Economics of Sports Facilities

America loves sports and is home to some of the world's largest and most expensive sports facilities. These venues often incur rising costs as franchise owners aim to out-do each other, seeking to create some of the world's best sports venues to compete with soccer and Olympic facilities abroad. It is necessary to understand the full economic effects that a sports arena has on an area to justify the costs they take to build.

  1. Construction Costs

    • Construction costs of sports facilities have steadily risen over the past century. Yankee Stadium cost around $2 million to build back in 1923 while the new Yankee Stadium cost an estimated $1.3 billion to build in 2009. Part of this is the that the cost of construction has risen, but another factor is that stadiums are increasingly trending toward installing high-end features such as huge high-definition screens and ample luxury suites for an affluent clientele.

    Funding

    • The biggest concern when constructing a sports facility is finding funding. As most states are in the midst of a budgetary crisis, voters are less inclined to use public funds to build stadiums. This puts the pressure on team and venue owners to come up with the financing themselves. With the costs involved, many owners seek to offset the price tag with at least some public funding or a naming rights deal where a third party provides a sustained investment in return for its name on the building.

    Infrastructure

    • The cost of the sports facility itself is not the only expenditure involved in constructing a new venue. The infrastructure to support a facility is also a factor. This includes parking garages, freeway access and public transportation to and from the facility. Without organized ingress and egress, the facility could remain empty as local traffic becomes a nightmare.

    Economic Impact

    • In theory, sports facilities should have a positive economic impact on a city. With a sports facility, more people will travel to that location, pay for local parking and buy concessions within the stadium. Local business should also see a boom as patrons provide business before and after events. In practice, however, studies such as one done by Dennis Coates and Brad Humphreys have shown that many visitors forgo other local spending because of the cost of attending events at the sports facility itself. On the other had, a study done by Xia Feng and Brad Humphreys shows that real estate values within one mile of a new sports facility tend to increase, so the merits of a new sports facility are debatable.