Quantifying the Economic Impacts of Community Events Steven R. Miller, Ph.D. Director: Center for Economic Analysis Presented at: Uppertunities May 25, 2016 Escanaba, MI

What are Community Events ConferencesTrade/Specialty Shows Arts FairsCarnivals and Festivals ConcertsHome and Garden Shows County FairsSporting Events/Tournaments Runs/MarathonsCharity 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.

How Events Impact Communities Build social cohesion Placemaking Enhances tourism visibility Increases instances of “tourists in one’s own town” Increases outside visitation

Public Budget Concerns Increasing pressure to justify public investment NGOs and sponsors want to know their investments are impactful Sound evaluation can be instrumental in getting public buy-in Is it worth the effort? Economic impact evaluations are more commonly found today

Economic Impacts of Community Events Used to estimate benefit/cost of public investment –Can be instrumental in providing 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

Economics of Events Economic Events… –Bring others from outside the community to the local community –Retain local residents in the community who may otherwise leave for other recreational opportunities

Relevant Geography To determine who came into the region, we must define the geography by which residents will be considered local –Single county? –Multiple county?

Some Background on Economic Impact Modeling Economic impact models are standardized –Mainstream tools of economists for decades –Well established and rigorously studied It starts with a direct infusion of economic activity –And traces related expenditures through their conclusions

Some Background on Economic Impact Modeling Because the models are standardized, the limiting factor is how one measures the direct infusion –The model does all the rest Best direct infusion measures account for –All changes – both increases and decreases

Some More Background on Economic Impact Modeling Three components make up an economic impact –D–Direct Expenditures – Direct Infusion into local economy –I–Indirect Expenditures – B2B transactions to support direct infusion –I–Induced Expenditures – Household expenditures from changes in earnings

Graphic Representation Total expenditures in the local economy is the sum of the Direct, Indirect and Induced expenditures We only need to know Direct Expenditures Event Expenditures Direct Expenditures Indirect Expenditures Induced Expenditures Total Expenditures

Even More Background on Economic Impact Modeling Every expenditure category has its own set of indirect and induced relationships –Expenditures should be broken out by expenditure category Gasoline Sporting goods Groceries Restaurants Lodging Etc.

Examples of Direct Expenditures –Host purchases in preparation and in hosting the event –Patron purchases while at event and/or within the event’s host community –Vendor purchases while at event or within the event’s host community Expenditures should be made to local vendors Exclude expenditures that would have taken place in the absence of the event

Correcting for Trade Margins Retail purchases should only count the local margins –Local share of retail goods sold is a small component of total retail price –Retail margins are the markups over cost of goods sold that retailers earn –Most impact models will extract trade margins from retail sales

Secondary Expenditures Up to this point, we have discussed the direct expenditures which needs to be provided to the model –The model will then estimate the Indirect and Induced expenditures

Indirect Expenditures Direct expenditures lead local suppliers to purchase more inputs – of which, some remain local –These secondary purchases by local businesses represent the indirect expenditures

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 Expenditures Local business owners, suppliers, and employees spend the additional income that they earn. Some of these purchases are local. –The secondary purchases from additional earnings represent the induced expenditures

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 additional 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 –EMSI: Economic Models Inc. –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 expenditures is vital –Facilities preparation & hosting spending –Patron spending –Vendor and exhibitor spending

Direct Expenditures for Facilities Preparation & Hosting Renting fees for equipment Location fees – if appropriate Local bands or entertainment –In essence, any public/sponsored expenditures for hosting the event should be captured if purchased from a local provider −The source of the funds is not relevant to the impact estimation

Estimating the Direct Impacts of a Community Event Estimating Patron and Vendor expenditures requires two parts 1.Expenditure profiles Average expenditure by category per visitor/party 2.Number of visitors Total number of visitors or parties Total expenditures is then simply the multiple of average expenditure and visitors

Estimating Direct Expenditures of Patrons Estimating patron expenditures is usually the most challenging –No easy way to record each and every transaction Must generate a representative expenditure profile –Often time, no easy way to determine number of visitors

Estimating Direct Expenditures of Patrons 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

Using Surveys to Estimate Patron Spending Surveys are a flexible means toward understanding visitor –spending –characteristics –experience –perceptions Generally they are undertaken as on-site intercepts

Using Surveys to Estimate Patron Spending, Cont’d Two vital questions must be addressed for patron surveys –Where do you live? ( Zipcode, Distance traveled ) –How much did/will you spend on X while in the community? Where X is Gasoline Sporting goods Groceries Restaurants Lodging Etc.

