Economic Impact Analysis
Economic Impact Defined
• The net economic change in a community
resulting from spending that can be attributed to
an event or facility
• A measure of new economic benefits that accrue
to the community that would not have occurred
otherwise
• Information regarding ROI in a development
project
Information Classification: General
Economic Impact Analyses are
conducted to…
• Learn the impact of:
• Sporting events (e.g., Super Bowl)
• The team itself
• Facility
• Learn who benefits and how:
• Community (jobs, taxes, etc.)
• Positive externalities
• Psychic impact
Information Classification: General
Setting the Parameters
• Geographic area of impact
• Differing definitions of the geographic area affect the
amount of economic impact that is measured
• Type of spending and by whom
• Displaced spending by locals
Information Classification: General
Visitors
• Differentiate between event attendees who are
visitors vs. those who are local residents
• Types:
• Casual
• Time-switcher
• Incremental
Information Classification: General
Sample Breakdown of Attendees at
an Event
Information Classification: General
Methodologies for Measuring
Economic Benefits of an Event
• Spending
• Direct, indirect, and induced impacts
• Effects on total output, earnings or income, employment,
and public finances
• Fiscal/tax impact
Information Classification: General
Spending Methodologies
• Direct spending:
• Secondary research
• Spectator surveys
• Corporate spending surveys
• Indirect and induced spending:
• Multiplier effect
Information Classification: General
When Analyzing Direct Spending
• How much are incremental visitors spending?
• What amount of spending goes to local
businesses?
• How much do the event host committee, event
management company, corporate sponsors, and
others spend?
Information Classification: General
Example Survey for Measuring
Direct Impact
X Games 2019 (Minneapolis, MN) ECONOMIC IMPACT SURVEY
1. Are you attending the X Games? ☑ Yes ☐ No
2. Your age: ☐ 18−24 ☑ 25−34 ☐ 35−44 ☐ 45−54 ☐ 55+
3. What is your gender? ☐ Female ☑ Male
4. Your annual household income: ☐ <$25,000 ☐ $25,000−$49,999 ☑ $50,000−$74,999
☐ $75,000-$99,999 ☐ $100,000−$124,999 ☐ $125,000 +
5. What is your residential zip code? 08055
6. How long will you be visiting Minneapolis? 4 day(s) 3 night(s)
7. While visiting Minneapolis, how many people in your party will you be paying for, including yourself? 3
8. While in Minneapolis during the X Games, how much do you plan to spend DAILY for the above group on the following?
Lodging $180
Transportation in Minneapolis (rental car, gas, parking, taxi, bus, etc.) $65
Event-related (tickets, concession, merchandise at X Games) $125
Food/beverage (not at X Games) $160
Entertainment (not at X Games) $75
Shopping (not at X Games) $120
Other (not at X Games) $20
9. Would you have visited Minneapolis this weekend if the X Games were not in town? ☐ Yes ☑ No
10. Does this visit to Minneapolis replace any other past/future visit to this area? ☐ Yes ☑ No
11. Primary reason for trip to Minneapolis:
✓ Attend this event ________ Business _________ Pleasure/Vacation Other ________________
Information Classification: General
Visitor Profile Created From Survey
Results
KEY FINDINGS FROM THE VISITOR SURVEY
Category Estimate
Total Attendance 90000
Total Number of Unique Attendees (individual people attending) 50000
Number of Local Residents 10000
Total Number of Visitors 40000
Number of “Time-switchers” Only −4000
Number of “Casual” Visitors Only −3000
Number of Visitors who came because of the X Games, but did not attend the official events1 500
Number of “Incremental” Visitors Counting Towards Economic Impact2 33500
Average Expenditure Estimates
Average Daily Expenditure Per “Incremental” Visitor Outside of official Events $225
Average Number of Days Stayed Per “Incremental” Visitor 2.50
Average Expenditure for Entire Trip Per “Incremental” Visitor Outside of official Events $563
Total Direct Spending of “Incremental” Visitors Outside of official Events3 $18,843,750
1
A number of people (typically children and spouses) came to Minneapolis because of the event, but did not attend any of the official events.
2
Spending by “time-switchers” and “casual” visitors was not used in the impact analysis.
3
Spending is only within Minneapolis.
