The Economic Impact Of Sports Tournaments And Events - city survey

Last year, the National Recreation and Park Association solicited cities to participate in a study detailing the economic impact of sports tournaments, festivals, and spectator events organized or facilitated by park and recreation agencies. The goal of the study was to collect reasonably accurate data from a substantial number of events, and to estimate the economic impact of these events, hopefully free from the errors and abuses found in most economic-impact studies. It was anticipated that these results would reveal consistent patterns and parameters that could be used to estimate economic impact in communities that did not lend themselves to the collection and analysis of empirical data.

Seven cities -- Boise, Idaho; College Station, Texas; Des Moines, Iowa; Everett, Wash.; Grand Rapids and Lansing, Mich.; and Scottsdale, Ariz. -- volunteered to participate in the study. All were reasonably diverse in size and geographical location. During the year, the economic impact of 30 events in these seven cities was estimated.

The Rationale for Economic-Impact Studies

When the park and recreation department in City A reported the financial consequences of organizing and hosting a national softball championship tournament, it revealed a loss of $9,375. When City A's convention and visitors bureau reported the consequences of hosting the same event, it showed a gain of $525,000. It is obvious which agency was likely to be viewed more positively by elected officials and taxpayers. Why did the two agencies report such disparate data from the same event? The two agencies used different approaches for demonstrating accountability for their public funds.

Park and recreation agencies have traditionally provided financial reports, while the tourism field has proffered economic reports. Thus, the two agencies have occupied very different positions in the eyes of public officials. By using economic reports, many convention and visitor bureaus have convinced elected officials and decision-makers that they are central contributors to their community's economic health. In contrast, because they rely upon financial reports, park and recreation agencies have not typically been successful in creating a similar niche for themselves.

Fig. 1 provides the rationale behind park and recreation agencies developing economic balance sheets to supplement financial information. Residents of a community "give" funds to their city council in the form of taxes. The city council uses a proportion of these funds to subsidize production of an event or development of a facility. The facility or event attracts nonresident visitors who spend money in the local community both inside and outside of the events and facilities they visit. This new outside money creates income and jobs for community residents, thus completing the cycle. When community residents provide the initial funds, they receive a return on their investment in the form of new jobs and more household income.

[Fig. 1 ILLUSTRATION OMITTED]

A park and recreation agency's traditional financial balance sheet assumes that the cycle shown in Fig. 1 starts and ends with city council, not residents. This is narrow and misleading because it includes only the taxes and revenue that accrue to local government from the event or facility. Such a narrow definition suggests that concern should be focused on income accruing to the council from lease fees, admission revenue, increased sales-tax revenue, and other sources. However, this approach is flawed conceptually because the money invested belongs to the city's residents, not the council. Although it is efficient for residents' investment to be funneled through the council, the return is what is important, not the proportion that filters back to the council. The purpose of economic-impact studies is to measure the economic return to residents.

Table 1 illustrates the differences between the financial and economic approaches. According to the park and recreation department's financial balance sheet, the tournament was a $9,375 disappointment. However, if the agency had used an economic balance sheet -- as tourism agencies do -- it would have shown a net return of $273,000, $511,000, or $150,000, depending upon whether economic impact was reported in terms of direct expenditures, sales impact, or impact on personal incomes. (These figures were calculated by subtracting the $14,000 net cost to taxpayers from the gross amount of hosting the event.)

Table 1. Amateur Softball's Economic and Financial Returns

Context

All 37 teams that qualified for the tournament were from
outside the local area. The average number of players per
team was 15. Some players brought family and friends with
them, so the average size of the contingent associated with
each team, including the players, was 21. Because it was an
elimination tournament, the length of time that the teams
stayed in the community varied from two to six nights.

Economic Return

A survey of the players revealed the following:

Total expenditures in the local area by players and   $287,000
their family and friends

An input-output model that calculated multipliers
concluded the following:

Total economic impact on sales                        $525,000

Total economic impact on personal income              $164,000

Financial Return

Income to the city parks and recreation department      $4,625
from entry fees

Costs incurred by the department, including            $14,000
manpower, to host the event

Net financial loss to the city                          $9,375

Payback Period

The cost of constructing the softball complex was almost $2
million. Based on economic return to residents in terms of
personal income, the capital cost of the complex would be
repaid after 14 similar tournaments.

The capital cost of the softball complex was approximately $2 million, which means that if the personal-income measure of economic impact was used, which is the most appropriate measure, the investment would pay for itself after 14 tournaments. How many other investments pay for themselves in two years (assuming seven tournaments per year) and continue to contribute $1 million to residents annually for the next 20 years?

Caveat Emptor

Because the findings reported by many economic-impact studies are not always what they appear to be, "buyer beware" is an appropriate warning for readers.

Most research projects are based on a search for truth. But the goal in economic-impact studies is to legitimize a position. Economic-impact studies are usually undertaken in order to justify a public expenditure in quantitative dollar terms, with the expectation that the results will reinforce the case for sustaining or increasing resources allocated to the service. In these circumstances, there is a temptation to manipulate the procedures to strengthen the case.

