NHL Hockey is Back – What it Means for Your Canadian Small Business

January 24, 2013 - 10 minute read

It’s not just sports fans that should be celebrating the return of Hockey Night in Canada. Whether you’re a die-hard hockey fan, a small business owner, or a hard-working Canadian tax-payer, the end of the NHL lockout and the return of hockey should come as great news.

Like it or not, hockey has a profound effect on Canadian society[1]

Like it or not, hockey has a profound effect on Canadian society[1]

Like it or not, hockey has a profound effect on Canadian society.

So much so, that when the pros are not playing, it produces a recession-like effect on the economy as a whole.

Not to suggest that what we experienced over the past almost four months of NHL lockout was even close to the collapse of capital markets back in October 2008. When news of the lockout was received, fear of job loss was not on the top of most people’s anxiety list, not did many people run to sell their Canadian stock holdings. In fact, a non-hockey fan, you may not have given the news of the lockout much thought.  But perhaps you should have. While certainly not as serious, the same concerns that you think about when you hear the word ‘recession’ should also come to mind when you hear the term ‘NHL lockout.’

As you may expect, retailers of hockey merchandise were largely affected during the lockout. Total Hockey, one of the top independent online retailers of hockey merchandise, reported a drop in hockey paraphernalia sales through the end of December of 75% compared with the previous years. BigSportShops.com, a website that sells official merchandise for NHL teams saw sales fall by 60% last Christmas.

An owner of a souvenir shop on St. Catherine St. in Montreal lamented that he is going to be in the red this year with half his business revolving around Habs souvenir merchandise. Left-over merchandise was an issue when the team didn’t make the playoffs last spring – having not played at all is a big blow.

Not only is merchandise affected but when hockey’s off, kids won’t pick up the sport. That means, there may be a drop in demand for paraphernalia and equipment that’s felt in a few years’ time. Such was the case after the lockout in 2005 reports the co-owner of Total Hockey.

Ok great. So hockey merchandisers lost big during the lockout. That’s a given. Same goes for ski resorts during a warm winter.

So what’s the cause for concern?

Across the country, hockey has a tremendous influence over the arts, entertainment and recreation industry. About month into the lockout, Statistics Canada reported a drop in output in the industry of 1.6%. At first, this may not seem like a staggering loss in the grand scheme of the Canadian economy, but a look at some individual small businesses paint a different picture.

The manager of G Sports Bar and Grill on Granville Street in Vancouver estimated that bar sales dropped about 45% since the lockout. Shifts for part-time workers were cut by half. In Vancouver, it’s estimated that a home game brings in $1 million, primarily to downtown businesses. That’s a few million dollars of lost revenue over nearly 4 months  of an empty stadium.

In Toronto, the staff at Whitley Sheaf Tavern were thrilled at the news of the end of the lockout. On hockey game nights, 50-100 additional patrons usually show up. As such, many bars and pubs located near stadiums saw revenues fall 35% during the lockout. Restaurants have taken an 11% hit, while fast food outlets are down 7% compared to 2011 numbers. According to a CTV news report, Edmonton took the biggest hit with a 27% drop in business. Spending near Montreal’s Bell Centre dropped 21% followed by a 17% drop for businesses near Toronto’s Air Canada Centre.  Think drop in profits,  drop in jobs, drop in tax revenues.

Again, you may argue that the effects of the lockout are still localized to the food and beverage industry.  If you don’t sell hockey related merchandise or are not in the food and beverage industry, you shouldn’t feel the effects of the sales drought. Not quite.

The effects of the lockout extend beyond hockey merchandise, bars and restaurants.

The president of Yellow Cab in Vancouver explained that drivers make an additional $50 every home game.

If one falls on the  weekend, up to $32,650 could flow to the drivers. Over 4 months, the losses add up – especially for the number of cabbies that support their families or send money abroad.

Stadium seating

Some 1,000 employees that would normally work home games were only given shifts at other events at the arena.

From a job perspective, the NHL lockout meant heaps of cut backs. At the Montreal Canadiens, employees took a 20% pay cut working only 4 days a week. Some 1,000 employees that would normally work home games were only given shifts at other events at the arena. The return of hockey means more jobs and more income for many hard-working individuals.

And the parking fees? Nobody likes to pay to park, but the Toronto-owned parking lot across Bay St. from the ACC normally grosses $6,000 on game nights – money that goes into the municipal budget along with your property taxes for spending on city programs.

Job loss across trickling through a variety of industries, an overall decline in disposable income, and  budget reductions on a government level. Sound familiar?

You may argue, however, that if people aren’t spending money in certain industries, they’re spending it in others. Unfortunately, this is not always the case. Sometimes the money which would have been used for entertainment purposes sits aside for a rainy day if not spent. This is bad for business as a healthy economy is a growing economy. If people aren’t spending their earnings, economic growth is hindered. The NHL lockout produced a negative effect on Canada’s GDP.  If people were spending their money, they certainly were not spending it at the same rate at when hockey was around.

Business vector graph

A growing economy can translate into higher foreign investment and increased demand for Canadian dollars.

Why should the average Canadian tax payer rejoice now that hockey’s on?

One of the definitions of a recession is two down consecutive quarters of GDP.  The lockout lasted only about 4 months, hardly enough time to cause any crippling effect of the Canadian economy – one which arguably survived the effects of the global recession much better than our US neighbours just a few years ago. Yet interestingly enough, Statistics Canada noted that the GDP grew by only 0.1% during this past October.  At the same time, BMO Nesbit burn estimated that if the entire NHL season were cancelled, it would have a negative impact of 0.1% on our GDP.  A tenth of a percent can make a difference. As a Canadian tax payer, a growing economy can translate into higher foreign investment and increased demand for Canadian dollars. Overall, this can mean an influx of additional tax revenues which presumably means better government services and even an improved lifestyle. So you should be rooting for things that grow the economy and with time improve the overall Canadian standard of living.

Whether or not you paint your face for game day doesn’t matter. Now that hockey’s back, we should all raise a glass of domestic for a stronger Canadian economy.

[1] photo credit: s.yume via photopin cc