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Economic Impact Study Report

Subject: Proposed Hopkinsville, KY, Sports Center

Prepared by: Pinnacle Indoor Sports

Date: October 2016

P I Sports, LLC 2714 W. Rainmaker, Prescott, Arizona 86305

Telephone: (928) 308-2230 e-mail: [email protected]

mailto:[email protected]

Hopkinsville, KY, Court Sports Economic Impact Study 2016

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Executive Summary

In the spring of 2016 Pinnacle Indoor Sports completed a market study for an indoor sports

complex to be located within Hopkinsville, Kentucky based on a request by the City of

Hopkinsville. During the summer of 2016 Pinnacle Indoor Sports then constructed Pro Forma

Projections for the proposed Hopkinsville, KY, sports complex for the City of Hopkinsville.

Utilizing those documents, and state and local sport activity and tourism spending figures,

Pinnacle has developed this report on the economic impact projection for the proposed indoor

sport complex development.

The report includes the estimated economic impact of:

tournaments and special events for both local and out-of-town attendees of basketball,

volleyball and futsal tournaments (sustainable in Year 3 and beyond)

re-occurring programming activities of basketball and soccer (sustainable in Year 3 and

beyond)

construction impact (one-time impact during construction)

on-going payroll and labor (Year 3 and beyond)

Pinnacle has calculated an estimated direct and indirect economic benefit to the community of

hosting 10 tournaments and eight annual re-occurring programming activities comprised of

basketball, volleyball, soccer and futsal plus the benefits of additional payroll and wages at the

facility to be approximately $3.4 million per year. This is the combination of:

Tournaments and special events $1,969,228

Re-occurring programming $1,160,352

Payroll and labor $270,107

The one-time impact of construction is estimated to be $1,843,200, which is 40% of the total

estimated construction budget of $4,608,000.

See Attachment A - Economic Impact Calculations for Hopkinsville, KY.

Overview of the Economic Impact Study

The purpose of the economic impact study is to evaluate the potential contribution of the indoor

sports complex for positive economic impact within the City of Hopkinsville.

The economic impact and contribution of the sports center has also been analyzed by Pinnacle.

Pinnacle assessed the immediate economic impact of these facilities based on an assessment of

the facilities projected contribution to tourism through visiting teams and players and increased

local spending and payrolls. This economic impact includes an estimate for room nights and

daily expenditures.

The indirect benefit of the proposed complex would include additional benefits such as

repeat/return visits and other positive financial impacts that the advertising and marketing

campaigns would have on non-sports tourism visitations. Indirect benefits are the changes in


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sales, income or jobs in sectors within the region that supply goods and services to the tourism

sectors. These indirect benefits come from activities created by the direct benefits.

It should be noted that the Economic Impact Study is based on certain assumptions regarding the

financing structure, the business and management model, regional and national economic trends,

the need to market and effectively manage high-quality programs geared toward sports teams

from outside communities, and the competitive landscape. Changes or poor performance with

any of these factors will impact results. The projections for economic impact outlined within this

document will require the implementation of a comprehensive sports tourism campaign which

will require collaboration between conventions and tourism, parks and recreation, and

management of the indoor sports facility.

When assessing the economic impact of proposed facilities, it is important to recognize that

mega-sporting events or large-scale, national tournaments and events should not be the primary

focus of optimizing economic impact. For this reason, Pinnacle has focused its economic impact

analysis on smaller-scale tournaments and special events and re-occurring programming.


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Assumptions and Drivers to Success

In short, Pinnacle’s findings revealed that the City of Hopkinsville possesses significant

advantages and opportunities to attract sports tourism events.

Pinnacle’s findings have been based on a number of assumptions, outlined below.

1. The financing structure will provide 100% funding and the facilities will not carry debt

service.

2. The proposed indoor sports center will be professionally managed by experienced staff, and

the facility operating systems, software, marketing and other systems will meet local market

standards for excellence.

3. The operating expenses, salaries, fees, and cost of goods sold will meet the revenue-to-

expense ratios outlined within Pinnacle’s pro forma.

