Donovan Mitchell of the Utah Jazz tested positive for COVID-19 early Thursday, becoming the second ... [+]
Wednesday was a historic day in many respects for the North American sports industry.
With more history likely to be made today.
All of which imposing considerable financial duress upon the lodging and restaurant industries, as well as service workers at sports venues.
On Wednesday, among other cancellations and suspensions in sports, we learned:
- The NCAA announced that fans would not be allowed to attend March Madness games. I fully suspect the tournament will be suspended or cancelled, after learning on Thursday morning that numerous conference tournaments already underway were cancelling play.
- Later in the evening, we learned the NBA suspended their 2019-20 season after learning that Utah Jazz center Rudy Gobert tested positive for the COVID-19 virus. Since the time I started writing this piece, his teammate Donovan Mitchell has also tested positive for COVID-19.
With the NHL playing in many of the same arenas as NBA teams, it’s likely the NHL will announce as early as today that they will at least go fan-less if not suspend their season. Major League Soccer and the XFL will likely follow suit. (Note that MLS suspended league play just as I prepared to post this article).
It’s highly likely Major League Baseball will have to follow suit, as the likelihood for community spread is even larger for outdoor sporting events than the indoor leagues currently suspending league-play. And most MLB teams draw more fans per game than the average NBA and NHL team (unless you live in Tampa or Miami).
Safety and precaution above all else should rule the day. We are seeing it in sports, as we are across many sectors of the economy. I sit in an empty classroom typing away, and all of our classrooms will be empty for the remainder of the Spring semester as we’ve been instructed to switch to online education...joining hundreds of other schools across the country in doing so.
But the beauty of higher education these days is with technology, thankfully, we can still provide a service to our students. And thankfully, the disruption to the status quo of university life at present won’t disrupt our pay.
Conversely, the disruption of sporting events in this country is and will have a considerable adverse financial impact on various aspects of our economy. But the sectors to be hit the hardest in the short run are:
- Service workers who work at sports venues as their primary source of income;
- Hotel and restaurant industries for cities hosting one-off sporting events (like pods or regionals associated with March Madness).
Service Workers at Sports Venues
Let’s start with the service workers at sports venues. Everyone from the food and beverage vendors, the ushers, the custodial staff, and anyone else who is strictly a seasonal employee who only gets paid when events take place within a building.
According to May 2018 data from the Bureau of Labor Statistics, the average annual salary for most jobs in the Food Preparation and Serving Related Occupations nationally is approximately $25,000, as compared to the national average salary across all jobs of $51,960. Many food and beverage employees at sports venues would fit into the food occupation descriptions referenced at the BLS.
For context, this site summarizes the income levels associated with officially-defined poverty levels in 2018. A $25,000 annual salary was right at the poverty level for a family of 4.
Given the financial disparity above, and to boost their income level further from the poverty line, it is not surprising that many of these service workers work at different venues within their home market. For example, in my 21 years living in St. Louis, I can’t tell you how many times I recognized the same beer vendor or merchandise store attendant or usher that was working both at Busch Stadium (MLB Cardinals) and Enterprise Center (NHL Blues).
And this double-dipping across different events/teams happens in every major and mid-major market in America.
In short, for these service workers who truly are working from paycheck to paycheck, the short term financial duress from suspended sports play is palpable. Whether the short run losses these workers sustain will be recouped will depend in part on what the league’s decide to do going forward, and that’s still uncertain since the timing of the virus containment is uncertain.
The best scenario for service workers is that the leagues merely suspend their seasons in the interim, but then resume play within the next 4-8 weeks without cancellation of games. One benefit both the NBA and NHL enjoy over MLB is that, being indoor leagues, they have the luxury of being able to push their seasons deep into the summer if they wanted to. Yes, facility availability will be complicated to dance around as most venues have events booked throughout the calendar year, but there are work-arounds (neutral sites being one of those). And yes, you don’t want to bump up against the 2020-2021 season too closely, but that league calendar hasn’t been set yet so things could get pushed back if necessary.
If, alternatively, these leagues cancel regular-season games or shorten their playoff structure, these service workers will feel the sharpest financial pinch.
And if all of this wasn’t bad enough, it’s the cancellation of one-time-only events like concerts or NCAA championship events that adds to their financial disrepair. These are like bonuses...events you don’t expect to have every year, so when they come around you want to take advantage and earn extra income.
But unlike the NBA’s ability to suspend the season with a larger window of time to make up games over the summer which could extend into July, it’s unlikely the NCAA would be able to revisit March Madness if played in May or June. Possible (since other NCAA championships take place then like lacrosse, softball and baseball), but challenging.
Hotel and Restaurant Industries Hit Hard...and They Are Not Alone
The hotel and restaurant industries take a major hit when one-off sporting events are cancelled because many of these events, from conference championship tournaments to NCAA championship tournaments in basketball, hockey and wrestling, draw crowds where 70-95% of the attendees are from other cities and states.
In my 20 years of doing research on fan spending at sporting events, roughly 60-75% of visitor spending for overnight visitors is either on their lodging or food/beverage consumption. So, without question, these industries are hit the hardest.
And though NBA, MLS, and NHL games are mostly attended by locally-based fans, there still is an adverse impact on restaurants since fans enjoy congregating at local sports bars to watch their favorite teams play with friends and strangers alike. No games, less reason to visit the sports bar.
But beyond the hotel and restaurant industries, there are dozens of other local businesses especially hurt when events like conference championships and NCAA tournaments are cancelled. For example:
- Local sports commissions, who often play key primary roles in successfully bidding on these events to come to their cities, don’t receive their small cut of the revenue generated from visitor spending...and this after spending months if not years in the planning and organizing of event delivery, operations, and hospitality;
- When cities host one-off events, the spike in visitor spending and increased hotel and restaurant activity is a spike in business for other local businesses who do business with hotels, restaurants, and the venue itself. For example, if these businesses outsource their catering to local catering companies, then those companies see a business spike as well (this is called the indirect impact of a sporting event, spurred by local business-to-business spending). But when cancellations occur, all the companies along the spending chain suffer the consequence to varying degrees.
- And of course, all of these businesses have employees who take the extra income earned from the increased flow of visitor spending and re-spend that money locally at various establishments (e.g. at the mall, museums, sporting events, retail, groceries). This is called the induced impact of a sporting event, as local workers who benefit financially from these sporting events are induced to spend more money locally. Again, cancelled events mean these visitor dollars don’t get a chance to trickle through the community.
I’m confident some degree of normalcy will evolve in the coming weeks and months, and that most of these adverse financial effects of suspended and/or cancelled sporting events will be short-lived.
But hopefully this discussion gives people a greater sense of empathy for the short-term financial hardships being experienced across the North American sports industry.
Yes, teams and leagues suffer too...and with lower league revenues, this impacts future salary caps and player salaries. It effects the bottom line for team owners and facility operators. But for me, the larger degree of empathy extends to those service workers at sports venues and those who work in the lodging and restaurant industries.
