1. Evaluation of Special Events Mostly based on Dwyer et al (2010)
Evaluation of Special Events Mostly based on Dwyer et al (2010). Tourism economics and policy.

2. Aim
Discuss the steps involved in the economic evaluation of a special event.
Appreciate the wider positive and negative effects and intangibles associated with the holding of special events requiring cost benefit analysis.

3. Impacts of Special Events
Special events provide important recreational opportunities for local residents.
Special events increase the opportunities for new expenditure within a host region by attracting visitors to the region.
They have the capacity to stimulate business activity, creating income and jobs in the short term and generating increased visitation and related investment in the longer term.
Other possible benefits from events include enhancing the image of a city or region, facilitating business networking and civic pride.
On the other hand, events are recognised to generate adverse environmental impacts such as various forms of pollution and adverse social impacts such as congestion, disruption to local business and community backlash.

4. Estimating Event Related ‘New’ Expenditure
There are several steps involved in the economic evaluation of a special event:  
Determine the boundaries of the ‘host region’ for the event.
Estimate ‘new’ expenditure associated with the event.
Estimate the economic impacts of the new expenditure.
Estimate the net benefits to the destination associated with the new expenditure.

5. “New expenditure”
Only that proportion of expenditure which represents an injection of ‘new money’ into an area is relevant to the calculation of the economic impacts.
This expenditure covers the event-induced expenditure made by visitors, participants, competitors/entrants, team managers/support staff, officials, media, VIPs, event organisers, corporate incentive groups, friends/family of those connected to the event, and spectators.
‘New expenditure’ is that which would not have occurred in the host region had the event not taken place.
In estimating ‘new’ expenditure associated with an event we need to make several different types of adjustments. These relate to:
Expenditure of local residents (transferred expenditure)
Expenditure by ‘casuals’
Expenditure by ‘time switchers’
Retained expenditure
Expenditure diversion
Direct imports

6. New expenditure inclusions and exclusions

7. The Economic Impact of an Event
The total new expenditure that occurs as a result of an event is used as the input to an economic model to determine the economic impacts on the destination.
The new expenditure of visitors and organizers/sponsors stimulates economic activity and creates additional business turnover, employment, value added, household income and government revenue in the host community.
The economic impacts of the new expenditure associated with a special event can be estimated using an economic model that identifies and quantifies the linkages between different sectors of the local economy and linkages with other regions.
the size of the multipliers will depend upon the type of model used to estimate the impacts.

8. Estimating the economic impacts of events using CGE models
Adam Blake has used a dynamic CGE model of the UK and London economies to forecast the economic impacts of the London2012 Olympics.
Blake divides the event impacts of the London Olympics2012 into three categories: pre-Games, during-Games and post-Games.
The modeling for this study was undertaken at three levels – the UK, London, and for five sub-regions within London.
The results of this study indicate that a mega event, even of the size of the summer Olympics, is unlikely to provide any substantial boost to either the national or host-region economy.

9. London Olympics2012 Pre-Games Impact
The pre-Games impact includes the impacts of the construction phase of the project, other pre-Games costs, as well as increases in visitor arrivals that occur because of London’s increased profile in the run-up to staging the Games.
 During-Games Impact
The during-Games impact relates to revenues from staging the Games; the impact of visitors during the Games; and its costs of operation.
 Post-Games Impact
The impact of the Olympics after the Games is often referred to as the “Legacy” effect. This includes a higher profile of London and the consequent increased future visitation to London because of this profile.
In addition, the stadia and transport infrastructure developed for the Games will provide experiences to residents for many years after the Games.

10. London Olympics 2012
The London2012 Olympics will have an overall positive effect on the UK and London economies, with an increase in GDP between of £1,936 million and an additional 8,164 full-time equivalent jobs created for the UK
However, there is a loss of GDP and employment in the areas outside London. Reasons for this include: spending in London by UK residents from outside London visiting the Games; movement of workers, whether migrants, commuter or temporary migrants, into London because of higher wages in the capital; and the provision of Lottery funding, which in effect transfers money to London.
The impact of the Games will vary significantly across different sectors of the UK economy.
Sectors that expand include construction, passenger land transport, business services, hotels and restaurants.
Sectors that are not directly related to the Games may contract in size indirectly as a result of hosting the Games. These include manufacturing, agriculture, fishing and other services.
These results are relative to the ‘No Games’ scenario in which a substantial amount of growth takes place in all sectors of the economy. Thus, while no sector is predicted to contract in the time span modeled, some will grow less because of the impact of hosting the Olympics.
The simulations indicate that any changes to the UK economy associated with the Olympics2012 will be comparatively small. Even in the Olympic year, the total economy wide effect for the UK is only 0.066% of total UK GDP at 2004 prices.

