“USES AND ABUSES OF ECONOMIC IMPACT STUDIES IN TOURISM”

<COPY ON SEMOONCHANG.COM>

Prepared forThe World Leisure Congress

September 11, 2014Mobile Alabama

AUTHORSSemoon Chang (USA)

Gulf Coast Center for Impact Studies®

Mobile, Alabama Katarina Petrovcikova (Slovakia)

KORA TRADE ltdKosice, Slovakia

Hwa-Kyung Kim (Korea)Jeju International UniversityJeju City, Korea

WHY IMPACT STUDIES

Possible motivesPublic relations: self-promotionIndustrial location incentivesFinancial support for existing

businesses Likely sponsors

Existing & new businessesEvent organizersGovernment

WHAT ARE IN IMPACT STUDIES

Employment impactWage impactImpact on tax revenuesRetail expenditures by sectorImpact on supply chain (?)Output impact (?)

WHO PREPARE IMPACT STUDIESLeading commercial companiesIMPLAN (IMpact analysis for PLANning) in

WIREMI (Regional Economic Models Inc)

in MAUniversity research centersEconomists of large corporations

Independent consultants: RIMS II

Regional Industrial Multiplier System

ECONOMIC IMPACT OF MARDI GRAS(NOW EXPLAIN!)

Year of Mardi Gras in Reported in or by Direct Total Report Impact Impact ______ ___________ _____________________ ______ _________ 2011 New Orleans Tulane University $144M $301M 2009 New Orleans Mayor’s Office n.a. $332M 2013 New Orleans mardigrasneworleans.com n.a. “over $1B” 2010 Mobile (AL) Chamber of Commerce $227M $408M 2013 Mobile (AL) City news release $227M n.a. ____________________________________________________________

A MODEL OF IMPACT ESTIMATION

DM x m = TMWhere

DM = direct impactm = multiplierTM = total impact

PRE-CALCULATION CHECK LISTClear definition of the impact areaSubtraction of leakages from impact expend.Subtraction of transfer expenditures (retail)Visitor count in open gate v. ticketed eventLocal v. out-of-town visitorsWage v. non-wage expendituresFull-time v part-time v FTEsShort term events v. long term operationsNegative impacts: economic & on-economic

TYPES OF IMPACTDirect effect = increase in inputs purchased

Indirect effect = additional rounds of spending in the supply chain of those inputs

Induced effect = household spending by employees throughout supply chain

multipliers = (direct + indirect + induced)/direct

PROPER USES OF MULTIPLIERS

PROPER USES OF MULTIPLIERS!!! Employment includes both full-time and

part-time No constraint to local supply chain: goods &

workers Changes in output assumed to lead to

proportional change in jobs; may not work for short-term events

No time lag assumed between initial spending and full impact

New & outside expenditures only No impact by local employees living outside No transfer benefits: Impact of new Wal-

Mart? I-O tables unique to individual industries; no

simple average of multipliers for several industries

TURNING ATTENTION TO EXPENDITURES PER VISITORDo we really know how much visitors spend when they visit?

Review of two festivals

ADD REGIONAL MAP

NATIONAL SHRIMP FESTIVAL, GULF SHORES (AL)

40TH ANNUAL NATIONAL SHRIMP FESTIVAL IN GULF SHORES (AL) Oct. 13 (Thursday) to Oct. 16 (Sunday),

2011 About 150,000 visitors (open gate) On-site questionnaire survey 1,393 completed the questionnaire 102 excluded for unreasonable responses 1,291 kept for analysis

845 by out-of-town visitors446 by local visitors

Local defined as the Baldwin Co.(AL), Mobile Co.(AL), Escambia Co.(FL) & Escambia Co.(AL).

BILOXI (MS) CRAWFISH FESTIVAL

20TH ANNUAL MISSISSIPPI COAST COLISEUM CRAWFISH MUSIC FESTIVAL IN BILOXI (MS) Two consecutive weekends: April 19 (Thu)

to 22 (Sun) and April 26 (Thu) to 29 (Sun), 2012.

Local economy defined as Jackson, Harrison, and Hancock Co. (MS)

Unique to Festival – “rides” Total admissions 48,726; excluding

complimentary admissions 726 useful out of 901 completed

questionnaire339 completed by out-of-town visitors387 completed by local visitors.

IN BOTH STUDIES Size of a group stated as 5+ assumed to be

5 7 or more days of staying assumed to be 7

days Average size of group: out-of-towners

126 day-outers 3.09; 212 over-nighters 3.04

Average size of group: locals256 day-outers 3.04; 190 over-nighters

3.43 If a visitor stays one night (2 nights), it is

counted as two days (3 days), etc. Lodging expenses for day-outers for renting

a condo or other facilities for stay during the day.

DAILY EXP. PER VISITOR 2012=100 NOT RECOMMENDED BEFORE ADJUSTMENTS (RIDE, CASINO, MALL) Out-of-town day outers:

$102.49 for the Crawfish Festival (excl. admissions)

$95.21 for the Shrimp Festival. Out-of-town overnighters:

$113.42 for the Crawfish Festival (excl. admissions)

$104.81 for the Shrimp Festival. Local day outers:

$56.23 for the Crawfish Festival (excl. admissions)

$109.20 for the Shrimp Festival (outlet mall nearby)

Local overnighters:$88.94 for Crawfish Festival (excl. admissions) $61.07 for the Shrimp Festival.

DAILY EXP. PER VISITOR 2012=100 RECOMMENDEDAFTER DELETING EXP ON RIDE, CASINO, & MALL Out-of-town day outers (average: $85.02)

$74.82 for the Crawfish Festival$95.21 for the Shrimp Festival

Out-of-town overnighters (average: $92.14)$79.67 for the Crawfish Festival$104.81 for the Shrimp Festival

Local day outers (average: $48.90)$27.91 for the Crawfish Festival$69.88 for the Shrimp Festival

Local overnighters (average: $41.74)$32.17 for Crawfish Festival$51.30 for the Shrimp Festival

GOING BACK TO IMPACT STUDIES…During the ground-breaking

ceremony of a new retail shopping center in Mobile on July 25, 2014, officials of the chamber and the developing firm expressed an opinion that the new shopping center “won’t have a negative impact on existing stores in the city”; “Retailers in Mobile would not be hurt by this.”

Lagniappe July 31-Aug. 6, 2014, p. 9.

After reviewing impacts of 12 professional stadiums and 12 major sporting events all with public subsidies, Baade concludes that “The sum total of the evidence does not suggest that sport subsidies standing alone produce social value in excess of their social costs,” and suggests that “since the preponderance of evidence does not support the notion that subsidies for sport alone can serve as catalysts for economic development, subsidy debates should focus on the public benefits as they relate to the enhanced quality of life imparted by teams, facilities, and sports mega-events.”

Powerpoint presentation by President Emeritus of the International Association of Sports Economists for the Public Affairs Forum Sponsored by the FRB of Atlanta, Birmingham, Alabama on July 17, 2014.

CONCLUSIONSImpact studies of short-term events

are likely to over-estimate their actual economic impact;

Policy makers need to be aware of the pitfalls inherent to these studies;

Subsidy debates should focus more on public benefits v. costs, and less on measured economic impacts, as they relate to the enhanced quality of life that may be generated by these events.