Information Classification: General
Indirect Economic Impact
• Visitor attends event, visits local restaurant
• Restaurant pays employees, buys food from local
farm
• Employees and local farmer buy clothing from
local retailer
• Retailer pays employees who shop locally
• Process continues
Information Classification: General
Multiplier
• Helps researchers quantify indirect and
induced economic impacts
• Measures the change in output for an
industry as a result of injection of $1.00 of
direct impact into that industry
• Types:
• Output multiplier (sales or transaction
multiplier)
• Income multiplier
• Employment multiplier
Information Classification: General
Example of Direct and Indirect
Effects of Spending
Information Classification: General
Example-Output, Income and
Employment Multipliers
HENNEPIN COUNTY MULTIPLIERS
Output Earnings Employment*
Transportation 1.70 0.78 16.86
Retail 1.68 0.68 17.23
Lodging 1.56 0.52 11.81
Entertainment 1.65 0.54 20.04
Food and Beverage 1.62 0.62 21.85
Miscellaneous 1.70 0.61 9.76
*The employment multiplier is measured on the basis of a $1 million change in output.
Information Classification: General
Calculating Total Economic Impact
CATEGORY DIRECT SPENDING* MULTIPLIER TOTAL
Transportation
$1,632,000 1.70 $2,774,400
Retail
$1,972,000 1.68 $3,312,960
Lodging
$4,155,000 1.56 $6,481,800
Entertainment
$975,100 1.65 $1,608,915
Food & Beverage
$4,385,000 1.62 $7,103,700
Miscellaneous
$422,000 1.70 $717,400
Inside U.S. Bank Stadium
— — —
Corporate/Team/Media $14,600,000 1.60 $23,360,000
Total Direct Spending $28,141,100 Total economic impact $45,359,175
*Does not include spending within U.S. Bank Stadium.
Information Classification: General
Fiscal (Tax) Impact
• Understand the tax code
• Separate tax revenue according to recipient
• Account for tax-exempt spending
• Account for the tax effects of indirect and induced
impacts
Information Classification: General
Example Calculation of Fiscal
Impacts
TAX CATEGORY
Sales $67,706
Lodging $124,650
Entertainment $153,903
Liquor $26,310
Restaurant $131,550
Sub-total $504,119
Indirect Taxation $349,583
Total Fiscal Impact $853,701
Note: Figures do not include spending within U.S. Bank Stadium, nor any rent paid by ESPN to the government-owned stadium.
Information Classification: General
Measuring Event Costs
• What are the costs of hosting an event?
• As opposed to its economic benefits
• To be complete, a study should include an
analysis of costs
Information Classification: General
Economic Impact of a Team
• View the team as a series of events (e.g., 81
home games for an MLB team)
• Measure the impact of the team as a local
business
• Organizational spending in the area
• Direct employment by the franchise
• Size of the local market
Information Classification: General
Capture Rate
• Percentage of money that is spent locally
• Often a significant portion of spending takes place
outside the local city
• Conservative estimate may be that only 10% is spent
locally
• Largest single expense item is player salaries
Information Classification: General
Where to Visitors Spend Their
Money?
Information Classification: General
Economic Impact of a Sport Facility
• Operations impact:
• Daily operation
• Construction impact
• Amount of money that comes in during construction
phase
• Controversial aspect of economic impact analysis
Information Classification: General
Underestimating Economic Impact
• Impossible to account for all corporate-related
spending
• Studies may miss visitors who are in town
because of an event but do not attend it
• Visitor surveys may contain blank responses
• Locals may spend more than they usually do
• Taxes may not all be accounted for
• Visitors may visit the city again in the future
• Psychic impact may not be counted
Information Classification: General
Overestimating Economic Impact
• Analyses do not account for reverse time-
switchers
• Opportunity costs
• Loss of other visitors due to hotels being full
• Economic analysis hasn’t accounted for various
adjustments
• Unethical analysts
Information Classification: General
Analyzing Economic Impact
Methodology
CONSIDER WHETHER:
Local spending is not counted.
Only incremental spending by casual visitors and time-switchers is counted.
Incremental visitor spending is fully counted.
Spending within a facility is not counted.
Spending that comes out of the event, team, or facility is counted.
Only the organizational spending by the event host committee, event management company, and corporate sponsors in the
geographic area of impact is counted.
Only corporate spending in the geographic area of impact that would not have occurred otherwise is counted.
Spending by organizations, corporations, and local governments related to bringing the event to town is counted as a cost rather
than a benefit.
Leakages outside the geographic area of impact (sales and income taxes of non-local governments and spending with non-local
employees, businesses, and organizations) are not counted.
Only the capture rate portion of franchise spending is counted.
Opportunity costs are accounted for.
Information Classification: General
Any Questions?
Information Classification: General
