The Economics of the NBA Playoffs
The final games of the NBA Playoffs are right around the corner. This is an exciting time for the athletes and the fans, but it’s also an exciting time for the host city! The NBA Playoffs have a far-reaching economic effect. Let’s look into the economics of this monumental sporting event.
The Playoff Economy: A Win-Win Situation
For host cities, the NBA playoffs are like hitting the economic jackpot. The influx of fans traveling from near and far injects a substantial amount of money into the local economy. Last year, economists estimated that Denver, the host city for the 2023 NBA Champions, the Denver Nuggets, saw a direct economic impact of up to $25 million.1 That figure even excludes ticket sales and Nuggets-branded merchandise.
Hotels, restaurants, bars, and various entertainment venues all experience a surge in business as fans flock to the city to catch the excitement live. Moreover, the playoffs often coincide with increased television viewership, leading to heightened exposure to the host city and its attractions, which can have long-term benefits for tourism.
Ticket Sales and Merchandise
One of the most notable economic impacts of hosting NBA playoff games is the revenue generated from ticket sales. Playoff tickets are in high demand, with fans willing to pay a premium for the chance to witness their favorite teams battle it out on the court. Games in the NBA Finals are often priced 200% higher than their regular season equivalent.2 This surge in ticket sales translates into a windfall for the teams and the arenas they call home.
Additionally, the sale of merchandise, including jerseys, hats, and other team memorabilia, peaks during the playoffs, further boosting revenues for both the teams and local retailers.
The Ripple Effect: Boosting Local Businesses
While the direct economic impact of ticket sales and merchandise can be quantified, the ripple effect of playoffs on local businesses is also important (if more challenging to measure).
Restaurants and bars near the arena experience a surge in patronage before and after games as fans gather to socialize and celebrate. Hotels enjoy increased occupancy rates as out-of-town fans book accommodations for their stay. Even businesses not directly related to sports, such as retail stores and spas, benefit from heightened activity and an influx of visitors.
It can be difficult to quantify this ripple effect, but in 2021, Visit Milwaukee created the most comprehensive data currently available. Their analysis found that the NBA Playoffs generated $57.6 million in economic activity for the city throughout the series, including direct and indirect spending.1
Infrastructure Investments and Legacy Benefits
In preparation for hosting playoff games, cities often invest in infrastructure improvements to enhance the fan experience and accommodate the influx of visitors. These investments can include upgrades to transportation systems, renovations to arenas and surrounding facilities, and improvements to public spaces.
While these investments may require significant upfront costs, they can have lasting benefits for the city, improving its overall attractiveness and competitiveness as a destination for future events and tourism.
Challenges and Considerations
While the economic impact of hosting NBA playoff games is significant, some challenges and considerations come with the territory.
Traffic congestion, increased noise levels, and potential disruptions to daily life can pose challenges for residents living near the arena. Additionally, there may be concerns about gentrification and the displacement of local businesses and residents in areas undergoing redevelopment for playoff-related activities.
The NBA playoffs represent far more than just a showcase of basketball’s top athletes; they’re a catalyst for economic growth and community development in host cities. The playoffs leave a lasting impact far beyond the final buzzer, from increased tourism and business revenue to infrastructure improvements.
As always, let us know if you have any questions.
Best,
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
Phillip Tompkins, CFP®
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