Do Golf Tournaments Make Economic Sense?

Make sense?

Does anybody even care?

This is part of a much broader question about whether the investment in modern day athletics makes sense. But we do not have time or space for broad philosophical questions. So let's stick to a sport that spurns such reflections.

The real question is whether sponsorships and advertising associated with sports increases sales and profits. And the answer is...maybe. Depending on who we're talking about and when and whether certain conditions apply. Which is to say, the data are notably ambivalent.

But smart, well-run companies and sensibly managed communities continue to do it anyway. And the reason seems to be that intangibles related to corporate reputation, management credibility and potential future sales are as important as any other factor. The direct financial benefit may be elusive, but the ability to provide clients with a unique, status-enhancing afternoon offers the provider with reflected glory and the beneficiary with some fun - and a sense of obligation that can be shared with one's employer.

It is, in that context, one of the few remaining types of direct human contact unlikely to embarrass either party. And we want to encourage that personal thing. Before we, as a society, forget what it feels like. JL

The Economist reports:

FOR the fans, golf tournaments obviously make economic sense. The pleasure of watching Lee Westwood float a 90-yard pitch to two inches must be worth whatever we paid to watch it happen, or we wouldn’t keep paying it. This holds true whether we are buying tickets to watch Mr Westwood in the flesh or simply slouching in front of the television.

But what about the towns that host golf tournaments, and the companies that sponsor them?
A town will include many people who, for some bizarre reason, are not golf fans. And a corporation, not being human, cannot appreciate the artistry of Rory McIlroy’s backswing.

Corporate sponsors are convinced they get a good deal. Consider Travelers, an insurance company. It sponsors an annual tournament called, cryptically, the Travelers Championship, which starts on June 21st.

“It’s great for our business,” says Andy Bessette, the chap at Travelers who, among other things, oversees its sports sponsorship. He cites three benefits. First, “global brand exposure”. The tournament is one reason, he says, why the Travelers’ red umbrella is “one of the most recognised icons in the world”.

Second, says Mr Bessette, the tournament is good for the community. Since 2007 it has had an estimated “economic impact” of $135m on the state of Connecticut, where it is held. Third, the tournament raises lots of money for charity.

This last point is clearly true. The Travelers Championship donated $1m to assorted good causes last year. (A large beneficiary is the Hole in the Wall Gang Club, which takes severely disabled children to summer camps.) All PGA tournaments are organised as charities. Between them they have given more than $1 billion to charity in the past decade and a half.

Mr Bessette’s other two points are hard to prove either way. Do golf tournaments benefit the community? They attract an influx of visitors, who no doubt spend money on hotel rooms, baggy shorts and copies of the Wall Street Journal.

Does that really add up to $135m of economic impact, though? Such estimates are notoriously unreliable. Andrew Zimbalist of Smith College did a survey of the economic literature on big sporting events such as the Olympics. He found that benefits were hard to pin down.

The new roads and stadiums that cities build before hosting the Olympics can be used long after the athletes have gone home exhausted. However, they must be paid for; plenty of Olympic cities go deep into debt to finance them. A big sporting event may attract lots of free-spending visitors. But some might have come anyway, and some will simply reschedule a planned visit so that it coincides with the Olympics.

Yet a golf tournament is different. It typically requires little new construction—the golf course is already there, and no golf tournament attracts Olympic-sized crowds, so it probably does not require new hotels. Also, while some people will no doubt reschedule visits to London to coincide with the Olympics, this seems less likely for Cromwell, Connecticut. It’s a nice place, (named after the Englishman who had King Charles I’s head cut off), but not a must-see destination.

As for the benefits to advertisers, Mr Bessette is probably right. People who buy insurance are quite likely to be middle-aged men. Golf is “the game that best connects with our audience,” says Mr Bessette. A big red umbrella floating in a lake by the course (see picture above) gets plenty of exposure on television. Before the tournament, the pros compete to see who can land one closest to the flag on the umbrella. And if you bring your children, they can compete to chip onto a replica of it.

As any golfer knows, life is full of hazards. Pity you can’t insure against an approach shot that hooks into the water.