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Was NBA All-Star Weekend a Financial Winner?

Kavitha A. Davidson is a former Bloomberg View columnist.
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The 2015 NBA All-Star Game has come and gone, and it was by most accounts a great success for both the league and the host city.

According to the NBA and NYC & Company, New York's official tourism group, the hoops weekend generated approximately $195 million in economic activity. That seems like good news, especially considering the blisteringly cold weather for fans and tourists. But as with any measure of a sporting event's economic impact, this number should be taken with a grain of salt.

Recent history shows that advance estimates tend to be wildly overstated. In 2010, the NBA All-Star Game held at the Dallas Cowboys stadium was projected to generate $268.5 million, including $152 million in direct spending by out-of-towners. Yet a review of tax receipts revealed that revenue in Dallas-area hospitality increased only slightly -- and for some areas actually decreased -- from the same month of the previous year. David DuBois, president of the Fort Worth Convention & Visitors Bureau, told the Dallas News that in his city, "the impact was in the tens of thousands of dollars instead of the estimated $6.56 million."

Looking at recent mega-events in the New York area --  the 2013 MLB All-Star Game at Citi Field or last year's Super Bowl at MetLife stadium -- doesn't clarify things. The baseball game was projected to generate $191.5 million from an influx of 176,000 tourists, but many economists scoffed at these numbers. While the planners said the Super Bowl was supposed to generate $600 million, PricewaterhouseCoopers projected only about a third of that. 

Economic impact estimates are based on a slew of assumptions -- a problem magnified in a tourist hub such as New York. Leagues tend to keep the actual reasoning behind these estimates close to the chest. NYC & Co. wrote in an e-mail that it doesn't plan on releasing a full report on the All-Star game's effect. So we are left to wonder how much economic activity came from tourists rather than residents; whether money spent around Madison Square Garden and the Barclays Center was simply displaced spending from elsewhere in the city (the "substitution effect"); or how to account for any financial boost from the All-Star Game versus what we could expect in New York during a weekend with two holidays, Valentine's Day and Presidents' Day. NYC & Co. acknowledged that "this weekend was relatively strong" because of both holidays, but stressed that its "analysis of the economic impact of NBA All-Star looks at the game in a vacuum, and not the economic activity/impact that occurs in the city that is not influenced by the game."

None of this is to imply that the event was a boondoggle. The NBA All-Star Game isn't a resource drain on the level of an Olympics or the World Cup -- tournaments that require publicly funded stadium construction projects with overruns that far outweigh the tourism boost. The Garden and Barclays were already standing, and New York is better equipped than most cities to handle a large influx of tourists.

Still, getting accurate economic data is important for reasons that go beyond New York. The idea that cities are "lucky" to host these events -- or to get new stadiums or even their own teams -- is pervasive throughout sports, and often used to strong-arm public concessions such as land grants and tax subsidies. And sometimes when cities hold events like an All-Star Game or Super Bowl, estimates are put forth by host committees as the basis for state tax refunds to help offset the costs of playing host.

The 2015 All-Star Game was a great event for the NBA, the city and fans. Above all else, New York knows how to put on a show -- how many other cities can incorporate Broadway acts into sporting events? But residents of any host city should still expect a more rigorous measure on economic impact after the fans have gone home. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Kavitha A. Davidson at kdavidson19@bloomberg.net

To contact the editor on this story:
Tobin Harshaw at tharshaw@bloomberg.net