4. The proposed facilities will include the types of sports surfaces, offices, and other program

areas outlined by Pinnacle. These facilities meet a set of standards that are critical to

tournaments and event competitions.

5. If a private management group is engaged to oversee a portion or all of the facility

management, this group will operate in a manner consistent with promoting economic impact

within the City and have a performance-based compensation agreement.

7. Conventions and Tourism will play a major role in marketing sports and other group events.


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The Real and Potential Costs and Benefits of Sports Facilities

Source: Tim Chapin, Identifying the Real Costs and Benefits of Sports Facilities


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Economic Impact Study - Methodology

It is important to understand the basis of this economic impact projection, and the limitations

inherent in any economic forecast. The practice of calculating the direct economic impact of an

entity on the local economy by ascertaining the amount of additional local spending by visitors

to an event from outside the immediate area is a longstanding one with near universal agreement

that local spending from these outside sources is a direct impact on the local economy that would

otherwise not have occurred but for the event. Additionally, the calculation includes annual re-

occurring programming activities that will be attended by members of the local populace and

result in increased local spending along with the new payroll and wages that will accompany the

operations of the proposed complex.

Pinnacle utilizes national and regional data

compiled by the National Association of

Sports Commissions (NASC), which is then

localized using direct data gathered from

local sources. From those organizations

Pinnacle obtained numbers of participants

and estimates of the number of participants

from out of the area that have attended past meets.

Utilizing expenditure averages for

lodging, meals and incidentals

obtained through the NASC, state of

Kentucky and local tourism

organizations, and using the known

duration of each event, Pinnacle has

calculated the estimated amount of

direct spending in Hopkinsville.

These are conservative figures

because direct, local sport tourism

spending amounts are not readily

available. The Hopkinsville-

Christian County Convention & Visitors Bureau provided information noting that the average

spent for overnight day visits by all out-of-town guests was $177.16.


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Sport Tourism – State of the Industry

Sports Tourism Business Model

The goal of the sport tourism business model is to attract teams, players, and spectators to the

market to generate revenue for the facility and to create economic impact through direct

spending in the community.

According to the National Association of Sports Commissions (NASC) Sport Tourism State of

the Industry Report the following are key findings as of 2015.

VISITOR SPENDING IS ON THE RISE - Estimated visitor spending associated with sports

events was $9.45 billion in 2015 (2014 - $8.96 billion; 2013 -$8.7 billion; 2012 - $8.3 billion).

This is an indicator of the strength of sport tourism industry with growth occurring the past three

years.

Another similar study by Sports Marketing Surveys USA (SMS) shows that in 2014, there were

34.9 million people who traveled with an overnight stay to participate in or watch an amateur

sports event, a figure that has remained fairly consistent going back to 2008. While 18 percent of

these sports travelers were ages six to 17, about 51 percent were ages 25 to 54, more evidence

that families are accompanying their young players to events. On average, according to the SMS

study, sports travelers in 2014 spent $256 per person per year—which might seem low on the

face of it, but that number is consistent with the George Washington University (GWU) study for

visitor spending, when you consider spending a night or two at an event, sharing rooms, etc.


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Kentucky Tourism

Cabinet of Tourism, Arts and Heritage Secretary Don Parkinson announced that Kentucky’s

tourism industry has experienced the strongest overall economic impact growth rate the state has

seen since 2005. All nine of the state’s tourism regions registered gains for 2015 compared with

2014.

Kentucky's tourism industry generated $13.7 billion in economic impact during 2015, an

increase of five percent over the previous year. The industry supported more than 186,000 jobs,

including 6,200 jobs created in 2015.

Kentucky tourism generated more than $1.43 billion in taxes, with $184.9 million going directly

to local communities. These are the strongest overall numbers the Commonwealth has seen in

the past 10 years.

Hopkinsville-Christian County Tourism

Christian County ranks 14th out of 120 counties in tourism, with an economic impact of $143

million for 2015. The Western Waterlands, Christian County’s tourism region, had a 5.8%

increase over 2014, with Christian County having a 4.02% increase.


