Do Big Events Make Money For The Local Economy?

This is a question we don't think gets asked often enough. In a lot of cases, cities & countries vie to host big events more for the prestige it brings than the true economic benefit for the local businesses and people. Sometimes big events can be more negative than positive from the perspective of local businesses.

As event professionals we are the last ones looking to cast doubt over the benefit of big events to local economies. We do find it peculiar that there isn't more of a focus on establishing and proving that big events have a positive impact on the local economy. We're acutely aware that, as a profession and an industry, we're predisposed to believing that our events are great and everyone locally must think they're great too. 

But. . .without actually finding out, how can we be sure?

Why bother?

Well, depending on where you fit into the overall event jigsaw (promoter, event manager, funding body, politician, sponsor etc.) there are a large number of reasons you should want to know the REAL impact and gain of a big event you're involved in. Here are some of those:

• If you're the event planner / manager you'll want to know what your event is worth to the local economy. This gives you bargaining / negotiation power.
• If you're a politician you'll want to somehow claim credit for the benefit to the local economy.
• If you're a sponsor you'll want to understand what value an association with the event will have. 
• If you're the promoter you'll want to know how much your product is worth when negotiating with the likes of hotel rooms etc. 
• If you're funding the event you'll want to see what value you're getting from your funding investment.
• If you're a local resident / business you'll want to know what overall benefit the event is, even if it may inconvenience you.

It's powerful information for everyone involved. 

For me, it has an even greater power for us as an industry. . . 

The industry

As event industry professionals we may 'know' the value of events and we may be quite convincing when persuading others of that value. Nothing works quite like figures, statistics and data though.

Definitely here in Ireland, there's an upswing in the number of events of all sizes happening, be they for promoters, corporates, local authorities, national bodies or anyone else. Things are picking up and there are some great things happening. 

It's on us to help keep that going though and one of the best ways of doing so is to be produce reports that set out, in black and white, the benefit of events. 

Since the end of the Celtic Tiger here, there's (rightly) been more emphasis put on ROI (return on investment) for events and everything else. Everyone involved in green-lighting events needs to see and understand real results.

That's a good thing. It's absolutely no harm, even if it does alter somewhat how we go about what we do.

The risk

I'm not an idiot. I know this is easier said than done, for many reasons.

Richmond, Virginia in the US recently held a UCI Road World Championships cycling event. At a news conference last month the Mayor of Richmond announced that the event was worth $88.9 million in direct spending to the local economy while he and race officials hinted there may be more similar events on the horizon for Richmond. 

The figure of €88.9 million was arrived at by Chmura Economics & Analytics, a local firm, who were commissioned to do an economic impact study on the event. 

On the face of it, the event looks like an amazing success for the local economy, especially considering the €88.9 million is only direct spending. Naturally, there would have been a significant amount of indirect spending, which could genuinely be attributed to the event and the crowds it attracted. 

That said, some independent analysts & economists have had a look at the report and have raised some significant queries in relation to the methodology and, consequently, the results. Key among those are the following:

• The hotel occupancy figures seem extremely high. As one analyst put it 'Every hotel in the Richmond region must have been full with a racing fan for 10 straight days, if these numbers are to be believed.'
• The crowd number estimate came from the race organisers. We've written about the lies often told by organisers / promoters when it comes to attendance numbers before and to rely on this quoted number to base an economic impact study is questionable. Indeed, the organisers themselves  have acknowledged that this number represents the cumulative number of people watching the event across 3 days. That being the case, the same person could be counted 3 times.
• A questionable survey base was used. The impact estimates were extrapolated based on a survey of about 400 people at the finish line area and the VIP area. This is quite likely to skew the results as the people who would watch the race in these locations are likely die-hard cycling fans and the bigger spenders of those attending.
• It is likely a lot of locals were counted among the 640,000 crowd estimate.
• The study utilised an out-dated figure for the number of hotel rooms in the area. It seems the study worked off there being 22,000 hotel rooms in the greater Richmond area. This was a 2012 figure, with the 23015 figure being closer to 18,000.
• The figures indicate pretty much EVERY hotel room occupied during the race was because of the race. This is a stretch and seems like dodgy methodology to me.
• The study contains no actual post-event data and figures. It's all estimates. 

Multiple analysts of the Richmond situation are keen to point out exactly what the good people at Chmura Economics & Analytics have said in their follow-up statement - the way they do THEIR studies is the market standard for those types of studies. Everyone does them in a similar way. The point all the independent analysts are making is that the way the industry does these is inherently flawed.

To me, it reads like this particular impact study is inherently flawed and it speaks to some of the issues with these in general.

The issues

The Richmond situation illustrates a number of issues.

These can be inherently flawed at times and sometimes, even when they're not, they may not be trusted by some parties. As one analyst noted recently - “One of the issues I have with all of these reports is they’re oftentimes — maybe even always — political documents as opposed to scientific documents.”

These reports are also conducted by very specialised agencies and there generally aren't too many of them around. 

They can also be quite expensive to commission and are generally paid for by local authorities or national funding bodies, rather than privater clients. 

That said. . . 

The alternative

What's the alternative? 

If we don't focus any efforts on proving that events are of benefit in figures, data, statistics and more then we're choosing to ignore something that can have a big impact on our development as an industry. 

We spend a lot of time and money and resources on all sorts of other things to help ourselves as 'individuals' develop but do we do enough to help develop our industry for our benefit and for those coming after us? 

I don't think so and I think we're neglecting this to our detriment. 

The bottom line

Return on investment is important in every industry, including the events industry. 

We need to embrace this.

The answer to whether big events make money for local economies is that they do and they don't. It depends on the event. 

What's important is that unless we PROVE they are of benefit to the local economy, then we can't just expect people to accept it and pay us to run them.