Much has been said about the economic impact of sports events. “Keeping score” is an important element in competition, and it can be equally important to those engaged in attracting events to a community. If an event has developed a reputation for producing large numbers of visitors, it will attract the interest of bidders. And, at the same time, the event owner begins to ask for more incentives from potential hosts.
Difficulties arise in estimating the potential impact of an event. Savvy hosts are learning to determine the potential return on investment prior to bidding. Equally savvy event owners are emphasizing their ability to produce visitors. It is not unusual to learn that estimates vary depending on where you sit!
What can be done to make these estimates work for everyone? Perhaps the first and most important thing to remember is the simple fact that all estimates are flawed. It is never possible to predict with accuracy what might happen and just as difficult to estimate precisely what did happen. It comes down to one word: “estimate.” Why, then, are claims of economic benefit made as though they are fact? The answer probably stems from a desire to believe the best no matter where your interests may be.
Some communities have begun keeping score in terms of room nights rather than spending realized. They feel this is a more objective view, one less subject to differences of opinion. Comparisons are made from year to year or between the results in the month the event took place and the same month a year previously. This approach, too, has its weakness. Some accommodation should be made for the rooms hat would have been occupied anyway. SO the estimate of room nights must be based upon a count traceable to the event. This requires some sort of system or survey.
The establishment of a system or survey gets us closer to the central issues with the computation of economic impact estimates. Information is needed before estimates are produced. All too often no provision is made for data collection. Surveys can be made at team registration or check-in at the hotel. They can be completed during the event itself.
So, data collection becomes the most difficult hurdle. The most common formula: the number of visitors, times the number of nights, times the amount spent by a tourist each day.
The National Association of Sports Commissions (NASC) developed an Economic Impact Template to assist its members in estimating what might take place or what did take place. Users can plug in their own data or use median numbers developed over more than 20 events.
Data collection and report preparation can be accomplished through professionally conducted studies, employment of a team from a university under the direction of a faculty member, or by a team from the organizing committee. In every situation the number of visitors, number of days spent in the market, and estimates as to amounts paid for hotel rooms, food and beverages, retail purchase etc., must be acquired.
We must also constantly deal with a recognized element in any professionally produced study. This element is called a multiplier. Economists are in agreement that a dollar spent turns over in the local community. Your restaurant purchase employs people whose wages produce additional spending. To account for this, multipliers are applied after direct spending estimates are complete.
In the sports event industry multipliers can produce inflated estimates that morph into statements of fact. It seems the larger the estimate the quicker it becomes fact. It is no longer a case of “we estimate direct visitor spending as x dollars.” It becomes instead a statement like “the total economic impact was y dollars.”
It is recommended that policies be developed within your organization on how to deal with economic impact. Be consistent, whatever you decide to do. And, explain how you arrived at a number when it is released. Please keep in mind the inability of experts to agree and use caution the next time you must announce a number because once it is out there it can not be retrieved.
