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

What Community Events Give Rise to Community Economic Impacts? ConferencesTrade/Specialty Shows Arts FairsCarnivals and Festivals Concerts Home and Garden Shows County FairsSporting Events RunsCharity Events 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.

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?

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

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

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

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

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

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 = = $240

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

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

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

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

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

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

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

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.

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

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

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

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

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?

Using Surveys to Estimate Patron Spending, Cont’d We need to separate local patrons from tourist-patrons 1.Tally attendees 2.Include this as a question on survey Requires a representative sample of attendees –All attendees have an equal chance of being surveyed

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.

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

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

Writing Surveys There exists several resources for writing surveys –Julie Leones, A Guide To Designing and Conducting Visitor Surveys –Daniel J. Stynes, Guidelines for Measuring Visitor Spending –Mike Woods and Suzette Barta, Estimating Impacts of Tourism Events: Methodology and a Case Study –Steven Miller, Quantifying the Economic Impact of Community Events

Writing Surveys, Cont’d visitor spending data collected in surveys must be compatible with the tools used to gauge the community’s economic impact. While most impact assessments follow the multiplier principal, how that multiplier is broken down determines what expenditures to collect.

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

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

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

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

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

For Further Information Daniel J. Stynes’ web site (MITEIM Model) – The Center for Economic Analysis –

Mail Surveys Advantages: –May be the least expensive option –Can be mailed over a large geography –Can be administered after the event has taken place to account for all expenditures Disadvantages: –Can result in low response rates –Some question may be misunderstood –Requires a representative list of participants

On-site Self-Administered Surveys Advantages: –Response rates may be higher than mail surveys –Less expensive than personal interviews or telephone interviews –Does not require visitor contact information before conducting the survey Disadvantages: –May be more expensive than mail surveys –Possible selection bias of survey participants –Event attendees may be limited to providing expected expenditures for their visit

On-site Interviews Advantages: –Tend to have high response rates –Can ask more complex questions –Can enter responses directly into a computer Facilitates recording of time the survey was taken –Does not require visitor contact information before conducting the survey Disadvantages: –Generally expensive –Bias may be introduced by the interviewer –It may be difficult to assure a representative sample –Event attendees may be limited to providing expected expenditures for their visit

Optional On-Site or Mail-In Survey Advantages: –High response rates with two options for completing the survey –Less expensive than personal interviews or telephone interviews –Does not require visitor contact information before conducting the survey –Provides a check for biased results of on-site completed surveys Disadvantages: –May be more expensive than mail surveys –Possible selection bias of survey participants –Must delineate between surveys completed on-site and surveys mailed On-site survey speculate on total expenditures Mailed in surveys may provide actual expenditures –Some question may be misunderstood

Two-Part Surveys Advantages: –Increased response rates –May provide greater insight to spending patterns through the post-event survey while retaining the ease of on-site surveys –Can provide more survey questions –Greater flexibility where on-site surveys may be administered as self –administered, or as interview surveys. Post surveys can be mailed or phone interviews. Disadvantages: –Complications arising from matching post event survey to on-site surveys –More expensive than on-site surveys –Require visitor contact information before conducting the survey –On-site selection bias carries over to post-event selection bias

Telephone Interviews Advantages: –Relatively easy to supervise staff –Information is generally keyed into a computer –Can address more complex questions –Can be conducted over a large geography –Can be administered after the event has taken place Disadvantages: –People with no phones are excluded –The best person to respond to the survey may not be the respondent –Households may screen their calls –Bias may be introduced by the interviewer –Projected response rate is difficult to estimate –Requires a representative list of participants

Administering Surveys Different survey methods require different preparations. –On-site surveys require greater attention on sampling –Interviews require greater attention to training Evaluators may consider some form of motivation for participants –Token gift item –Entry for raffle