Using Surveys to Estimate Patron Spending, Cont’d Other questions worth considering –If you are a resident of XXX would you have traveled outside the community if this event did not take place today(This week)? –Besides the event, did you take in any other activities? –Did you shop at non-event venues? –Please rate your experience. We can get creative, but remember, people do not like taking surveys – keep it short

Using Surveys to Estimate Patron Spending, Cont’d Try to get a representative sample of attendees – All attendees have an equal chance of being surveyed If doing on-site intercepts, take samples at different times and different locations Sample size? –More is preferred –Should not be fewer than 35 out-of-town and 35 from in-town

Using Surveys to Estimate Patron Spending, Cont’d Expenditure profiles of out-of-town patrons will be different from in-town patrons Separate surveys into local and out-of-town responses, calculate averages, where blank means zero –That is, don’t assume a blank is “no-response” The average expenditure per visitor or party is then the expenditure profile

Calculating Patron Expenditures Number: would not have stayed in town Gasoline Sporting goods Groceries Restaurants Lodging Etc. Gasoline Sporting goods Groceries Restaurants Lodging Etc. Out of Town Expenditures Local Expenditures Number of out- of-town visitors/parties Number: would have stayed in town XX = = Total Patron Expenditures Exp1Exp2Exp3=++ Impact Expenditures Exp1=+ Exp2 Number of visitors/parties + + =

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 –Vendor sales If you find that vendor sales per person is $100, one must wonder… Local businesses can be queried as well for indication of patron activity

Direct impacts of Patron Expenditures Patron expenditures are generally measured in common units –Party-visits are the best unit for measure –Party expenditures are generally easier to manage than per-person expenditures

Estimating Direct Expenditures and Receipts of Vendors Estimating vendor impacts is a bit more complex –Limited and known number of vendors –Easily reached Vendors both spend and sell –Local vendor sales create local impacts –Out-of-town vendor expenditures create impacts

Using Surveys to Estimate Vendor Spending, Cont’d 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? ( Gasoline, groceries, lodging, etc… ) –How much did you sell? ( may also need type of vendor )

Using Surveys to Estimate Vendor Spending, Cont’d Other vendor questions worth considering –If you are a resident of XXX would you have traveled outside the community if this event did not take place today (This week)? –Did you shop at non-event venues? –Please rate your experience. –Do you plan to attend next year? Consider others.

Direct impacts of Vendor Expenditures Vendor expenditures are two-part –For out-of-town vendors: –For local vendors:

Alternative Survey Methods One’s choice of survey approach will depend on many factors –Off-site surveys require contact information Phone or mail surveys are viable Can capture a larger share of expenditures –On-site surveys can be collected without contact information Intercept surveys May not capture all expenditures

Off-site –Mail Surveys –Phone Interviews On-site –Self-Administered Surveys Completed at event or mailed upon return –Intercepts/Interviews Combined On- and Off-site –Get contact info on-site and conduct an off-site survey Alternative Survey Methods

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 –Can create respondent bias –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 –Patrons’ expenditure claims 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 –Allows recording the time the survey was taken –Does not require visitor contact information before conducting the survey Disadvantages: –Generally expensive –Selection 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 –Much more expensive than on-site surveys –Requires visitor contact information for conducting the survey –On-site selection bias carries over to post-event selection bias

Administering and 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

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 Administering and Writing Surveys

Of paramount importance, 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 by expenditure categories determines what expenditures to collect. Administering and Writing Surveys

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 Administering and Writing Surveys

Questions? The Center for Economic Analysis –

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.

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.