11. Cost Benefit Analysis of Events
In order for the government to make an informed decision to fund and event and the level and type of support event assessments need to be broadened to take, where practicable, a more comprehensive approach embracing not only economic but social and environmental factors
Economic impacts are not net benefits
The standard economic method of estimation of net economic benefits of these types of effects is cost benefit analysis (CBA).
CBA attempts to incorporate all of the costs incurred and the benefits received by the community as a result of the holding of an event.
If the benefits exceed costs, there is a positive net social benefit and the event should be supported.
Conversely, if costs exceed benefits, there is a negative net social benefit and the event should be modified or not supported.
The main problem involves identifying and valuing the event associated costs and benefits as comprehensively as is feasible.

12. Cost Benefit Analysis of Events
CBA recognises that the consumer surpluses of residents will be important to event evaluation.
While the expenditures of residents is regarded as transferred expenditure for economic impact assessment purposes, the consumer surpluses they receive due to the holding of the event is a primary component of benefit assessment in a CBA of the event.
 On the basis of a CBA, the decision maker can judge whether the economic benefits of the event are greater than the costs, and whether the event represents the best use of the funds, when funds are limited and alternative calls on funds exist.

13. Good economic evaluation of events
Good economic evaluation of events is a precondition for efficient allocation of resources in this sector.
The best practice approach to measuring the impact on economic activity, and in particular, on output (GSP or GDP) and employment is to use a CGE approach
Estimation of the economic impacts is only part of the evaluation story. If funds are to be provided to assist an event, it is necessary that the cost of these funds be compared to the benefits from the event. The event should be subjected to a CBA.

14. Economic impact analysis
Expenditure effects:
Direct: Visitors spend on lodging, food etc (and or government agencies invest…). New money (visitor expenditures that go to local production) are injected into the local economy.
Indirect: The direct income generated is spent on other goods and services (and so on).
Induced: The increased spending resulted from the additional income generated by direct expenditures
Indirect + Induced = Secondary effects

15. Multipliers
Indirect effects: Hotels buy services and products from local producers who earn income/jobs
Type I sales multiplier=(direct sales + indirect sales)/ direct sales
Induced effects: household spend income earned either directly or indirectly from visitor spending
Type II sales multiplier = (direct sales + indirect sales + induced sales)/direct sales
Example: suppose Type I =1.4 and Type II=1.8
$10 in direct sales transfers to $18 total sales effect

16. Leakages
Imports: Goods and services (not localy produced but) needed for the local production
Savings out of incomes received: not all additional income will go to consumption
Taxes: when tax proceeds are not re-spent in the host region

17. A simple example
Assume an event attracts 1000 visitors who stay 2 days (overnight) and each spends $200 per overnight
Table 1 Expenditure per visitor per day in $
Sector
Spending
Lodging 90
Restaurants 30
Other 80
Total
200
Table 2 Total expenditure by (1000) visitors in $
Sector
Spending
Lodging
90000
Restaurants
30000
Other
80000
Total
200000

18. A simple example
What proportion of goods and services are made locally?
Computing retail margins and local shares. (say Other are groceries on which visitors spent % of these go to local retailers, 10% to local producers of food and 70% go to imports (leaks out).
The region captures 64% of the visitor expenditures.
Table 3 Margins (%)
Sector
Margin
Local prod
Imports
Lodging
100
Restaurants
Other 20 10 70
Table 4 Computation of direct effects
Sector
Local prod
Retail margin
Imports
Total
% Total
Lodging
90000
100
Restaurants
30000
Other
8000
16000
56000
80000 30
128000
200000
0.64

19. A simple example
Here $ visitor spending resulted in $ direct sales within the region, generated direct income and 2.94 direct jobs. Including the secondary (multiplier) effects the total impact for the region is $ in sales, $74900 in income and 4.63 jobs.
Table 5 Multipliers and ratios for the region (often from I-O models)
Sector
Direct effect ratios
Total effect multipliers
Income/sales
jobs/$Million sales
Sales II
Income II/sales
Jobs II/sales
Lodging
0.3 20
1.7
0.6 35
Restaurants
0.35 30
1.6
0.55 40
Other
0.5 25
1.5
0.7
Table 6 Spending impacts
Sector
Direct effects
Total effects
Sales
Income
Jobs
Lodging
90000
27000
1.8
153000
54000
3.15
Restaurants
30000
10500
0.9
48000
16500
1.2
Other
8000
4000
0.24
12000
4400
0.28
Total
128000
41500
2.94
213000
74900
4.63

20. Some own studies http://users.du.se/~rem/Mortazavi%20and%20Cialani.pdf