Predicting the Financial Benefit form Relocating Struggling NHL Franchises to High-Demand Markets

Open Access
Author:
Lorenz, David Andrew
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Edward Coulson, Thesis Supervisor
  • David Shapiro, Honors Advisor
Keywords:
  • Sports Economics
  • Economics
  • Econometrics
  • NHL
  • Hockey
Abstract:
This paper analyzes the factors determining demand for National Hockey League (NHL) franchises and examines the degree to which these factors affect financial success given hockey- related revenue as an indicator. Using data from nine seasons, the effect of several demand factors on hockey-related revenues was determined through regression analysis. For example, hypothesizing that financially successful NHL franchises are in areas with a high general demand for hockey, some NHL franchises are not optimally located for financial success. In the regression model, youth hockey participation rates are used as a proxy to determine an area’s demand for hockey. Youth hockey participation rates are expected to have a statistically significant positive correlation with hockey-related revenues. Prior to determining optimal relocations, recent financial data is used to identify struggling franchises. Using the statistically significant coefficients from the regression results, optimal relocation areas are selected for the struggling NHL teams. Hockey-related revenues are then predicted for the new locations, using estimated demand factor coefficients obtained from the regression results and new location demand data. Columbus, Ohio; Raleigh, North Carolina; St Louis, Missouri; and Phoenix, Arizona were selected to relocate to Quebec City, Quebec; London, Ontario; Hartford, Connecticut; and Milwaukee, Wisconsin respectively. After considering relocation costs, all moves proved to be financially beneficial. The estimated demand factor coefficients, combined with the new location data, predict an average increase in hockey-related revenue, less relocation costs, of 17% for these moves.