Use of Decision Tree Model in Sport Management
Case
Author: Cevda Mumcu & Kimberly Mahoney
Online Pub Date: January 15, 2020 | Original Pub. Date: 2018
Subject: Decision Analysis, Events Management
Level: | Type: Indirect case | Length: 1718
Copyright: © 2018 Human Kinetics, Inc.
Organization: | Organization size: Small
Region: Northern America | State:
Industry: Advertising and market research| Sports activities and amusement and recreation activities
Originally Published in:
Mumcu, C. , & Mahoney, K. ( 2018). Use of decision tree model in sport management. Case Studies in
Sport Management, 7 (1), 1– 3.
Publisher: Human Kinetics, Inc.
DOI: http://dx.doi.org/10.1123/cssm.2017-0036 | Online ISBN: 9781529706819
© 2018 Human Kinetics, Inc.
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http://dx.doi.org/10.1123/cssm.2017-0036
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Abstract
When individuals need to make a decision, they often face alternatives and some uncertainty.
Identifying alternatives and anticipating outcomes in a systematic way provides value in better
decision-making. Decision trees help to clarify the choices, risks, monetary gains, and other
information involved in the decision. As a result, managers can make an informed decision when
choosing the alternative that provides the best net gain and whether the net gain is worthwhile to
pursue. As such, this case presents a scenario in which the sport marketing manager of the local
sports commission is working with the convention center to bring a sporting event to the city in
order to enhance the city’s image and generate positive economic impact. The manager is faced
with evaluating three alternatives (Event A, Event B, or neither) and making a recommendation
to the sports commission and convention center executives regarding which event to pursue, if
any. This case provides an opportunity for students to practice using this strategic management
tool to Help in systematic decision-making while investigating the event bidding process.
Case
Keywords : decision trees, event management, strategic management, systematic decision making
As the sport marketing manager of the local sports commission (an arm of the local convention and visitors
bureau) in Jeffersonville, U.S., you have been asked to work with the convention center to bring a sporting
event to the area in order to enhance the city’s image and generate additional revenue in the community. This
Midwestern city has a diverse metro population of just over 2 million people with a median household income
of $43,850. Jeffersonville is centrally located within the state and within the region. The city offers over 4,500
hotel rooms in the downtown area and an amazing food scene. There is both vibrant nightlife and numerous
family activities in the area. The city is home to a minor league baseball team and an NBA team, as well as
a number of colleges and universities in the area. The city has a history of hosting successful events, both
large and small, and city officials are working to enhance Jeffersonville’s reputation as an event and tourism
destination.
A convention and visitors bureau (CVB) is considered a destination marketing organization (DMO) working
to attract events and visitors to a community. DMOs, including CVBs, represent a specific destination and
help long-term development of communities through a travel and tourism strategy (Destinations International,
2017). CVBs are generally not-for-profit organizations funded by local government (often through hotel/bed
taxes). CVBs work to attract events to their city and in doing so will Help meeting and event professionals
with the planning and coordination of their events. In addition, CVBs also encourage business travelers and
visitors to visit local historic, cultural, and recreational sites (Destinations International, 2017).
It is common for rights holders organizations (RHOs; those that own the rights to one or more events) to utilize
a request for proposals (RFP) process to solicit proposals from potential host cities and venues (Greenwell,
Danzey-Bussell, & Shonk, 2014). Examples of RHOs include national sport governing bodies, the National
Collegiate Athletic Association (NCAA), and the National Football League (NFL), as well as smaller grassroots
programs, regional organizations, or any other organization that owns events that are bid out and/or awarded
(National Association of Sports Commissions, 2017). CVBs typically take the lead in preparing a proposal
in response to an RFP as part of their efforts to attract events to the city. Those proposals often require
coordination with a number of stakeholders, including the CVB, local hotels, and facilities.
Many cities with a heightened focus on attracting sporting events, such as Jeffersonville, also utilize a sports
commission or sports council. The sports commission may be an arm of the CVB or may be a stand-alone
organization, but, regardless of the structure, their function/purpose is the same: to attract events to the
city that bring visitors and positive economic impact, though the sports commission is generally focused
on sporting events. As such, the mission statement for Jeffersonville’s CVB and sports commission is to
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strengthen the awareness of the city as a convention and visitor destination, attracting individuals, families,
and businesses from around the world to increase revenue and stimulate economic development and growth
for the community.
As the sport marketing manager with the local sports commission, you search for alternative events to bring to
the city and you come across Event A and Event B, both of which will accept proposals/bids for hosting rights
in the near future. Jeffersonville has the facilities and support structure to support pursuit of either event.
Event A: Girls Volleyball Junior National Championships
This annual event includes over 1,200 teams competing across 5 divisions and multiple age groups. The
event draws approximately 18,000 participants and up to 30,000 spectators from across the nation. The event
requires 4 move-in days, 10 days of competition, and 1 move-out day. Historically, the event has been held
in late-June to early-July and the average stay per team is 4.5 nights. Based on data shared by previous
host organizations, the economic impact on the host city is in excess of $50 million. It is important to note
that this high-profile event has garnered great interest from cities across the country and has been hosted by
much larger cities in recent years, both of which may decrease the likelihood of a successful bid for the city
of Jeffersonville. Jeffersonville meets or exceeds all requirements of the RFP, though larger cities often have
greater resources and amenities to offer potential RHOs and their respective events. Therefore, submitting a
proposal to host Event A would require a particular emphasis on the unique advantages of Jeffersonville as a
host for the event.