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This increase in general area tourism can be construed to mean that a new, well-marketed sports

center could share in that increased tourism trend and attract new, sport team tourism that is not

currently in the market due to other attractions and non-sport specific marketing programs

already in place.

Tourism Analysis

Tourism has become an increasingly large part of the Hopkinsville economy. The proposed

sports facility will be located adjacent to the current James E. Bruce Convention Center and

within five miles of numerous hotels and lodging establishments, as well as a multitude of retail

and shopping centers and dining establishments:

Lodging (within three miles)

Comfort Suites

La Quinta Inn

Best Western

Hampton Inn

Roadway Inn

Holiday Inn

Dining (within three miles)

Buffalo Wild Wings (New)

Logan’s Roadhouse

O’Charley’s

El Bracero

Buffalo Wings & Rings

Zaxby’s

Holiday Burgers

Joelle’s Café

Senor Lopez Grill & Cantina

Little Caesar’s

McDonald’s

Taco John’s

Retail

Hopkinsville Towne Center (New)

The proposed indoor sports facility will benefit from the close proximity of supporting services

such as hotel, retail, dining, and entertainment developments. The presence of these types of

establishments will make the facility more desirable for participants and visitors. Furthermore,

the proximity of these amenities will make the destination more attractive for tournament and

event organizers as well as out-of-town guests participating in tournaments and events.


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Assumptions

It is important to understand the basis for the projected number of tournaments included in this

Economic Impact Statement (EIS). Pinnacle conducted a market feasibility study and financial

pro forma of the proposed project in the spring and summer of 2016. Pinnacle has based these

economic impact calculations on the original market study and pro forma. Pinnacle’s tradition of

being conservative with projections is of note with these figures and subsequent calculations.

Based on national figures, it is Pinnacle’s assumption that court sport tournaments will result in

an average out-of-town element of 75% of the total number of attendees.

It is also important to understand that while the development of a sport complex in Hopkinsville

will allow for the hosting of events it cannot host today; it will not automatically confer

economic benefits from outside spending since such direct spending will accrue only to the

extent that events are successfully planned, marketed, and hosted.

Pinnacle has conservatively estimated that 10 tournaments, a combination of basketball,

volleyball, could be hosted at a new facility given the current plan for in-house management and

marketing, and local and regional teams which expressed an interest and willingness to travel to

Hopkinsville. Additionally, the calculation includes eight annual re-occurring programming

activities that will be attended by members of the local populace.

These numbers could, of course, be higher if a professional, concerted marketing effort and other

incentives (hotel rates, meal plans, area attractions, etc.) were utilized to attract outside sport

teams and organizations.


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Economic Multipliers

The calculation of direct economic spending due to identified events is not controversial and is

universally well-accepted. This cannot be said about the common practice of applying a

multiplier to the direct spending to obtain the expanded economic impact (indirect impact) of

outside dollars spent in a local economy. The theory is that some identifiable percentage of

direct spending, such as renting a hotel room and patronizing a local restaurant, will in turn be

spent locally by the hotel and the restaurant to obtain goods and services locally, such as labor

for cleaning and food ingredients for prepared meals, and that this multiplier effect is necessary

to recognize the full extent of the value of

outside dollars injected into the local economy.

Economists differ strongly on the validity of

such a multiplier effect, and those that endorse

the concept differ widely on the extent of that

effect. The average multiplier used is

approximately 1.7 times the amount of direct

spending. The range is roughly from 1.2 to as

high as 4 times the amount of direct spending.

For the purposes of this report Pinnacle has included an additional calculation with a multiplier

of 1.7 as shown in Attachment A – Economic Impact Calculation.

Conclusion

There are a number of considerations

that should be understood in

conjunction with the attached economic

impact calculation. The estimated

economic impact of nearly $3.4 million

is projected due to an assumption that

the City of Hopkinsville will employ a

professional sport-sales staff member

who can successfully market and host a

minimum of 10 annual tournaments

with an additional eight annual re-

occurring programming activities with

accompanying payroll and wages to

support that programming. To the extent that a significant number of these events do not

materialize, the total calculated estimated direct economic impact will be significantly reduced.


