Saturday, October 20, 2012

Location and the A's Economic Benefit

With the Tigers in the World Series, a spotlight has been shined on the city of Detroit. The Toronto Star had a great piece today on the rebirth of the city's downtown.

The article by Bill Morris starts off:

Back in the bad old days, office workers in downtown Detroit staged a macabre daily sporting event. At quitting time there would be a mad dash to the parking lot — eyes out for muggers, or worse — then, quick, fire up the car and race home to the suburbs. As night fell, downtown turned into a ghost town.

He goes on to say:

The reverse exodus (to the suburbs) has become so pronounced that downtown Detroit can now be fairly accused of imitating such desirable Manhattan addresses as Chelsea or Tribeca. Yes, it’s gotten so bad — or good — that it’s now nearly impossible to find a vacant apartment to rent in downtown Detroit.

And later:

“Look out there,” (Detroit native Dick) Dettloff says, pointing over the rim of the stadium to the north. “Those are all new condos. Downtown is coming back, and you’ve got to give a lot of the credit to (Tigers owner) Mike Ilitch. If our guys win the World Series, that’ll bring a lot of money into this area. They’re talking 70 million bucks.”

The Detroit Free Press recently chronicled what a then hypothetical World Series appearance would mean for the city economically. From Katherine Yung's piece:

"Unambiguously, major league sports playoff games bring out extra expenditures," said Patrick Anderson, CEO of the Anderson Economic Group. 

He estimates that the overall boost from all of the Tigers' postseason games will amount to more than $72 million -- the economic benefit forecasted when the Tigers made it to the championship series in 2006. 

Later in the article:

"I don't know if I am screaming at the TV because I want the Tigers to win or because I know they are going to fill our hotel for a week," said Judy Booth, director of sales and marketing at the Detroit Marriott hotel at the Renaissance Center. 

A World Series means a sellout of all of the hotel's 1,298 rooms. 

The Westin Book Cadillac sold out all of its 453 rooms on Monday, Tuesday and Wednesday, said Scott Stinebaugh, the hotel's director of sales and marketing.

Thinking About the A's

The reality is that the A's economic benefit reaches far beyond the city limits of Oakland. Visiting teams tend to stay in San Francisco. (For instance, here is a tweet from Tigers pitcher Justin Verlander during the ALDS.)

Part of the reason for this is that Oakland simply does not have as many hotel rooms as San Francisco. Oakland also lacks San Francisco's high-end brand names -- no Ritz-Carlton or Four Seasons for instance.

Oakland's total number of hotel rooms, as calculated by the adding the numbers provided by the Oakland Convention and Visitor's Bureau is 3,584 -- including the Claremont Hotel which is technically in Berkeley (by mailing address anyway). The Port of San Francisco, as part of its promotional materials for The America's Cup noted that as of 2009 there were 32,976 hotel rooms in San Francisco.

A further comparison is can be seen when looking at Detroit. As of 2008, according to the Southeast Michigan Council of Governments there were 5,731 hotel rooms in Detroit proper.

San Jose, where the A's ownership would like to move the team to, has 4,000 hotel rooms citywide according to Team San Jose.

The natural extension of this is to conclude that the A's overall economic benefit doesn't stop at the foot of the Bay Bridge.

The city of San Francisco -- between visiting teams and fans and players living in the city -- has a very real incentive to be in favor of keeping the A's in nearby Oakland.

Why San Jose Would Change Things

If the A's were to move south, hotels in San Jose would likely benefit as the option of staying in San Francisco becomes more difficult. The distance to San Francisco would increase from about 17 miles (mapping from the Four Seasons to the Coliseum) to 42 miles (mapping from the Four Seasons to the HP Pavilion).

If you search for where opposing teams stay when playing the Sharks in San Jose, the consensus appears to be downtown San Jose -- for instance, the Vancouver Sun spotted the Canucks at the hotel Valencia last May.

With this in mind, consider A's Managing Partner Lew Wolff's various hotel investments. While Wolff owns part of the Fairmont in San Francisco, his company Wolff Urban Development, LLC lists among its properties both the Fairmont and the Hilton and Towers in San Jose. In addition, in 2011 Wolff also purchased the Sainte Claire in downtown San Jose. He is very clearly well-poistioned to gain from fans and teams staying in San Jose.

This notion was brushed aside in KCBS's Matt Bigler's story regarding the purchase of the Sainte Claire:

Rumors that the hotel could be used by visiting Major League Baseball teams if MLB allows the A’s to move to San Jose are “highly speculative,” said Santa Clara County Assessor Larry Stone.

“He’s got 3 other hotels that could provide the same option,” Stone said, adding that the purchase should nevertheless signal to city officials that Wolff is committed to help bring people and business to downtown San Jose.

It isn't speculative at all.

Wolff very clearly, and sensibly, wants a cut of the ancillary revenue streams that would be created by bringing a team to downtown San Jose. It is utterly naive to think that Wolff's personal calculus regarding the team's location isn't impacted by his non-team investments. In San Jose he has stakes in hotels and office buildings throughout the city. His investment in Oakland is non-existent besides being a tenant of the Coliseum.

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