Economic Impact of the Chesapeake Energy Arena

February 7, 2016PRT 466

Richard Skylar Chilton

History

The Chesapeake Energy Arena is Located in downtown Oklahoma City and is currently

home to the NBA franchise Oklahoma City Thunder. Many people from outside of the area

think of the Thunder when it comes to the Chesapeake Energy Arena but that has not all ways

been the case. The Arena opened in 2002 and had an open house for local residents but the

Thunder’s first game was not until the 2008-2009 NBA season (Chesapeake Arena). The Venue

originally was the Ford Center Arena but Chesapeake Energy bought the stadium naming rights

in 2011. Since opening in 2002 Chesapeake Energy Arena has hosted over 1200 events and 10

million fans and has helped bring life and entertainment to downtown Oklahoma City. It all

started in the 1999 when the city of Oklahoma City approved plans through MAPS

(Metropolitan Area Projects) to begin construction on the Chesapeake Energy Arena (then

known as the Ford Center Arena) in downtown Oklahoma City (Chesapeake Arena). MAPS was a

project that was formed in 1993 to create a temporary 1 cent sales tax in Oklahoma City and it

lasted through July of 1999 and generated over 309 million dollars and about 54 million in

interest off of this(OKC.gov). Chesapeake Energy Arena is a 581,000 square foot venue and is

owned by the city of Oklahoma City. When first constructed it cost the city 89.2 million dollars

but has since seen improvements. (Chesapeake Arena). The Arena can hold a capacity up to

over 18,000 fans for basketball games and the stadium can be manipulated to efficiently hold a

little over 3000 for a Theatre style concert. (Chesapeake Arena). When the Arena was first

designed it was a requirement for the arena to meet the specifications of the National Hockey

League (Chesapeake Arena). The arena has supported a diverse lineup of events like the

Oklahoma City Thunder, concerts from stars like Jay z and Justin Bieber, and it also hosts other

sporting events like the Oklahoma City Blazers hockey team and the NCAA men’s basketball

tournament games (Chesapeake Arena). The arena has also been ranked in the top 25 in

concert ticket sales consistently over it’s life span (Chesapeake Arena). Those are just some of

the events that the Chesapeake Energy Arena holds, but what makes it so successful is the

diverse amount of people that it reaches out to with the variety of events it holds. An

interesting fact about the arena is the fact that during the 2005-2007 NBA seasons the

Chesapeake Energy Arena temporarily was home to the New Orleans Hornets in the aftermath

of hurricane Katrina (Chesapeake Arena). In 2009 the city issued another one cent sales tax that

helped pay for the 122 million dollar renovations of the then Ford Center Arena (Chesapeake

Arena). These renovations included upgraded seating, new and improved locker rooms,

improved arena lighting, and a new and improved scoreboard (Chesapeake Arena). These

improvements have been a great part in making the Chesapeake Energy Arena a staple tourist

attraction for downtown Oklahoma City.

Economic Impact

The latest economic impact study of the Chesapeake Energy Arena was in 2009 when it

was known as the Ford Center Arena and it shows that in 2009 alone the direct spending alone

was almost 100 million which was when the Oklahoma City Thunder just got started (MAPS 3).

The average ticket cost for an event at the Chesapeake Energy Arena is $36.35 and the Fan Cost

index is 237.40 which is what the average family would pay to attend an event there (ballparks).

The Oklahoma City Thunder is the main source of revenue for the Chesapeake Energy Arena

and Forbes estimated that the amount of money spent at the “gate” for the Thunder was 49

million in 2014 but the only problem is those tickets are sales tax exempt and taking the sales

tax percent into account for Oklahoma City that means the city loses almost 2 million dollars in

taxes (K.O.2014). Oklahoma City pro sports teams alone bring about 350 jobs to the area (K.O.

2014) There is not an economic impact study of every event that takes place in the Chesapeake

Energy Arena but the Oklahoma City Convention and Visitors Bureau estimates that each home

game played by the Thunder hauls in a whopping 1.5 million dollars of direct spending to the

city and about 78 million for the whole season which is 41 home games which is less than when

the franchise first got started. There is estimated to be 1-5 percent of the 18,000 attendees for

the Thunder that are out of town and bring money into the Oklahoma City area (K.O. 2014). The

Oklahoma City Barons hockey team has an estimated of 300,000 dollars per game and brings in

almost 11 million dollars per season for reference and that shows just how much more the

Chesapeake Energy Arena brings in from the thunder (K.O.2014). Also there is the fact that the

Thunder brought jobs and money to the Oklahoma City economy that was not there before.

Mechanisms of Economic Impact

As mentioned in the textbook Financial Resource Management Sports, Tourism, and

Leisure Services “Economic impact assessment measures the amount of local responding of

money that comes into the economy because of a particular event or project.” (Brayley, R. E., &

McLean). Economic impacts usually take into account the amount of money that is brought into

a local area due to in this case a venue. That means, how well do other businesses in the

surrounding area get effected on a broad scale because of the events that the venue brings

about? The Chesapeake Energy Arena brings people from all over the country to see a top tier

NBA program in the Oklahoma City Thunder and this inevitably causes a multiplier effect for

other local businesses. Economist Mark Snead tells the Oklahoman “We don’t have mountains.