Because economic-impact studies use complex procedures and produce quantifiable outcomes, bottom-line-oriented audiences often presume that the analyses are "scientific" and that outputs are objective and unequivocal. This is misleading. Economic-impact analysis is an inexact process; therefore, output numbers should be regarded as a "best guess," not inviolably accurate. To further illustrate, five different individuals would probably produce live different results.

The National Recreation and Park Association's involvement in this study was stimulated by an awareness of the temptation to adopt inappropriate procedures and assumptions in order to generate favorable numbers, and the tendency for errors that result from genuine lack of understanding of economic-impact analyses. NRPA considered it important that statistics relating to economic benefits be accurate, otherwise the credibility of the Benefits effort would be undermined.

Some Conclusions

Reviewing the results from the 30 case studies did reveal some consistent patterns. Researchers will be quick to point out that results from the tournaments and events in the seven cities followed here are likely to differ from studies of similar events in other communities. Notwithstanding these reservations, in communities where managers have no empirical data but are required by stakeholders to provide estimates of visitor spending and economic impact, or need such estimates to help reposition their agencies, the results from these case studies suggest useful parameters for providing "intelligent guesses."

Patterns emerging from the 14 sports tournaments suggested the following:

1. The larger the number of out-of-town participants, the greater the likely economic impact.

2. If an overnight stay is not required, the economic impact on the community is likely to be small. The highest total expenditures correlated strongly with longer tournaments, which presumably required more overnight stays. The two tournaments with the smallest economic impact were both one-day events. Such sports events are probably too small or not prestigious enough to attract visitors from far away, thus relying primarily on locals.

3. An expectation of approximately $55 per participant, per day is likely to be a reasonable basis for estimating expenditures at youth soccer tournaments.

4. An expectation of approximately $100 per participant, per day is likely to be a reasonable basis for estimating the expenditures at softball tournaments.

Patterns emerging from the 16 festivals and events suggested the following:

1. Large groups of participants and spectators do not necessarily equal large economic impact. Many out-of-town visitors traveled short distances to an event, and their spending on accommodations and food in the host community was minimal.

2. The importance of ascertaining the proportion of time-switchers and casuals was clearly demonstrated. Time-switchers are visitors who plan to visit a community in the near future but change the time of their visit to coincide with an event. Casuals are visitors already in the community who elect to go to an event instead of doing something else. In both cases, the spending of these individuals would have occurred without the event and, thus, cannot be counted as economic impact attributable to the event. In five of the 16 studies, time-switchers and casuals represented approximately one-third of all visitors.

3. Reasonably accurate measures of economic impact are dependent upon reasonably accurate visitor counts. At sporting events where teams or individuals have to register with the organizer, an accurate count is usually available. Similarly, at gated spectator or festival events that charge an admission, accurate counts are available from ticket sales or turns the counts. However, many festivals are not gated and do not charge admission. In these cases, organizers frequently make educated guesses at attendance numbers. Accuracy in sampling, data collection, and analysis is of little use if the total attendance counts are inaccurate.

4. A golf tournament--a stop on the men's pro tour -- demonstrated the extraordinary economic impact generated by a mega-event in a local community. The total expenditure not only reflected a large proportion of out-of-town visitors and multiple nights spent in the community, but also that the visitors were relatively affluent. The nearly $30 million estimate of direct spending was limited to the expenditures of spectators, and dwarfed the $8 million generated by the other 15 festivals and events, as well as the $3.3 million at the 14 sports tournaments.

5. Expenditures by out-of-town visitors exceeded $100,000 at seven of the 16 special events, while 11 of 14 sports tournaments exceeded this mark. These data suggest that sports tournaments are more likely to generate substantial positive economic impacts than special events because of the higher proportion of out-of-town participants and the frequent requirement that participants stay for multiple days.

Presenting the Results

Agencies should prepare an annual economic-impact report for their stakeholders. Extrapolations can be made between data collected from surveyed and non-surveyed events in a community. An example, taken from sports tournaments in City A, appears in Table 2. Data from the six events listed above the bold line were collected by surveys, while no surveys were performed at the remaining four events. These events were then matched against the first six, and the per-team member, per-day dollar value was used from the matching events to calculate the total expenditure and economic impact.

Table 2. Economic Impact of Sports Events Held in City A in 1998

                                       Duration
                                       (No. of    No. of
                                Date    Days)     Teams

USS Swim Meet                   1-23      3         24
Boys' Soccer Tournament         2-20      3         68
Girls' Soccer Tournament        2-28      3         70
Girls' Fastpitch
 Invitational Tournament        5-29      3         69
ASA Men's Fastpitch
 Softball Championship          8-1       3         28
ASA Men's Class B
 National Championship          9-7       5         60
Budweiser Tournament            5-2       2        162
State Girls' Fastpitch U-18     7-10      3         34
Men's Slowpitch State Class C   7-24      3        101
State Women's Fastpitch         8-1       2          5
Total                            -        -        621

                                Average
                                Size of      No. of
                                 Team      Individual
                                 Squad    Participants

