Quantifying the Economic Impact of Community Events

1. Quantifying the Economic Impact of Community Events Steven R. Miller: Director Center for Economic Analysis Presented at: MSU Extension Conference 2007 October 9 - 11, 2007 Michigan State University Kellogg Center East Lansing, MI

2. What Community Events Give Rise to Community Economic Impacts? Any non-continuous event that may draw in outside visitors to the community, or entice local residents to remain in the area that would otherwise visit other communities.

3. Public Budget Concerns • Program evaluations are more commonly found today • Increasing pressure to justify public investment • Sound evaluation can be instrumental in getting public buy-in • Is it worth the effort?

4. Economic Impacts of Community Events • Can be used to estimate benefit/cost of public investment • Can be instrumental in gaining public support • Can be used to gain corporate sponsorship of events • Can be combined with other studies to measure the economic impact of tourist activities within the community

5. Project Appraisal vs. Evaluation • Project appraisals: What is expected to happen • used in the process of deciding if resources should be applied to the project • Project Evaluations: What did happen • used in the process of reviewing the performance of a project

6. Measuring the Economic Impact of Community Events • Three components make up an economic impact • Direct Impact • Indirect Impact • Induced Impact

7. Direct Impacts of Events • Purchases directly linked to the event itself • Local purchases for event • Patrons’ purchases while at event or within the event’s host community • Vendors’ purchases while at event or within the event’s host community • All purchases must be directly attributable to the event and remain within the region • Purchases that would have taken place in the absence of the event should be excluded

8. Indirect Impacts • Secondary effects that are derived from the direct impacts • Direct expenditures lead local suppliers to purchase more inputs. Some of these purchases are local. • These secondary purchases by local businesses represent the indirect impacts

9. Indirect Impacts, Cont’d • Rodeo event buys $100 worth of feed grain from a local wholesaler • Local wholesaler buys $75 of feed from local farms • Local farms buy $50 of seed and fertilizer from local supplier • Local supplier buys $15 of packaging material from local producer • Total impact = 100 + 75 + 50 + 15 = $240

10. Induced Impacts • Secondary effects that are derived from the direct and indirect impacts • Local business owners, suppliers, and employees spend the additional income that they earn. Some of these purchases are local. • The secondary purchases from additional revenues represent the induced impacts

11. Induced Impacts, Cont’d • From Rodeo example, • Feed supply wholesaler is able to pay workers to work more hours as well increases profits • Both wholesale business owners and workers have more money to spend. Some is spent locally • Beneficiaries of additions purchases also have more to spend; a portion is also spent locally

12. Total Impact • Is simply the sum of the three component impacts • In practice, the total impact is calculated as a multiple of the direct impact

13. Economic Multipliers • The larger the local economy, the larger the multiplier • Some industries have larger multipliers than others • Generally generated by computer models • RIMS II: Bureau of Economic Analysis • IMPLAN Pro: Minnesota IMPLAN Group • MITEIM: Daniel J. Stynes, MSU • Expert Judgment: Any expert near you

14. Estimating the Direct Impacts of a Community Event • Direct impacts • Must be directly attributable to the event • Would not have occurred without the event • An accurate measure of the direct impact is vital • facilities preparation • patron spending • vendor and exhibitor spending

15. Direct Impact of Facilities Preparation • In many cases, event hosts will purchase, rent, or hire for site preparation • Such purchases meet our criterion • Directly linked to the event, • Would not occur without the event • They should be purchases to local providers

16. Direct Impacts of Patron Expenditures • Patrons will likely spend money both at the event and in the surrounding community • Spending by local residents should not be counted unless they stayed in town because of the event • Spending by visitors from outside the community should be counted

17. Direct Impacts of Vendors and/or Exhibitors • Vendors are also likely to spend money both at the event and in the surrounding community • Expenditures of local vendors should be excluded while those of outside vendors should be included. • Vendors also make sales • Sales of local vendors should be included in in the direct effect, but sales of outside vendors should be excluded. Don’t double count patron expenditures and vendor sales.

