Week 7 – Economic Impacts of Events PDF

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21639 – Event Impacts & Legacies Week 7 – Economic Impacts of Events Economic Dimensions & Success  The success of a festival or event is traditionally measured in terms of its economic contribution to event stakeholders, the community and the region (Dimmock & Tiyce, 2001). Who is interested in Economic impacts & why?  Governments - Potential for economic stimulus - Potential to financially underwrite urban regeneration, infrastructure development  Communities - Opportunity Costs - Potential for negative economic outcomes such as inflation, increases in housing/land costs.  Private Sector - Benefit arising from expenditure associated with the even How are the results of Economic Evaluations used?  By event organisers: - For sponsorship proposals and applications for funding  By Government: - To assess the economic impacts of events against other opportunities for supporting economic development - To determine the extent of support for events.  By Event Sponsors: - To enable comparisons of events against each other and against other sponsorship opportunities. Key Terminology  The economic impact of an event on a region = The net sum of the economic consequences of all of the cash inflows and outflows that occur because of the event.  Not to be confused with in-scope expenditure or ‘new expenditure’ = Expenditure that would not have occurred in the host region had the event not taken place.  Know for exam! In-Scope as the Basis for Economic Impact  In-Scope expenditure is used as the base component for any form of economic impact study.

Gabrielle Guindi

21639 – Event Impacts & Legacies Issues with Economic Impact Evaluation  Big claims of economic impact  Inappropriate use of multipliers leading to inflated figures  The value of economic impact studies  Much scepticism around reported figures  Economic evaluation employed as a PR exercise  Consider who is commissioning the economic impact studies The way forward...  ‘If the economic impact of events is not assessed in a consistent fashion, the credibility of the results will invariably be questioned and the opportunity to benchmark the performance of one event against other events will be limited’ (Jago & Dwyer 2006, p. 8)  In-scope expenditure represents a solid basis for comparison and benchmarking. Determinants of in-scope Expenditure 1. Number of Visitors 2. Types of Visitors & Types of Events  Different spending patterns e.g. - Domestic vs. International Visitors - Event tourists vs. those attending the event as a secondary attraction - Type of visitor e.g. sponsors and media - Type of event e.g. sporting events vs. arts/cultural events 3. Length of Stay  International vs. Domestic Visitors  Pattern of pre-& post touring 4.

Organisers & Sponsors  Expenditure within the host region using income generated from outside the region = ‘new money’

Inclusions & Exclusions of Measuring In-Scope Expenditure 1. Local Residents (Transferred Expenditure) 2. Purpose of Visit (Expenditure of Casuals) 3. Time Switching 4. Retained Expenditure 5. Crowding Out Effects 1. Local Residents  Expenditure made by locals at an event should not be included  Why? As this money would’ve been spent elsewhere had the event not been held  Referred to as transferred expenditure 2. Purpose of Visit – ‘Casuals’  Expenditure made by persons who would have visited a destination anyway if the event had not been held should not be included.

Gabrielle Guindi

21639 – Event Impacts & Legacies  ‘Casuals’ = visitors who are already in a destination for another reason but who attend the event  An amount of their expenditure can only be counted if they stay longer to attend the event or spend more than they would have. 3. Time Switching  Expenditure of visitors who are simply ‘time switchers’ should not be included  People who were planning to visit the destination anyway and simply adjusted the timing of their trip to coincide with the event  E.G The event impacted on their trip timing but did not generate the visit  An amount of their expenditure can only be counted if they stay longer to attend the event or spend more than they would have 4. Retained Expenditure  Events visitors/participants/sponsors located within the host region who would have spent money outside the region had the event been held elsewhere.  Whilst not technically ‘new money’ it is thought to stem an outflow of money or leakage from the region  Valuable in the situation where a competitor destination is clearly identified  Difficult to measure and is therefore not commonly included. 5. Crowding out effects  Expenditure leakages that occur when event related expenditure ‘crowds out’ expenditure that would have otherwise occurred in the destination, for example: - Locals who have the host region during the event - Visitors who choose another destination • Difficult to measure and is not commonly included The Measurement Process – Direct In scope Expenditure 1. Establish a geographic boundary 2. Identify direct cash flows into and out of the region that are directly attributable to the staging of the event  From various stakeholders E.G. attendees, sponsors, organisers, vendors, media 1. Establish a Geographic Boundary  Sets the bounds for what is considered ‘new money’  Must be identified at the outset of the study, and adopted consistently throughout data collection  There may be multiple regions of interest in the one study  E. G Economic activity within a local area AND within the State. 2. Calculate Direct In-Scope Expenditure  Visitor survey needs to uncover: - Visitor Origin & Purpose of Visit - Average Length of Stay - Visitor Expenditure  E.G Event tickets, Accommodation, Meals, Food & Drinks, Other entertainment costs, Transport, Personal Services

Gabrielle Guindi

21639 – Event Impacts & Legacies 

Organiser survey needs to uncover: - Organiser income  E.G Ticket Sales, Sponsorship, Grants, Merchandise  What can be counted as ‘new money’ - Organise Expenditure  E.G Performers/Artists, Construction/Hire, Marketing, Salaries/Wages, Travel, Administration. - Attendee/Population Estimates

In Scope Expenditure as an Input to Economic Impact Studies  In scope expenditure = Baseline Data  Economic Impact Studies use a multiplier  The multiplier concept is based on the premise that initial expenditure by visitors permeates through the rest of the economy  The ‘Ripple Effect’  The initial injection of money has 3 types of impacts: 1. Direct Impacts 2. Production Induced Impacts 3. Consumption Induced Impacts 1. Direct Impacts  Those occurring to the provider of the good or service  E.G. Event tourists purchase goods and services including: - Accommodation - Food & Beverage - Tours - Attractions - Entertainment - Shopping 2. Production Induced Impacts  Occur when the businesses which make sales to visitors purchase inputs from other business operators.  These other businesses, in turn, purchase inputs from other firms and so on.  Almost every industry in the economy is affected to some extent by the production induced effects of the direct tourist expenditure. 3. Consumption Induced Impacts  Arise when: - Employees who reside within the geographic area spend their increased income on goods and services from businesses within the area, and - Owners of businesses that expand sales as a result of the event spend their profits in the region.  The cycle continues... Total Effect  The sum of the direct, production induced, and consumption induced effects is the total effect  During this process, there can be ‘leakages’ – a proportion of the original spend that is not retained within the local economy

Gabrielle Guindi

21639 – Event Impacts & Legacies  To estimate the total effects, we need to put the expenditure data through an economic model. Economic (Multiplier) Models  Common multiplier models include Input-Output (I/O) and Computable General Equilibrium (CGE) models  Multipliers measure the economic impact of an initial injection of spending into an economy.  The higher the multiplier, the larger the effect of the initial expenditure  The inappropriate use of multipliers is responsible for inflated figures of the economic impact of an event Summary  Most stakeholders are interested in economic impacts as a guide to decisionmaking/strategizing.  Several models available for assessing economic impact  In-Scope expenditure is the most trusted  Need to ensure that in-scope expenditure data is valid as a comparable baseline.

Gabrielle Guindi...