Events’ impact often inflated, economists say
Posted on Sunday, December 24, 2006
FAYETTEVILLE - Motorcycle enthusiasts spend millions of dollars at Bikes, Blues & BBQ, but no one knows for certain how much revenue the annual motorcycle rally brings to Northwest Arkansas.
It draws thousands of visitors each fall to Fayetteville's Dickson Street and is among the biggest, most successful yearly events in Arkansas.
But measuring the economic impact of bikers - as well as football fans or craft fair attendees - is an imprecise science, economists say. It's difficult to know the impact, whether it's a national affair such as the Super Bowl or a local event like the motorcycle rally.
An economist's best work often starts with assumptions about attendance and limited surveys about how much was spent. The answers come from people who show up, but they do nothing to identify people who stayed home or left town because the event was in town, said Victor Matheson, an economist at the College of the Holy Cross in Worcester, Mass.
A Dickson Street jeweler and others contend Fayetteville's motorcycle rally has grown so popular that it curtails spending by area residents who dislike the extra traffic and the loud vsroom-vroom of motorcycles.
"My basic premise is that it's not fair to penalize the property owners like me and to have access choked off to a business for four days,"said Bill Underwood, owner of Underwood's Fine Jewelers.
Organizers tend to exaggerate the economic benefits of their events, Matheson said. In October he published his study of sporting events, including Super Bowls, the Olympics and Major League Baseball's All-Star Games.
The economic impact of large events are at times used to push for or justify taxpayer spending on such things as new stadiums or arenas. At smaller levels, the estimates are used to justify things such as additional police protection or street closings, Matheson said.
"If the motorcycle folks say it brings in tens of millions of dollars, surely you can support it with some extra police officers,"Matheson said. "There's nothing wrong with that. That's what governments do. Govern- ment is there to provide services to support the businesses. "The question is, are they providing way more support than they are worth,"he said. "If it's rosy things in a report to justify massive public spending, you should be suspicious."
THE MAIN EVENTS No one doubts that the motorcycle rally, the War Eagle Fair in Benton County, the FLW Wal-Mart Open Tournament on Beaver Lake, the Rodeo of the Ozarks in Springdale and University of Arkansas football games pump cash into the region from outsiders. In the case of Bikes, Blues & BBQ, event organizers say, the cost to the city is quickly replaced by the revenue that flows into Fayetteville and the cities near it.
Fayetteville police officers and dispatchers worked an extra 656 hours during the 2006 Bikes, Blues & BBQ rally, said Shannon Gabbard, a police spokesman. The cost was $ 37, 309, and the city wasn't reimbursed by event organizers.
The city was reimbursed by organizers for $ 2, 088 of the $ 3, 638 spent by the Fire Department, said Susan Thomas, a city spokesman. The city also expects to receive $ 1, 000 for the work of the Parks and Recreation Department to replace mulch and plants.
What's less clear is exactly how much revenue Bikes, Blues & BBQ brought into the area.
Bikes, Blues & BBQ paid the University of Arkansas Center for Business and Economic Research to determine how much money the 2005 event in Fayetteville brought to Northwest Arkansas.
The research started with organizers' assumption that 200, 000 to 300, 000 people attend the event. But that estimate never stemmed from a true count, said Greg Mack, advertising and promotion director for Bikes, Blues & BBQ.
"I asked the cops one year, ' How many people do you think are here ?'"Mack said. "That's where the first number came from. And I added to it as T-shirt sales and Web site traffic went up. There's no science to that number. We never pretended there was."
UA used the 200, 000 to 300, 000 figure as the starting point of its study, said Kathy Deck, the center's interim director who did much of the research.
Fayetteville residents and business owners were surveyed. Visitors were quizzed about spending and the lengths of their stays.
"We wanted to look at legitimate tourists who are coming in for the event,"Deck said. "You want to kick out those who came to Northwest Arkansas for other reasons. We tried to be careful about these very issues."