USS Swim Meet                     45         1,079
Boys' Soccer Tournament           15         1,020
Girls' Soccer Tournament          15         1,050
Girls' Fastpitch
 Invitational Tournament          12           828
ASA Men's Fastpitch
 Softball Championship            14           392
ASA Men's Class B
 National Championship            14           840
Budweiser Tournament              14         2,268
State Girls' Fastpitch U-18       12           408
Men's Slowpitch State Class C     14         1,414
State Women's Fastpitch           12            60
Total                              -         9,359

                                   Teams       Teams
                                   from        from
                                   Inside      Outside
                                   City        City

                                No.    %     No.     %

USS Swim Meet                     2    8.3    22    91.7
Boys' Soccer Tournament           5    7.4    63    92.6
Girls' Soccer Tournament          0    0.0    70   100.0
Girls' Fastpitch
 Invitational Tournament         15   21.7    54    78.3
ASA Men's Fastpitch
 Softball Championship            1    3.7    27    96.4
ASA Men's Class B
 National Championship            2    3.3    58    96.7
Budweiser Tournament             30   18.5   132    81.5
State Girls' Fastpitch U-18       1    2.9    33    97.1
Men's Slowpitch State Class C    14   13.9    87    86.1
State Women's Fastpitch           0    0.0     5   100.0
Total                            70   11.3   551    88.7

                                                Average Direct
                                                 Expenditures

                                   Total       Per    Per Team
                                Expenditure   Team    Per Day

USS Swim Meet                      124,999    5,682    1,894
Boys' Soccer Tournament            128,519    2,040      680
Girls' Soccer Tournament           160,956    2,299      766
Girls' Fastpitch
 Invitational Tournament           184,517    3,417    1,139
ASA Men's Fastpitch
 Softball Championship              93,219    3,453    1,151
ASA Men's Class B
 National Championship             386,999    6,672    1,334
Budweiser Tournament               303,864    2,302    1,151
State Girls' Fastpitch U-18        112,761    3,417    1,139
Men's Slowpitch State Class C      300,411    3,453    1,151
State Women's Fastpitch             11,390    2,278    1,139
Total                            1,807,635       -       -

                                 Average Direct
                                  Expenditures
                                                      Economic
                                           Per Team    Impact
                                Per Team    Member
                                 Member    Per Day

USS Swim Meet                     126         42
Boys' Soccer Tournament           136         45
Girls' Soccer Tournament          153         51
Girls' Fastpitch
 Invitational Tournament          285         95
ASA Men's Fastpitch
 Softball Championship            247         82
ASA Men's Class B
 National Championship            477         95
Budweiser Tournament              164         82
State Girls' Fastpitch U-18       285         95
Men's Slowpitch State Class C     247         82
State Women's Fastpitch           190         95
Total                               -          -

                                        Economic Impact

                                              Personal
                                  Sales       Income    Jobs(*)

USS Swim Meet                     236,852      64,201     5.3
Boys' Soccer Tournament           247,085      69,493     5.7
Girls' Soccer Tournament          305,070      85,889     6.8
Girls' Fastpitch
 Invitational Tournament          351,588      99,811     8.0
ASA Men's Fastpitch
 Softball Championship            176,903      50,904     4.0
ASA Men's Class B
 National Championship            730,973     211,870    16.7
Budweiser Tournament              440,655     151,729     9.8
State Girls' Fastpitch U-18       163,523      56,305     3.6
Men's Slowpitch State Class C     435,648     150,005     9.6
State Women's Fastpitch            16,517       5,687     0.4
Total                           3,104,814     945,894    69.9

(*) This figure refers to both full-time and part-time jobs. It assumes the local economy is operating at full capacity and that there is no slack to absorb additional demand created by these events.

The economic-impact report in Table 2 shows that almost $1 million accrued in new income to city residents, and that out-of-town expenditures resulted in more than $3 million in additional sales. This balance sheet was presented to City A's council as part of the budget process and helped to solidify the department's position as a contributor to economic development.

RELATED ARTICLE:

Measuring the Economic Impact of visitors to sports tournaments and special events

NRPA has published an 87-page how-to publication titled Measuring the Economic Impact of Visitors to Sports Tournaments and Special Events. This guide includes materials developed for the study. Its four sections discuss how to reposition park and recreation departments so they are perceived by stakeholders as central contributors to economic development, describe the rules and principles that govern legitimate economic-impact studies, describe how to collect data, and report the results of the 30 economic-impact studies and the conclusions they suggest.

In addition, the guide provides sample questionnaires and templates of reports, which make it simple for agencies to plug in their numbers and produce a report. The publication is available by calling (703) 858-2190.

Looking to reposition your park and recreation department as a central contributor to economic development in the eyes of community stakeholders? John L. Crompton, CLP, a professor of park and tourism sciences at Texas A&M University, gives P&R readers some helpful hints on how to instigate public enthusiasm -- and impress the bottom4ine pants off of community leaders at the same time (p. 142).

COPYRIGHT 1999 National Recreation and Park Association
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