COVID-19 shuts down football conferences — what about small towns?
Cancelling the 2020 NCAA football season will have dramatic impacts on the local economies that in normal times are strengthened by being home to local institutions of higher learning. It is increasingly apparent that the economic damage sustained by small college towns will likely be much larger, relatively, than in larger college cities. While universities and colleges are renowned for overselling their economic impact to the local or state economy, there is no doubt that having a college or university, it’s associated faculty, students and visitors, is a valuable resource for a local economy.
In the past, small college towns have been more resilient in recessions precisely because colleges tend to be stable employers and home to customers for local businesses. Also, enrollment often increases during recessions as students seek to increase their human capital and the opportunity cost of attending college drops. This countercyclical nature of colleges and universities usually provides a virtual force field that can protect many businesses located in small college towns. Furthermore, for those colleges that have a football program, there are usually six Saturday’s every fall, when every business in the hospitality and leisure sector can look forward to more spending before, during and immediately after the gridiron events.
Unfortunately, the SARS-CoV-2 induced recession and the continued fallout has led many members of the Football Bowl Subdivision and Football Championship Subdivision to unilaterally, as in the case of the University of Connecticut, or as a group, as in the case of the Mid-American Conference, to cancel or postpone their 2020 football season. These decisions are being made for justifiable public-health reasons, but the economic impact on local small and micro businesses will be substantial and protracted and, for many, existential.
Small business, defined by the Small Business Administration as having less than 500 employees and less than $7.5 million in annual revenue, is a category that also includes micro businesses, which have fewer than five employees and revenues below $250,000. Given these definitions, anyone who has been to a small college town has probably seen many more firms that look more micro than small. This is because small college towns tend to have smaller populations and have less diversified economies focused more on the service and hospitality-leisure sectors, catering to faculty, students and visitors. Small college towns generally do not have large manufacturing or financial sectors.
Unlike most previous recessions, the COVID-19 induced economic crisis is hitting the service, hospitality and leisure sectors much harder than, say, the manufacturing and financial sectors.
While the loss of football will make the fall Saturday’s a little less exciting for players, students and fans, the loss of spending associated with the events will be substantial and small college towns are likely to feel the worst of it. While there are no official estimates for how much money is spent outside of college football stadiums during the course of a season, Patrick Rishe, an economist at Washington University in St. Louis, in an analysis earlier this year for ESPN, estimated that the attendees to the programs in the so-called Power 5 conferences (the Atlantic Coast, the Big Ten, the Big 12, the Pac 12, and the Southeastern) stood to lose $303 million in non-ticket spending or $4.7 million per school.
If that is the spending associated with hotdogs and programs within the stadium, then the spending associated with tailgating, overnights in hotels or short-term rentals, celebratory beers and wings before and after the game, and foam-finger No.1’s and other memorabilia, mostly supplied by small and micro business, is much, much greater. Furthermore, the spending in small college towns is a much-anticipated injection into the local economy that is not nearly as vital for larger cities that host colleges and universities.
In normal times, hosting a college or university is a boon for a small town as it provides a steady flow of outsiders who come and spend in the local economy, throughout the year — not just during football season. This sustained spending is now at risk in the short run and perhaps even longer if the college sports landscape dramatically changes. Many non-revenue generating sports, that rely upon football revenues and alumni donations that are often influenced by the existence or quality of the football program, are at risk of being permanently cancelled. Several universities and colleges throughout the country, most notably Stanford University, have already discontinued several men’s and women’s teams, even before the recent decisions concerning whether to play the 2020 football season. Every game, regardless of sport, has a visiting team that often spends money on restaurant or catering services, hotels, transportation, and a home team that often draws visitors who also spend in the local economy.
Whether the shuttering of non-football programs is temporary or permanent is an important question for student athletes and their families and fans, but also for the small and micro businesses who benefit from these non-football related events.
Craig A. Depken, II is a professor of economics in the Belk College of Business at the University of North Carolina at Charlotte. His research interests include sports economics and the impact of sporting events on local economies.
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