The research led to an estimate: The economic impact of Bikes, Blues & BBQ was somewhere between $ 34. 7 million and $ 52. 1 million.
A study in 2004, when the motorcycle rally organizers listed attendance at 100, 000 to 200, 000 people, assumed the economic impact was $ 19. 1 million to $ 38. 3 million.
Matheson, in his research on mega-events such as the Super Bowl, said some event organizers inflate estimates and do a poor job of accounting for local people who attend but spend far less than out-of-towners who travel long distances to attend.
A study of the U. S. Open tennis tournament outside New York City provides one of the best examples of economic impact inflation, he said.
The Sports Management Research Institute estimated the event brought in $ 420 million in 2001. Using that figure, the economic impact of the tournament was roughly 3 percent of the city's economic impact from tourism for an entire year, the report showed.
"It is simply impossible to believe that one in 30 tourists to New York City in any given year are visiting the city solely to attend the U. S. Open,"Matheson wrote in his report.
Underwood said there's similar overestimating when it comes to the Bikes, Blues & BBQ attendance figures, which were placed at more than 350, 000 people this year.
Underwood said the attendance makes no sense because there are about 4, 800 hotel rooms in Benton and Washington counties. He concedes that not every visitor needed a room or stayed in town.
Neal Crawford, the owner of Jose's and one of the founders of the Bikes, Blues & BBQ rally, said Underwood's numbers don't matter.
"The fact is, all the restaurants and hotels are packed,"Crawford said.
KNOWING WHAT'S RIGHT Researchers need to consider several factors to accurately determine the economic impact of an event, Matheson said. First, they must adjust for "substitution effect."That's caused by someone who spends money at a festival but who would have spent money somewhere else locally even without the festival in town. Second, there's a "crowding out effect,"which includes people who stay home or leave town due to a major event. For example, visitors avoid the Field Museum in Chicago when the Chicago Bears play home football games nearby because there's so much traffic congestion, Matheson said.
A third factor is what Matheson calls "leakage."It includes vendors who come to Fayetteville, benefit from the business of the Bikes, Blues & BBQ, then return to their out-of-state homes.
"That money all leaves town,"Matheson said.
The key to knowing whether a study gives a realistic view is understanding how the report came together, and whether substitution effect, crowding out and leakage were considered, Matheson said.
Many event organizers are unable to provide the basis for their estimates when they are pressed, he said.
Others provide an economic impact figure, but don't know its basis. Such is the case with organizers who recently convinced The Poultry Federation to hold the Poultry Festival in Rogers in 2008, 2009 and 2010.
A news release last month announced that Rogers and Bentonville worked together to get the event to the John Q. Hammons Convention Center in Rogers. It said the festival's economic impact at Hot Springs in 2004 was $ 4 million to $ 5 million.
That was a surprise to Cindy DeWitt, the sales director for the Hot Springs Convention and Visitors Bureau. A 2004 study showed 1, 870 hotel rooms were booked and attendance was about 3, 000 people. The economic impact was $ 1. 704 million, she said.
Judith Kimbrell, administrator of The Poultry Federation, said there was no other economic impact study that year. The organization that puts on the event that brings attendees from Arkansas, Oklahoma and Missouri.
Tom Galyon, who moved from Corpus Christi, Texas, two months ago to become executive director of the Rogers Convention and Visitors Bureau, said he didn't know the origin of the $ 4 million to $ 5 million estimate. He wants UA to do a detailed analysis on the festival's impact in 2008.
"I like to have a hook to hang a hat on,"Galyon said.
Organizers of other Northwest Arkansas events have tried to measure their economic impact directly or by reviewing the research evaluating similar events.
They include: The FLW bass tournament on Beaver Lake in the spring. Dave Washburn, a spokesman for the FLW Outdoors, said economists in Wisconsin determined a major professional bass tournament has an impact of $ 4 million. University of Arkansas football games. UA researchers surveyed hundreds of people attending an October 2004 game against Georgia, placing the game's economic impact at $ 25. 4 million.
