Various Irish media outlets reported that the quarter final hurling matches recently held in Pairc Ui Chaoimh will generate a cash injection for the local economy of 25 million (12.5 million per event). Economic impact analysis is generally done by estimating attendance at sporting events, surveying a sample of spectators as to their spending associated with the game, and then applying an economic multiplier to account for money circulating through the economy after the initial round of spending. To put this in context, the 12.5 million per event claim would be a local multiplier benefit of 278 euros per spectator (directly and indirectly) attending Pairc Ui Chaoimh.
Did you attend either of the quarter final matches? How much did you spend? In the sports economics literature, typically for major sporting events, the multiplier effect doubles the size of the initial round of spending. So each spectator (at full capacity) would need to spend about 140 euros for the day in the local economy and that would then lead to an indirect benefit of 140 euros for the local economy. The indirect benefit comes about by employment being generated by the initial 140 euros spend by the spectator and then the employees and businesses in receipt of that money will spend their incomes locally which in turn generates more jobs and so on- hence the multiplier effect. Do you think 140 euro is a realistic spend per attendee at the matches? What local economic benefits can we expect from Pairc Ui Chaoimh?
The Pairc Ui Chaoimh redevelopment cost 80 million and has been applauded as a great local success story in recent weeks. The re-development definitely has brought a lot of economic benefits. For instance, during the construction phase, there was employment created. Secondly, people who attend matches or events will generate spending in the local community which will potentially expand local employment. Thirdly, and probably the most significant benefit arises if the events attract people from outside the Cork area, where money flows in from individuals that cannot be considered part of the local economy where the presence of the stadium acts like an export of entertainment. Finally, the spending occurring in the construction phase, attendance at events and matches by local and non-local people will lead to a local multiplier effect as increased local income leads to more spending and job creation. Further, people who are interested in attending local sporting events and concerts will have improved well-being benefits. These lauded benefits are likely to garner widespread public support and over the past two weeks the success story of Pairc Ui Chaoimh has been applauded by most of the public.
However, there are many costs to such projects that are less often highlighted. While construction expenditures for sports infrastructure have stimulative effects on the economy, the opportunity cost of this investment must also be considered. For instance, 30 million of the funding came from the state coffers. This money along with the additional 50 million could have been invested elsewhere generating equally beneficial employment stimulus. Perhaps, alternative projects could have been financed with the 30 million of state money such as improved public transport, improved education facilities or investment in hospitals etc. Or, alternatively your taxes could have been reduced. Further, did the materials, labour, or technology for Pairc Ui Chaoimh come from outside the city? If it did – then that represents an actual outflow of investment from Cork. And in terms of the ticket sales – does all of go to Cork GAA or does a proportion leak back to headquarters in Dublin?
What about the public costs associated with events? For instance, security costs and increased policing? And, the non-economic costs associated with congestion and disturbance for local residents? Are these taken into account when assessing the economic benefit of stadiums? Finally, many of the events at Pairc Ui Chaoimh will be attended by local people – if they don’t attend the events where else would they spend their money? For instance, would they be spending it locally anyway? When people are attending from outside Cork - are the benefits to accommodation, restaurants and bars in addition to existing tourists or are they acting as a substitute?
The benefits of stadiums are often put forward as arguments to gain public support for such investments. But the reality is that when all the potential economic costs are taken into account, the net economic benefit is probably much smaller than expected or claimed.