Poor playoff showing by Canadian NHL teams gives economy a stick check

[Patrick Wiercioch #46 of the Ottawa Senators takes down Nikita Soshnikov #41 of the Toronto Maple Leafs during an NHL game at the Air Canada Centre on March 5,2016 in Toronto, Ontario, Canada. (Photo by Claus Andersen/Getty Images)]

Chalk it up to a little Canada Day patriotism, Statistics Canada’s latest pulse check on the country’s gross domestic product made headlines both south of the border and across the pond after the arts, entertainment and recreation sector dipped 3.9 per cent as a result of no National Hockey League playoff games in the country.

Translation: the home teams failed to deliver and our economy felt a little shock.

But the real losses are apt to be at the city level, explains Dr. Norm O'Reilly – renowned Canadian hockey scholar, the Richard P. & Joan S. Fox professor of business and chair of the department of sports administration at Ohio University.

“Many Canadians travel city-to-city for playoffs,” he says nodding to a report he prepared on the economic impacts of the Ottawa Senators. “So at a city level, impact is considerable.”

According to the 2014 study, the Sens bring in around $100 million a year in direct spending and an additional $100 million in ripple effects. While Statistics Canada was rather blunt with its prognosis during its wrap up of the country’s GDP winner and losers in April, the impact of our revered national sport (well, “official winter sport”) is a hard one to pin down given how much the economic benefits vary from franchise to franchise.

Glen Hodgson, senior vice president and chief economist at national think-tank The Conference Board of Canada recently took a stab at it in an editorial last January, working around the lack of data from Statistics Canada and the closely held cards of privately-owned NHL franchises by drawing from research by Forbes and extrapolating from there.

“Forbes thinks NHL teams spend in the range of US$100 million to $140 million annually on players, other salaries, and hockey operations,” he writes. “Toronto, Montreal, and Vancouver generally use the full room under the player salary cap, while the other Canadian franchises (Ottawa, Winnipeg, Calgary, and Edmonton) generally do not spend to the cap’s max (currently set at US$69 million).”

Toronto, Montreal, and Vancouver stood out among the top 10 most valuable teams in the league in 2015, with all other Canadian teams also bringing in huge revenue numbers last year.

Hodgson also points out that while Canada is no longer a major manufacturer and exporter of skates, sticks and shin guards, hockey gear is still very much synonymous with Canada.

“If it is designed, marketed, distributed, and/or financed in Canada, these activities add wealth to our economy,” he writes.

Taking a broader look, a 2015 study commissioned by Scotiabank and Canadian Tire and spearheaded by O’Reilly, puts the direct economic impact of the sport on Canadian communities at $2.6 billion.

Tourism made up the biggest impact, accounting for 52 per cent, while NHL clubs and major events made up 31 per cent of that figure. NHL salaries that came back home only accounted for 10 per cent of that and six per cent was fuelled by corporate sponsorships. According to the study, Canada has more than 5,000 full-time jobs in hockey and more than 150,000 volunteers filling in the gaps as coaches and administration work an average of five hours a week.

“Although it is not to be considered direct impact (or incremental benefit), it is reported that the economic activity related to hockey is in excess of $11.2 billion annually in Canada,” write the authors, pointing to tourism and spectator purchases – season passes, merchandise, parking at games, etc. – as the key economic drivers in this regard.

But just because Canadian teams weren’t hosting Stanley Cup playoffs at home last month, that doesn’t mean Canadian hockey players weren’t making money with about 50 per cent of all players in the NHL coming from Canada.

“As long as those players still come home and spend some of their U.S.-earned dollars in Canada, there would be an increase in GDP,” adds O’Reilly. “Provided it is not balanced off by the number of international players playing in Canada who spend their Canadian income outside of Canada.”