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Attachment A

Economic Impact Calculations of a Proposed Sports Center in Hopkinsville, KY

CY 2020 Sustainable Year

Economic Impact

From Tournaments & Special Events $1,969,228

From Local Programming $1,160,352

From Payroll/Labor Wages $270,107

Total Economic Impact $3,399,687

Economic Impact Summary for Hopkinsville, KY, Indoor Sports Center

*Note: The construction cost estimate that is in the pro forma was $4,608,000. Labor income typically

comprises approximately 40% of the cost of this type of recreational construction; the remaining portion

represents the cost of materials. The one time economic impact from construction is $1,843,200

Event # o

f To

urn

amen

ts &

Sp

eica

l Eve

nts

# o

f Ev

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ays

per

To

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ey

# o

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ams

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urn

ey

# o

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laye

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ou

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Gu

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per

Pla

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Att

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Nu

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Fam

ily U

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% L

oca

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# Lo

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% O

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Are

a A

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# O

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Are

a A

tte

nd

ee

s

Avg

. Le

ngt

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f St

ay (

day

s)

Ro

om

Nig

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Ave

rage

Dai

ly H

ote

l Rat

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Ave

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Ho

tel E

xpen

dit

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Average

Daily

Expenditure

per Family

Unit for Out

of Area

Attendees

Average

Daily

Expenditure

per Family

Units for

Local

Attendees

Direct

Economic

Impact

(excluding

hotel) from

Out of Area

Attendees

Hotel

Expenditures

Total Direct

Economic

Impact from

Out of Area

Attendees

Total Direct

Economic

Impact from

Local

Attendees

Economic

Impact

Multiplier

Total Economic

Impact (1.7

multiplier)

Year 2020 - Sustainable Year

Volleyball 1 2.5 24 240 1.8 672 3 25% 168 75% 504 2 2 110$ 220$ $177 $67 $28,140 $73,920 $102,060 $3,752 1.7 $179,880

Volleyball 2 2 24 240 1.8 1344 3 25% 336 75% 1008 1.5 1 110$ 110$ $177 $67 $90,048 $36,960 $127,008 $7,504 1.7 $228,670

Basketball 2 2.5 32 320 1.8 1792 3 25% 448 75% 1344 2 2 110$ 220$ $177 $67 $150,080 $197,120 $347,200 $10,005 1.7 $607,249

Basketball 3 2 32 320 1.8 2688 3 25% 672 75% 2016 1.5 1 110$ 110$ $177 $67 $270,144 $73,920 $344,064 $15,008 1.7 $610,422

Futsal 2 2 36 360 1.8 2016 3 25% 504 75% 1512 1.5 1 110$ 110$ $177 $67 $135,072 $55,440 $190,512 $11,256 1.7 $343,006

Tournament Totals: 10 148 1,480 8,512 2,128 6,384 $1,969,228

Economic Impact Calculations for Hopkinsville, KY, Indoor Sports Center

Local Out-of-Area

Event # o

f R

eo

ccu

rrin

g P

rogr

ams/

Sess

ion

s

# o

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ams

# o

f G

ame

s P

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Sess

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# o

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Team

# o

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ays

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Pla

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Att

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Nu

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Un

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# O

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Are

a A

tte

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Ave

rage

Dai

ly R

ate

Economic

Impact

Multiplier

Total Economic

Impact

Year 2020 - Sustainable Year

Basketball Leagues 4 36 8 10 11,520 1.4 27,648 2.4 100% 27,648 0% 0 $30 1.7 $587,520

Indoor Soccer Tournament 2 28 3 12 2,016 1.4 4,838 2.4 100% 4,838 0% 0 $30 1.7 $102,816

Indoor Soccer Leagues 2 48 8 12 9,216 1.4 22,118 2.4 100% 22,118 0% 0 $30 1.7 $470,016

Re-occurring Programming Totals: 8 112 22,752 54,605 54,605 0 $1,160,352

Economic Impact Calculations for Hopkinsville, KY, Indoor Sports Center

Local Out-of-Area

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