economic impact study
TRANSCRIPT
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Economic Impact Case StudyEstimating the Economic Cost due to the BP Oil Spill of
2010 to Grande Isle and Laffite Louisiana
New Developments in Measurement and Analytics
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Principals and Team
John C. Crotts, Ph. D., is a Professor and former founding director
then chair of in the Department of Hospitality and Tourism
Management in the School of Business at the College of
Charleston. Between 2001-2009 Dr. Crotts was recognized by
Pearce as one of the 10 most influential scholars in tourism,
marketing and psychology. John serves a EVP of Development
for Bottom-Line Analytics LLC and leader in the area of tourism
research and analytics. John has a doctorate from the University of
Oregon.
Michael Wolfe is CEO of Bottom-Line Analytics LLC. He is also
presently a managing director of Global Analytics Partners.
Michael has extensive consulting experience in the field of
marketing analytics and is a recognized expert in predictive
modeling and marketing ROI measurement. Michael’s direct and
consulting experience covers such firms as McDonald’s, Coca-
Cola, Starbucks, Capital One, AT&T and L’Oreal. and with travel
and hospitality experience with Hyatt Hotels, Charleston Port
Authority and the Bronx Zoo. Michael has an MA in Economics
from the University of Iowa and Ph.D. coursework from Indiana
University
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The BP Horizon Oil Spill
• April 20, 2010, the offshore drilling facility called the Deepwater Horizon, owned by BP Petroleum Corp. caught fire, exploded and spilled 5 million barrels of crude oil over an 86 day period before crews plugged the leaks.
• The oil slicks from this accident killed and damaged wildlife, fisheries and habitat across the entire coast of Louisiana.
• Two communities on the Gulf Coast of Louisiana, Grand Isle and Lafitte, intended to sue BP in Federal Court to recover damages.
• The economies of both of these communities were heavily dependent on tourism and sports fishing. Each year, about 6,000 sports fisherman travelled to these communities for recreation. Surveys taken in 2008 and 2009 found that each tourist spent on average 2 days in these communities, spending about $1,335.
• Even following the clean up of oil slicks and shoreline damage, environmental experts estimated that it would take 10 years before these communities would begin to recover to the level of tourism experienced in years prior to the oil spill
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The BP Horizon Oil Spill
• Bottom-Line Analytics / Global Analytics Partners was hired by attorneys of Grand Isle and Lafitte for the purpose of estimating the cost linked to the damage caused by this oil spill.
• The following key assumptions are assumed and based on factual evidence available– Per estimates from the La. Dept. of Natural Resources, it will take 10
years for the offshore fish population to renew and build back to the levels prior to the spill. Therefore, damages will be assumed to accrue each year beginning one year after the event, from 2011 through 2019.
– The number or tourists affected by the oil spill will be derived from hotel occupancy and revenue data from area hotels, sourced from Smith Travel Services data. Hotel revenues lost will be pro-rated and projected from actual hotel revenue trends data for the period 2004 to December 2009, just prior to the spill event. Actual post-spill hotel data from May 2010 through December 2010 were used as a basis for estimating lost hotel sales. These losses were assumed to be constant for the ten years forward.
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5,000
10,000
15,000
20,000
25,000Other Gulf Hotels Booking Revenue Mil. $
Other Gulf Shore Regions Hotel Revenue
Forecast, 2011-2019
+3.9% ACGR
Prior to 2010, all gulf-shore hotels were growing revenues at an average
annual rate of +3.9% (source Smiths Travel Data)
6Prior to the Spill Year of 2010, these communities’
hotel revenue growth mirrored other gulf-shore hotels
+3.9% ACGR
Evidence strongly supports the assumption of using the same growth project-tions for these communities as for the overall gulf shore hotels (Source: Smiths Travel Data)
7From prior hotel booking trends in the area and across 5 gulf-
shore states, we would expect hotel demand to grow +3.9%
per year for the next decade, had the spill not occurred
+3.9% ACGR
Grand Isle/Lafitte Hotel Revenue & Pre-Spill Projections
8Defining Grand Isle & Lafitte’s Tourist Market
• The estimated market for sourcing tourists for Grand Isle & Lafitte reaches such major cities as Houston, Austin, Corpus Christi, Dallas, Little Rock, Memphis, Baton Rouge and Birmingham, Al. The tourist draw for Grand Isle & Lafitte comes from a radius of about 400 miles.4
Exhibit 12
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Evidence from prior surveys shows an average tourist
trip is worth $1,335 and about 21% is for lodging
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The total hotel revenue losses amounted to $21.6
million over 10 years
Losses
11Projecting Total Tourism Revenue Costs from BP Oil
Spill for Grand Isle & Lafitte
• Total losses for hotels over
ten years comes to $21.6 M
and .$82.3 M for other
tourist costs.
• The grand total for all
damages amounts to $109
M.
Year
Grand Isle/Lafitte Hotel
Revenues Without Spill Est
Grand Isle/Lafitte
Hotel Revenues
With Spill No
Recovery Est Hotel Lost Revenue
2004 2,582,880$ 2,582,880$ -$
2005 2,673,789$ 2,673,789$ -$
2006 2,788,101$ 2,788,101$ -$
2007 2,883,248$ 2,883,248$ -$
2008 3,051,056$ 3,051,056$ -$
2009 3,271,335$ 3,271,335$ -$
2010 3,437,402$ 2,348,373$ ($1,089,029)
2011.F 3,674,078$ 2,453,113$ ($1,220,965)
2012.F 3,862,931$ 2,460,985$ ($1,401,946)
2013.F 3,898,371$ 2,462,463$ ($1,435,908)
2014.F 4,088,370$ 2,470,383$ ($1,617,987)
2015.F 4,282,152$ 2,478,461$ ($1,803,691)
2016.F 4,523,091$ 2,488,506$ ($2,034,585)
2017.F 4,699,492$ 2,495,859$ ($2,203,633)
2018.F 4,882,772$ 2,503,500$ ($2,379,272)
2019.F 5,073,200$ 2,511,438$ ($2,561,762)
Total Cost Summary
Total Hotel Revenue Current Opportunity Cost ($17,748,778)
NPV Adjusted Hotel Costs ($3,893,632)
Total Hotel Revenue Lost ($21,642,410)
Total Other Tourism Costs ($82,345,000)
Grand Total BP Damages Estimate ($103,987,410)
Source: Smith's Travel
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Litigation Result
• In the litigation between Grand Isle/Lafitte, LA and BP,
this study became the foundation for damages sought.
The litigation took 3 years, involving numerous appeals
and delays. In early 2016, BP settled with these
communities for the full amount.
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