It's not a question of being able to afford it(I assume you could give everyone who attends the entire conference a pizza and still have $ left over) it's what would be most effective for the most people. If you get a local place to do it for you you'll not only save on the cost of pizzas(more profits to invest in the winner of the event) you'll give a local place some much needed attention. Plus, since a lot of people who will go to the hackathon already live in the area, they'll get quite a few new customers as well. And if that's not a win-win, I don't know what is.