We don’t have a coastline. We don’t have a ski resort; Amenities include pro sports franchises.

It’s one of those components that now make Oklahoma City completely in a different

category.” (J.W 2012) This shows how much sports and in particular the Oklahoma City Thunder

means to the economy of Oklahoma City. Greg Powell, who is the general manager of

TapWerks Ale House & Café says “On nights where we have a Thunder game, we will see

anywhere from a 20- to 40-percent increase in sales, just because there’s a Thunder game.”

(K.O.2014) That is a substantial increase in sales all because there is a Thunder game and that

happens 41 times during a regular season and during the NBA playoff Powell says business will

double (K.O. 2014). Other businesses presumably get similar rates of increase as well and in

some places there could be even more. Powell also goes on to state there is a growing rate of

businesses and hotels in the surrounding area and this is directly attributable to the

Chesapeake Energy Arena and the Thunder (K.O. 2014). The Chesapeake Energy Arena since it

has been the home to the Thunder and underwent huge renovations has become a staple of

the culture in Oklahoma City.

Critical Analysis of Economic Impact Assessment

I believe that the numbers are credible due to the fact that I have found multiple reports

and statistics that give similar numbers. It is very important to realize that methods of economic

impact are important to analyzing and that is obvious in my sources because they all use similar

methods to come up with numbers in a similar fashion. Gwen Burrow from “Economic

Modeling” talks about three different things that makes an effective and reliable economic

impact and the first of those is effect on earnings (G.B.2013). This is talking about not only

salaries of sports workers but also of local residents who are effected by the in flow if money to

a particular area (G.B. 2013). This is true in the reporting I have found because all of my sources

gave relevant estimates of money brought into the Oklahoma City area. The second is

occupational growth in the area which is the (G.B. 2013). The data I have collected also talks

about how many jobs have come about because of the Chesapeake Energy Arena from Thunder

employees to workers at local restaurants. The third and final thing that makes an effective

economic impact assessment according to Gwenn Burrow is industry patterns (G.B. 2013). This

means does the Chesapeake Energy Arena effect other industries outside of the world of sport?

My answer is yes it does because the influx of people to the area surrounding Chesapeake

Energy Arena for Thunder games effects other business in positive ways because visitors from

outside the area want to experience the Oklahoma City Culture. I sensed some biases when

looking up some information on the Chesapeake Energy Arena website because it did not talk

about the tax dollars that are lost at the gate for Thunder games. Other reports I have used for

my research do not seem biased because I see both positive and negative effects of the

Chesapeake Energy Arena.

Conclusion

Economic impact is an all encompassing study and takes into account all aspects of the

economy and there can be both positive and negative effects. Jobs, money put into the

economy, and money brought to local businesses are all something that are measured by

economic impact. The Chesapeake Energy Arena is a staple attraction to visitors coming to

Oklahoma City and the economic impact it has on the city is remarkable. The venue causes a

huge chain and multiplier effect in the community and effects businesses in other areas like

restaurants and hotels by bringing in people from all over the country and jolting local

businesses. The amount of direct spending brought into the area is remarkable and if the

Oklahoma City Thunder continues with its success there is no doubt in my mind that business

will continue to grow in the Oklahoma City area.

Works Cited

Ballparks Chesapeake Energy Arena. (n.d.). Retrieved February 3, 2016, from http://basketball.ballparks.com/NBA/OklahomaCityThunder/index.htm

Brayley, R. E., & McLean, D. D. (2008). Financial resource management: Sport, tourism, and leisure services. Champaign, IL: Sagamore Pub.

Chesapeake Energy Arena. (n.d.). Retrieved February 03, 2016, from http://www.chesapeakearena.com/about-the-arena/overview

G. B. (2013). Not Just a Game: The Impact of Sports on U.S. Economy - EMSI | Economic Modeling Specialists Intl. Retrieved February 03, 2016, from http://www.economicmodeling.com/2013/07/09/not-just-a-game-the-impact-of-sports-on-u-s-economy/

Metropolitan Area Projects. (n.d.). Retrieved February 02, 2016, from http://okc.gov/maps/index.html

Oklahoma City Ford Center (MAPS 3); MAPS 3 Citizen's Advisory Board. (n.d.). Retrieved February 02, 2016, from https://www.okc.gov/AgendaPub/cache/2/tvujakqwt0r210yowc1sunun/108444302052016015010569.PDF

J. W. (2012, June 18). The OKC Thunder Has a Big Economic Impact, But It’s Hard to Say How Much. Retrieved February 03, 2016, from https://stateimpact.npr.org/oklahoma/2012/06/18/the-okc-thunder-has-a-big-economic-impact-but-its-hard-to-say-how-much/

K. O. (2014). Sports bring big money to OKC and local businesses. Retrieved February 03, 2016, from http://okc.biz/2014/09/08/cover-story-sports-bring-big-money-to-okc-and-local-business/