Consumption Benefits of National Hockey League Game Trips Estimated from Revealed and Stated Preference Demand Data

By Whitehead, John C.; Johnson, Bruce K. et al. | Economic Inquiry, January 2013 | Go to article overview

Consumption Benefits of National Hockey League Game Trips Estimated from Revealed and Stated Preference Demand Data


Whitehead, John C., Johnson, Bruce K., Mason, Daniel S., Walker, Gordon J., Economic Inquiry


I. INTRODUCTION

When the Baltimore Orioles moved from their 1950s-vintage home in Memorial Stadium to Oriole Park at Camden Yards in 1992, a new era in stadium and arena construction dawned in North American professional sports. The greatly enhanced premium seating, luxury suites, concessions, sight lines, and other amenities made possible by advances in architectural design and construction technology led to large increases in revenues for the Orioles. Teams in Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA), and the National Hockey League (NHL) joined the rush to replace their now economically obsolete arenas and stadiums with their own versions of Camden Yards. Of the 30 NHL teams, 25 have moved into new arenas since 1993. Several other facilities are under consideration.

Two teams that have not moved into new arenas are the Edmonton Oilers and the Calgary Flames, Alberta's two teams in the NHL. The Oilers continue to play in Rexall Place, located just outside downtown Edmonton, which opened in 1974. The Flames play in the Scotiabank Saddledome, dating from 1983. Management of both teams complain of a lack of space for luxury suites and other premium seating, as well as cramped facilities for concessions, placing them at a competitive disadvantage with other teams in the league (Kom 2008; Mah 2007).

As a result, a need for new facilities has been expressed in both cities, where discussion has focused on where the new arenas would be sited and to what extent they would be publicly financed (Mason 2010). This paper takes the opportunity presented by the possibility of new NHL arenas in Alberta to examine the demand for hockey game trips among residents of Edmonton, Calgary, and the rest of the province of Alberta. Using data on both revealed and stated preferences from a telephone survey conducted throughout Alberta, we estimate the effect of ticket prices, team quality, arena amenities, and capacity on the latent demand for NHL hockey. Unlike most attendance studies, we measure private consumption benefits of new arenas, in the form of consumer surplus, to current and future game attendees. Furthermore, unlike the one previous study that econometrically estimated consumer surplus for game attendance (Irani 1997), this paper includes data on travel costs in the estimation of the demand function, allowing an estimate of the full consumer surplus.

II. LITERATURE REVIEW

Economists have conducted many empirical analyses of the demand for attendance at sporting contests. Borland and Macdonald (2003) discuss the conceptual issues and provide a theoretical discussion of the demand for sporting events. Two studies in particular are relevant to this paper because they address the impact of new stadiums and arenas on season attendance. Zygmont and Leadley (2005) use a panel data set of season attendance spanning 1970-2000 in MLB to estimate the "honeymoon effects" of a new stadium on attendance and ticket prices, and find substantial positive effects on both that persist, with only modest declines, for 8-10 years. They conclude that a baseball-only stadium that replaces an older multipurpose stadium will generate an additional $228 million in ticket revenue over 15 years.

Leadley and Zygmont (2006) test for honeymoon effects in the NHL from 1970 to 2003 using Tobit analysis as the capacity constraint is usually binding in the NHL, unlike in MLB. For instance, during the 2009-2010 season, 11 NHL teams achieved season attendance greater than or equal to 100% of seating capacity with an additional 6 teams operating at better than 97% capacity. In MLB in 2010, five total teams exceeded 90%, with only three of those playing to full capacity for the entire season. The honeymoon effect in the NHL from 1994 to 2003, a period in which 21 new arenas opened, increased an NHL team's attendance by 15%-20% and the honeymoon lasted eight years. …

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