Penn State's Economic Fallout: Will the Sandusky Scandal Sink a Whole City?
If the school's legendary football program is disbanded for a year or more, an entire city's economy will suffer.
As the NCAA wrestles with its response to the conviction of former Penn State assistant coach Jerry Sandusky and the independent report conducted by former FBI director Louis Freeh, the impact of Penn State football on the rest of the university and the surrounding community of State College has been thrown into sharp relief. Although it is not yet known what the NCAA’s sanctions will be—or if there will be any —one punishment that has been called for by many sportswriters and observers is the “death penalty.” Although this isn't the official name for any sanction and could take many different forms, what many want to see is the football program disbanded for a year or more: no games, no recruiting, no team.
The team’s place at the moral center of the university and State College community has become dislodged following the Freeh report’s damning revelations. But a canceled football season would mean more than just no games. It would result in a economic and financial reckoning for Penn State and the entire State College economy.
The 106,572 seats at Beaver Stadium are just the start of it. The college town has a population of just more than 40,000 for 357 days of the year, but on the seven football Saturdays when the Nittany Lions are playing at home, it becomes the third-largest city in Pennsylvania, according to the Penn State athletic department, with a population of almost 120,000. This influx of visitors means more food served, beer poured, and gas pumped throughout State College. But there’s no better reflection of the economic impact of Nittany Lion football than in State College’s hospitality industry.
Go to the websites of State College hotels and you are confronted with an application—yes, an application—to get a hotel room for a gameday weekend. That's the whole weekend: it is standard practice, and has been for decades, to require guests to book two nights on such weekends, according to Mark Morath, president of Hospitality Asset Management Co., which has several properties in State College.
Morath described the football season as just that: a season. Prices rise for those six or seven Saturdays the same way rentals in the Hamptons become (even) more expensive in July than in April. But not every football Saturday is created equal—Ohio State means higher rates, and a bigger haul for the hotels, for instance, than Ohio University.
Reservations for a king room at the Days Inn State College during the late October weekend when the Nittany Lions face off with the Ohio State Buckeyes will run you more than $800 for two nights, while the home opener against Ohio University is only a bit north of $500. A similar room on a nonfootball weekend in October? Around $250. Reservations for those pricey rooms have been available been since mid-October of last year. At the Hilton Garden Inn, rooms for the weekend of the Oct. 6 game against Northwestern are already sold out, and a standard room for the Ohio State game is more than $1,000.
Morath reports no decline in reservations from the previous year. The only changes he’s noticed are that the guests are younger and there are more reservations made online. “We have not had any guests tell us that they’re not coming to a game because of the football situation,” Morath said.
There was, however, a decrease in season ticket sales last year, and even some games that were not sold out or saw visiting fans sitting in prime areas near the middle of the stadium. This year, Morath was expecting a slight decrease in season-ticket sales and attendance again, though Morath argued this was due to Penn State overhauling its season-ticket program and requiring donations, part of its “Seat & Transfer Equity Plan.” Under the plan, season-ticket holders are required to pay steeper donations to the Nittany Lion Club for seats closer to the 50-yard line. So older season-ticket holders who used to buy eight-to-10 tickets every year were instead more likely to purchase two or four. The resulting attendance gap was even commented on by Paterno in October. Penn State ended up selling 5,000 fewer season tickets than average last season.
Penn State students, however, have shown no compunction about buying up as many season tickets as possible. According to the Penn State athletic department, as of late June, the more than 21,000 student season-ticket purchases was a 10 percent increase over the previous year’s total to that date.
The money that alumni and students are willing to put back into the university through buying football tickets is just one indication of how Penn State’s football program serves as a cash cow for the entire school and its surrounding community. According to data cited and analyzed in Forbes by Patrick Rishe, an economist and sports consultant, almost 63 percent of Penn State’s total $116.2 million in athletic revenue in the 2010–11 academic year came from football. Even more strikingly, football turned a profit of more than $50 million, while the athletic program as a whole made slightly more than $30 million, which means football’s gargantuan revenues were covering the losses of the rest of the school's athletics program.
And while it does not appear that ticket or TV revenue will be affected by the Freeh Report, merchandise revenue took a hit when the Sandusky scandal first broke last year. According to Matthew Powell, an analyst at SportsOneSource, retail sales of Penn State apparel were about $80 million in a typical year, but fell to $65 million this past year, a 25 percent decrease. “I would expect a similar result this year,” Powell wrote in an email.
While Penn State fans and alumni scattered across the country may be buying less apparel, there is little indication that the heart and soul of Penn State athletics—those six or seven home football games a year—are seeing, or will see, any decrease in Nittany Lion ardor. Morath described a community excited for the first season under new head coach Bill O'Brien, even wearing shirts inscribed with the word “Billieve.” State College’s businesses and the rest of Penn State are believing too. They have to.