Here in Chicago, the local economy gets a boost next weekend, when tens of thousands of runners lace up for the 34th annual Chicago Marathon. Bank of America, the marathon sponsor, says the race means about $171 million for the local economy.
That got us thinking: What does the number really mean?
Let's start with the Bank of America media packet. Lots of numbers: 45,000 runners, more than a million observers along some 26 miles of Chicago streets through 29 neighborhoods. $171 million of marathon money – and its ripple effect - gushing into cash registers and tax rolls and workers’ pockets last year, they say.
But do runners and their families really spend that much? Well, some people do their part.
Outside Fleet Feet in Lincoln Park there’s a steady flow of runners – and cash. Anna Clement is 24, running the marathon for the first time. She says she'll probably spend $500 total.
I’m guessing Anna’s on the high end.
"I usually buy shoes," Clement said. "And Goos, which you need for the extra energy. And expensive clothing."
So is the marathon an excuse to buy expensive clothing? Not an excuse, Clement says. "But you do feel like you deserve it."
So Anna's kicking in her $500 or $600, but how do you get to $171 million?
As they say on that Marketplace show... let’s do the numbers.
Of the 45,000 runners, projections are that about seven thousand will be from other countries. 19,000 from other states. So you figure 26,000 will need hotel rooms.
Some locals will want them, too, so let’s put 30,000 folks up for the night, at $200 a hotel room. That’s $6 million. Good to know if 30,000 of your friends ever come to town on the same night.
If they stay a second night, that’s $12 million.
And what if all 45,000 runners drop three hundred bucks on shoes and Goo? Another $13.5 million.
And they have to eat.
The city’s web site says there are 7,300 licensed restaurants in Chicago, so let’s give every one of them $2,000 in increased sales. Another $14.5 million.
It’s adding up, but I’m still getting only around $40 million.
The sponsors say there’s about $70 million in so-called direct spending – the meals and sweatpants - and that generates a separate $100 million benefit – they call it a trail of economic activity - or $171 million.
So what gives? Before Mayor Emanuel starts counting all the new cops he can afford, what’s the real “economic impact” of this huge event?
It takes one of those University of Chicago profs to inject a dose of reality. Enter Allen Sanderson, pictured below, who studies and teaches the economics of sports.
He says, the real economic impact is more like $25 million, maximum.
"My usual thing when I see one of these economic impact studies, whether it’s of the Chicago marathon or the Chicago Olympic bid, is to take whatever number they give me and move the decimal point one to the left," Sanderson said. "If they say it’s a hundred million, I think it’s ten million."
Now don’t get the wrong idea. Sanderson’s not knocking the marathon. He himself has run three of them. He once analyzed the marathon’s economic impact report for a previous sponsor, LaSalle Bank. And he thinks the event is great for Chicago. But he says economic impact statements almost never take into account what he calls leakage.
He gives an example of a souvenir marathon cap.
"Maybe the cap sells for $20. That gets put into these silly economic impact models as a $20 direct expenditure when in fact the cap was probably made in China," Sanderson said.
So the economic impact here is pretty much just the markup – maybe a couple of bucks.
"Even if somebody stays in a hotel room and they pay $200 a night, it looks as if there’s $200 added to the city’s economy," Sanderson said. "Well, it depends what happens to the $200. If it’s a Sheraton hotel their headquarters are someplace else. Some of it stays in the local Chicago economy, but a lot of it leaks out."
Another thing that isn’t taken into account in these studies is the cancellation effect. A good example of that, he says, is a Bears game.
He says that Virtually everybody who goes to a Bears game is from Chicago, so it’s money that they’re spending inside Soldier Field that they’re not spending somewhere else in the Chicago area at a mall, at a restaurant, so it’s just a swap.
"As I’ve often said, this may affect where people drink beer but not how much beer they drink," Sanderson said.
So you can’t just count every time the register rings. Sanderson says the real question is how much money you bring in from outside and how much of that outside money stays here.
Local labor, he says, is where the real economic impact is. How much of the marathoner’s dollar stays in Chicago, and how much ends up paying wages here? Restaurants, with all their local labor, might benefit the most.
Cesar Pineda is chef and owner of Ciao Amore. He says Ciao Amore got two full seatings from last year’s marathon, a lot of it from pre-race carbo-loaders.
"Anything with pasta and fresh marinara," Pineda says. "The best marinara in the city, so they go crazy."
Sanderson says in economics, there are winners and losers, and here, less than a block away, Linda Guttierrez has to close her Cuernavaca restaurant.
"Because the whole street is blocked," Guttierrez said. "We don’t have no business but we enjoy ourselves. We lock the door. We put the real loud music because I have speakers outside."
So is it $171 million or $25 million?
The answer matters, of course, to all these businesses and ultimately, through taxes, to city coffers. But to these marathon enthusiasts, maybe not all that much.
"And we’re all out there screaming. My father, my mother, we’re all out there," Guttierrez said. "And I always keep saying next year I’ll run it, but I never do."