Rodeo of the Ozarks in Springdale. The event draws about 35, 000 attendees most years, and had an economic impact of $ 4. 74 million in 1996, said Rick Culver, a Rodeo of the Ozarks board member. The rodeo survey, done by an Arizona company, accounted for $ 489, 914 for lodging, meals and camping. Another $ 300, 000 was spent on rodeo tickets. The spending was then multiplied by six by a former Springdale Chamber of Commerce official to come up with the economic impact. Multipliers attempt to calculate a ripple effect caused by new money that comes into a community. But multipliers are overused in research, Matheson and Deck said. Deck didn't use a multiplier in the motorcycle rally research. "When I see a number like six, I get very leery,"she said. "Most would prefer that you estimated on the conservative side. It's the test of reasonableness."
NO STATEWIDE ESTIMATES
Eddie Fugatt, the Arkansas Department of Parks and Tourism's assistant research manager, said there's no statewide estimate of how much money fairs and festivals generate in the Natural State.
"It takes thousands of dollars to do festival research and nobody really wants to pay for it,"Fugatt said. "We could come up with a number, but it would just be based on too much guesswork to put much validity to it.
"We know how much an outof-state traveler spends ($ 60. 50 per day in 2005 ), but a festival can't just take the attendees and multiply it by that."
On their own, organizations have tried to justify events to the public and prove their value, but not everyone worries about it much. That's the case of those who put together the War Eagle crafts fair.
Researchers years ago placed an economic impact on the crafts fair, but it's been so long ago that Shirley Sutton can't remember what it showed or how it was done.
Sutton is the executive director of the private, nonprofit organization that runs the fair, taking over the annual event started in 1954 by her mother, Blanche Elliott.
The attendance is estimated at 180, 000 to 200, 000 in the fall and 75, 000 to 80, 000 in the spring, Sutton said.
The attendance stems from the estimates of Benton County sheriff 's office reserves who guide visitors into the hay fields to park their cars.
Dana Sutton, Shirley Sutton's daughter-in-law and the organization's accountant, said she's uncomfortable using the estimates.
"I'm not standing out there counting them, so I don't know,"she said.
The numbers don't matter much to Shirley Sutton, either. She just knows every hotel room in Benton and Washington counties is filled for the fall event and most of the 300 vendors who show up in the fall are satisfied with their sales.
It's always been an important event, too. So much so that Elliott, a UA graduate, once called Frank Broyles, the Razorbacks football coach from 1958-76 and athletic director since 1974.
Elliott asked Broyles to move the football game to a different Saturday because it made finding a hotel room difficult for War Eagle attendees, Dana Sutton said.
"He tactfully said that wasn't something he could do,"she said.
GETTING TOO BIG Underwood, the Dickson Street jeweler, said he knows Bikes, Blues & BBQ contributes to the local economy. "My complaint is it blocks access to businesses,"Underwood said. "It's inevitable that something has to change. They have to make changes to get along with people. "I'm not advocating killing the event. It is beneficial. It does contribute to charity."Fayetteville Mayor Dan Coody said the event has "reached a point where something has to be done."There are those, he said, who want Fayetteville's motorcycle rally to rival those in Sturgis, S. D., and Daytona Beach, Fla.
"It can't continue to grow at this rate and stay on Dickson Street,"Coody said. "I think anything taken to an unhealthy extreme is worth a second thought."
In a Bikes, Blues & BBQ news release last week announcing $ 150, 000 in charitable donations to 32 organizations, the event was described as having more than 350, 000 attendees in 2006.
The release says the event is "estimated to have risen in rank to the third largest rally in the nation"behind Sturgis and Daytona Beach.
"We know our attendance is not a measurable situation,"Crawford said. "All we are doing now is trying to control what's coming. We don't call 200, 000 people and tell them to come to town. We do it, and all these people show up."
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