Event B: State High School Coaches Association Convention
The flagship event of the coaches’ association takes place annually during the summer. Nearly 2,000 high
school coaches from a variety of sports, athletic directors, and administrators attend this two-day event, along
with approximately 80 exhibitors and sponsors. The convention kicks off with a golf scramble the day prior
held at a local golf course with approximately 250 participants. Securing a central location within the state
for their convention is an important consideration for the coaches’ association. Jeffersonville has hosted this
event successfully several times and has become a trusted host city for the State High School Coaches
Association Convention.
Due to current budget constraints, you must identify the best event to pursue, if any. Your initial reaction
may be to pursue the more prestigious event, but a prestigious event does not automatically translate into
increased profits for all stakeholders. On the other hand, your initial reaction may be to pursue the smaller
event where you perceive the greatest likelihood of being awarded the event even though it may not provide
the recognition to help attract larger events in the future. There are a number of factors at play and there is
no simple solution. The sport marketing manager is best served to utilize a strategic approach to examine the
available data and make a recommendation regarding which event to pursue.
In order to compare the possible outcomes of bidding and hosting alternative sporting events and not bidding
for an event at all, you decided to use a decision tree model as a tool. Prior to constructing the decision tree,
you identified the cost of bidding for Event A and Event B, the probability of being awarded Event A and Event
B, the cost of hosting Event A and Event B, the probability of an excellent event execution for Event A and
Event B, and the estimated financial benefit resulting from an excellent event and a mediocre event for Event
A and Event B. All the necessary information is provided in the payoff table (see Table 1).
Table 1: Payoff Table for Bidding and Hosting Sporting Events
Event A Event B
Cost of bidding $200,000 $10,000
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Probability of being awarded .1 .9
Cost of hosting $1,000,000 $60,000
Probability of hosting successfully .7 .9
Financial benefit expected by an excellent event (including revenue for the
convention center and economic impact for the city) $50,000,000 $3,750,000
Financial benefit expected by a mediocre event (including revenue for the
convention center and economic impact for the city) $38,000,000 $1,600,000
The probabilities are subjective and are established based on industry knowledge and experience, as well
as case-specific industry research. In this instance, Event A is a large, national event with strong anticipated
economic impact for the host community. Therefore, it historically attracts a number of proposals from across
the country each year. Due to the competition and other factors presented previously, the probability of being
awarded Event A is .1. On the other hand, Event B is a smaller, state-based event which limits the number
of possible host cities. In addition to the reduced competition, Jeffersonville has successfully hosted Event B
several times previously, has an established relationship with the coaches association, and the city is centrally
located in the state, which is important to the event organizers. Therefore, the probability of being awarded
Event B is .9.
Additional issues may be taken into consideration when establishing the probabilities for hosting each event
successfully. For Event A, Jeffersonville meets all the requirements as outlined in the RFP, meaning the city
has the infrastructure and resources needed to host the event. However, as this would be a new event for
Jeffersonville there may be unanticipated challenges and expenses that impact the probability of success. For
Event B, Jeffersonville not only offers the infrastructure and resources needed to host the event, but, most
importantly, has a proven track record of successfully hosting Event B. Therefore, the probabilities for hosting
each event successfully have been established at .7 for Event A and .9 for Event B.
In order to help the executives from the sports commission and convention center make a decision on which
sporting event to pursue, if any, please perform the following by using the information provided in the pay-off
table for the bidding and hosting sporting events:
• 1.
Construct a decision tree as the sport marketing manager of the local sports commission and
convention and visitors bureau (CVB) for Jeffersonville.
• 2.
Compare the three alternatives (Event A, Event B, or not bidding for any event) for their expected
values and net gains.
• 3.
Prepare your recommendation to the executives from the sports commission and convention center
and be prepared to explain your decision tree model and the preferred choice.
Discussion Activities/Questions
• 1.
Calculate the expected value and the net gain for Event A with the new probability of .3 for being
awarded the event, and compare the new outcome for Event A with the outcome of Event B from
previous assignment.
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• 2.
What would your recommendation to the executives be now?
• 3.
What are three main take-aways from this exercise?
References
Destinations International. (2017). Frequently asked questions. Retrieved from
https://destinationsinternational.org/general-information/frequently-asked-questions
Greenwell, T.C. , Danzey-Bussell, L.A. , & Shonk, D.J. (2014). Managing sport events. Champaign, IL: Human
Kinetics.
National Association of Sports Commissions. (2017). Sports commissions 101. Retrieved from
https://www.sportscommissions.org/Portals/sportscommissions/Documents/About/
Sports%20Commissions%20101.pdf
http://dx.doi.org/10.1123/cssm.2017-0036
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