like Grand Canyon University’s Dr. Smith and, formerly, Artigue, who previously served as executive director of the MBA Sports Business Program at Arizona State University, believe the job market in the sports industry only continues to expand, as the collars for many jobs go white. “We need number crunchers more than ever in the sports industry, people who understand the big economic picture,” says Artigue. “These are jobs that didn’t exist as such in the industry a few years ago. But, as sports worldwide becomes a more corporate beast, we need people who can do that. Sports is, after all, a $240-billion industry nationwide, larger than all the domestic auto makers combined. Somebody’s got to crunch those numbers.”

The economic impact of professional sports isn’t measured only by ticket counts and hot dog wrappers, but by the philanthropic endeavors of the organizations. The Arizona Diamondbacks, for example, have given more than $30 million to the Phoenix community in the last decade, supporting a wide range of special projects, from suiting up underprivileged Little League teams to refurbishing fields and supporting indigent health care. “We are a community asset and we’ve cultivated a lot of good will in the community,” says Diamondbacks president Hall. “The philosophy is: We need to give back to the community as much as we can. You can’t control your wins and losses on the field, so you look to find other ways to win, even when you’re losing.”

The Diamondbacks organization employs 250 full-time workers and another 2,000 part-time workers, 50 weeks a year, and in 2010 was named The Most Positive Team in Sports by United Nations, a credit to Hall’s belief that a positive, employee-first culture is best business. Last year, the Diamondbacks gave nearly $4-million charitable contributions to the community, Hall says.

A less tangible, but richly significant economic impact comes from the media exposure offered by national broadcasts of sporting events from Arizona, says Artigue. “Most of our pro sports events are broadcast back to the cities we’re playing, and there are almost always postcard shots of Arizona during these broadcasts, which situate the state as a desirable tourist destination.” Artigue notes that the media exposure value of the 2008 Super Bowl game was estimated at $60 million. “That’s a lot of postcards inviting people to come to Arizona. Sometimes it’s for a game. Sometimes it’s for a vacation. Sometimes it’s a businessman who decides to move his corporate headquarters to the state. You can’t underestimate the economic impact of the media exposure for a state like ours.”

Beyond the baseball, golf, soccer, tennis, football and myriad other sports played in the area, and the rich and varied economic and employment impact they offer the area, Artigue says it’s important, too, to note how such a blooming sports market affects quality of life for Arizona residents. “You can’t measure that by dollars and cents, but sports is invaluable to the quality of life in Phoenix,” says Artigue. “Ask anyone who lives here what sports means to them and their quality of life. That’s worth appreciating, too.”

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