Economic-Impact Study

What makes up an economic-impact formula? Numerous formulas are available; the difference resides in whether the research for the makeup of the formula was drawn from primary research or secondary resources (Brown, Rascher, Nagel & McEvoy, 2010). Lastly, but most importantly, the formulas are different in the application of multipliers and associated multiplier-modeling techniques used. This variance in formula construction is one of the leading causes why an event can have two vastly different economic values. It is also worth noting that the author or proponent of a study plays a major role in how the end number comes out.  According to Don Schumacher, Executive Director of the National Association of Sports commissions, “All numbers are estimates. If you wish to begin understanding the accuracy of the claim, check to see who paid for the study! All too often, studies are impacted by the need to show tremendous news when just good news would suffice.” In an effort to standardize the process, some municipalities have gone to local sports commissions for guidance and/or hired outside firms to develop formulas on their own.

Whether it’s an economic-impact study on the Super Bowl or a request for proposals to construct a community athletic complex, all formulas have the same core components. Large events tend to account for the various local taxes and what local residents do during the event, among other items. The components of a formula are: 

  • Attendance (out-of-town preferable; local attendance, if included, should be separate)
  • Number of days/nights in the area (area should be defined in the study)
  • Projected spending per traveler
  • Multiplier (if applicable).

For example: 

  • Attendance x number of days x projected spending = economic impact. 
  • If a multiplier is used, it can be inserted after projected spending. The more challenging part of this exercise is obtaining the data for the formula.  

Data Collection 

Data can be collected in many ways and by almost anyone, including staff, volunteers and research firms. The key is to keep everyone using the same techniques and forms. Attendance numbers can be obtained from ticket sales, attendance counters by gate staff or by estimating from registration information. Surveys at the event or attached to registration forms are an effective way to gather information on the number of days spent in the area and projected spending habits. Offering an incentive or possible discount on registration for completion of this form will help ensure a better return. If resources are limited and/or a large range of participants is not obtained, many sports commissions and state tourism agencies have calculators that have most of the data and formula already configured (albeit broader and mostly estimated).MichiganStateUniversityhas a great free Tourism Economic-Impact Calculator available online. While the outcomes derived from these formulas may not be as accurate as those conducted with raw data from the event, it will nonetheless provide a glimpse of the economic impact. For more precise numbers, the National Association of Sports Commissions has developed a useful economic-impact template. According to Schumacher, “The tool allows members to estimate what might happen before the bid and can be very helpful after the fact in creating the final estimate. If a study is conducted during the event, the template produces even better estimates. This tool allows computation of direct spending only, spending adjusted for displacement (estimating what would have happened anyway without the event) and/or spending less displacement times a multiplier.” Lastly, keeping accurate and accessible records of all data collection is helpful for any future economic-impact study. This is especially useful when attempting to project the economic impact to a board or governing body for a similar event.

An Eye On Multipliers

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