18. Direct impacts of Patron Expenditures • Event patron expenditures are generally measured in common units • Party-visits may be the best unit of measure • Party expenditures are generally easier to manage than person expenditures

19. Estimating the Number of Visits • Gated Events • Non-Gated Events • Single-Venue Events • Multi-Venue Events

20. Estimating the Number of Visits, Cont’d

21. Estimating the Number of Visits, Cont’d • Augment counts with • Vehicle counts • If you find that there are 20 people per car, something’s amiss • Vending sales • If you find that vending sales per person is $100, one must wonder… • Local businesses can be queried as well for indication of patron activity

22. Using Surveys to Estimate Patron Spending • Surveys are a flexible means toward understanding • visitor spending • characteristics • experience • perceptions

23. Using Surveys to Estimate Patron Spending, Cont’d • Two vital questions must be addressed for patron surveys • Where do you live? • How much did/will you spend on X while in the community? • Three vital questions must be addressed for vendor surveys • Where do you live/do business? • How much did/will you spend on X while in the community? • How much did you sell?

24. Using Surveys to Estimate Patron Spending , Cont’d • We need to separate local patrons from tourist-patrons • Tally attendees • Include this as a question on survey • Requires a representative sample of attendees • All attendees have an equal chance of being surveyed

25. Selecting Sample Size First estimate the variance of spending by visit, if one is not already known. Then estimate the total number of samples needed to be within a range or tolerance. Since we are only using tourist spending to form direct impacts we need 25 completed tourist surveys. If we expect 1 out of ever 4 visits to be tourists, will need 100 completed surveys to get 25 completed tourist surveys.

26. Selecting the Method of Survey • If contact information is available for all attendees, a phone interview or mail survey may be best. • If not, on-site contact is required. • Conduct on-site surveys • Collect representative sample of contact information

27. Selecting the Method of Survey, Cont’d • Off-site • Mail Surveys • Phone Interviews • On-site • Self-Administered Surveys • Completed at event or mailed upon return • Interviews • Combined On- and Off-site

28. Writing Surveys • There exists several resources for writing surveys • Julie Leones, A Guide To Designing and ConductingVisitor Surveys • http://www.ag.arizona.edu/pubs/marketing/az1056/ • Daniel J. Stynes, Guidelines for Measuring Visitor Spending • http://www.msu.edu/course/prr/840/econimpact/pdf/ecimpvol3.pdf • Mike Woods and Suzette Barta, Estimating Impacts of Tourism Events: Methodology and a Case Study • http://www.ag.iastate.edu/centers/rdev/net2002/handouts/woods.pdf • Steven Miller, Quantifying the Economic Impact of Community Events • http://www.cea.msu.edu/

29. Writing Surveys, Cont’d • Michigan Tourism Spending and Economic Impact Model (MITEIM) has the following spending categories • Motel, hotel cabin or B&B • Camping fees • Restaurants & bars • Groceries, take-out food/drinks • Gas & oil • Other vehicle expenses • Local transportation • Admissions & fees • Clothing • Sporting goods • Gambling • Souvenirs and other expenses

30. Direct Impacts • Extract direct impacts per visit from surveys and per vendor as the average total expenditures by spending category • Each spending category has a direct Impact calculated as • Collect the event preparation impacts and assign them to spending categories

31. Using Direct Impacts • Direct Impacts must be adjusted to reflect the regional area capture rate of spending category. • Capture rate represents the proportion of local expenditures that will have a direct impact on the local community. • The MITIEM model does this automatically. Hence, the user need only add the direct impact as calculated above. • IMPLAN has the option to apply its own capture rates or customized capture rates • RIMS II requires users to estimate capture rates

32. Using Direct Impacts from Surveys, Cont’d • Each spending category has a total impact calculated as • Were direct impacts are adjusted for the local capture rates

33. Total Community Economic Impact of Event • Add up the total impacts of each spending category to get the total community impact of the event

34. For Further Information • Daniel J. Stynes’ web site (MITEIM Model) • http://www.msu.edu/~stynes/ • The Center for Economic Analysis • www.cea.msu.edu/