Key characteristics of mega-events are that they significantly impact the host city, region, or nation and that they attract significant media coverage. There are three types of events, all of which are commonly hosted throughout areas of Indiana: business, festival, and sporting events. Business events relate to the hosting of conventions (“GenCon”), conference meetings (National Rifle Association), and trade shows (Performance Racing Industry) , whereas festivals range from carnivals, fairs, and musical concerts (Jazz Fest, Bonnaroo), to other more cultural-specific events (e.g., ‘500’ Festival Parade, Circle City Classic, Gay Pride Parade).

As mentioned above, cities and regions throughout the country and world compete for the opportunity to host a large, well-attended event or a nationally, even globally televised event like the Super Bowl or the Indianapolis ‘500’. Why? First, advancements in mass communication and satellite technology provide access to much larger viewing audiences. Second, because these events are exposed to a large viewing audience in attendance and watching on TV, corporate sponsors, merchandisers, and broadcasters invest heavily in these events and want to showcase the events in as positive as a light or impression as possible. Third, hosting mega-events provides an opportunity for cities and regions to promote themselves to new audiences.

Why do cities and regions invest heavily in these events by building infrastructure and providing incentives to attract these events? The rationale for the large investments in these events relate to job creation, an attraction of visitors from outside the community, and a short-term economic boost to local business (e.g., full hotels and restaurants during the event).

Cities and regions hosting large sporting events are typically justified on the basis of a positive and direct economic boost from visiting spectators and participants and the creation of typically short-term jobs related to the event.

An economic impact study of the Indianapolis 500 revealed that the race was responsible for generating $336.6 million annually, which was almost 50 percent of the Indianapolis Motor Speedway's $727 million annual impact on the central Indiana economy. An analysis of NASCAR’s Daytona 500 found an average of a $41.77 million increase in taxable sales within Volusia County, in which Daytona resides, that was directly attributable to the race.

Sporting events can also attract tourists and visitors from areas beyond the local region, particularly since the global expansion of communication and satellite television has increased the audience of televised sporting events. Previous research has also shown the role of national and international media elevating the profile and awareness of an area to new investors and tourists.

These large events can also leave a favorable enough impression with spectators and participants who may return later for a non-event visit or even decide to relocate to the area permanently. Commenting on the importance of non-local visitors, Joie Chitwood, former Senior Vice President of Business Affairs for the Indianapolis Motor Speedway (IMS) stated:

“It was conservatively estimated that (IMS)… provides $727 million (annually) to the economy of Indianapolis. What racetracks really do is draw people from at least 300 miles away. What motorsports does is it brings people to town, and it's that dollar that comes from outside the community that provides the greatest impact.”

Mega-sporting events have also been shown to be a tool used to promote local products and to attract investment and economic development. The media coverage of these events can showcase local businesses and tourism during the televised broadcasts, a term referred to as the showcase effect.

In the video below, I further explain the showcase effect in the context of the 2011 Super Bowl in Indianapolis.

There are many things to consider when your town or city decides to host a mega-event. First and foremost, hosting large events require considerable financial investments and often help from local taxpayers to help build and maintain buildings (e.g., Convention Center, Lucas Oil Stadium), but also attract sporting events and conventions in the form of significant financial incentives and discounts. A few years ago, not every Hoosier supported the Indiana state government providing $100 million in funds to help the Indianapolis Motor Speedway, a private company, with upgrades. These events can also cause an increase in traffic congestion, and disrupt the lives of local residents, especially those not interested in the event. Further, the economic impact of the event is often exaggerated and much higher than it probably estimated. There are three key reasons for this exaggeration.

First, the substitution effect suggests that a local resident is spending his or her money at the particular local event venue that they would have otherwise spent somewhere else locally, thus not really boosting their impact on the local economy. Further, outside visitors or tourists also could be choosing to spend their money at the venue instead of another tourist spot in an area.

For example, I live in Indianapolis and plan on spending the weekend at the track drinking beer with my friends. I'll spend $10 on a tenderloin and another $20 on beer and ice. Thus, I spent $30 at the track. What would I be doing if I wasn't at the track? Taken my lady to a nice, $30 meal of appetizers at the Greenwood Park Mall Applebee's. In sum, the $30 I spent at the track would've been spent somewhere else in metro Indy, so is my spending at the track really boosting the local economy that much?

Second, the event could cause the displacement of locals, or crowding out, caused by the burdens of increased congestion or noise from the event. Because of an increase in traffic congestion or a perception of increased crime, local residents may decide to leave and travel outside the region to avoid the perceived congestion, traffic, and social disruption associated with the event. Further, higher prices associated with the event might be another reason local residents are deterred by the event and will leave the area for the weekend. Also, visitors from outside the local area who frequently visit the locale might choose not to visit during the event in order to avoid the crowds and congestion.

Shockingly, there are people who live in Speedway that leave during the month of May because they can't stand the noise, traffic, and drunks. Similarly, at a lot of urban, street circuits, locals will leave for the weekend because they can't stand the noise of race cars and all of the congestion and barriers.

Finally, leakages refer to the revenue generated by an event that is not returned or does not stay in the host area. Many non-residents will visit an area for an event, spending considerable money on tickets and merchandise which largely benefit other non-residents. For example, if a fan from St. Louis purchases merchandise from a Justin Bieber concert downtown at the Murat Theater, that revenue does not stay in Indianapolis, but instead benefits the ‘Biebs’ (Justin Bieber).

There is also a concern of an unexpected outcome of the event if it doesn’t go according to plan, or is not successful and actually casts the city or region hosting the event in a negative light. For example, a severe weather event may delay or cancel the event. Consider the 2010 Super Bowl hosted in Dallas, Texas. While Indianapolis enjoyed temperatures as a high as 50 degrees during Super Bowl Week, Dallas had a major snow/ice storm that shut down much of the city during the week prior to Super Bowl Sunday. The Indiana State Fair stage collapse in 2012 became a nationally-covered tragedy that did not portray the event in a positive manner.