Contents
- The headline figure is usually gross spending
- Whose money was already in the city?
- What did the event push out?
- Leakage starts with the purchase orders
- Multipliers deserve more suspicion than they get
- Why does an honest figure serve the organizer?
- Counting the slow money: suppliers, skills and return visits
Spending at an event and the economic impact of an event sound like the same thing, and most of the impact reports that cross my desk treat them that way. They are not. Spending is everything people paid for while the event was on. The economic impact of an event is the new money that entered a defined area because the event took place there, after you take away what would have been spent anyway and what flowed straight back out. The first number is almost always large. The second is smaller, harder to calculate and far more useful.
The confusion is not innocent, and I say that as someone who has sat on the organizing side of congresses and forums. A big figure helps with sponsors, with the next bid, with the hotel partners and with the press release. Nobody gets thanked for halving it. But a figure that only grows is a figure people gradually stop believing, and in the end that hurts the events that really do bring value to a city.
The headline figure is usually gross spending
Most impact reports are built in a similar way. Attendees are surveyed, or estimated, and multiplied by an average daily spend on accommodation, food, transport and shopping. Organizer spending is added. Then the total is multiplied again by a coefficient meant to capture the money that circulates through suppliers and wages. The result goes on the first page in a large font.
Each step in that chain is reasonable on its face. The problem is what the chain leaves out. The International Association of Event Hosts’ guidance on economic impacts puts it plainly: a robust figure comes from assessing the additionality of event spending, which means subtracting deadweight, displacement and leakages from the gross new expenditure. Between the gross figure and the honest one sit four subtractions:
- spending by local residents, which would mostly have happened in the area anyway;
- spending by visitors who were in the area for other reasons and simply attended while they were there;
- regular visitors and regular business pushed out by the event;
- money that left the area to pay suppliers, owners and performers based elsewhere.
Every economist who works on events knows these four well. What surprises me is how rarely they appear in the reports that organizers, rights holders and their agencies publish.
Whose money was already in the city?
Start with the residents. A family from across the city that spends a Saturday at a festival is having a good day out, but in economic terms they have moved their weekend budget from the cinema and the shopping center to the festival grounds. The money changed hands inside the same city. The eventIMPACTS method, which the association endorses, goes as far as discounting all spending by local residents as deadweight, precisely because the danger of overstating impact is so real.
Some will object that residents sometimes spend more than they would have, or stay home instead of travelling elsewhere for a similar event. That is true, and careful studies try to capture it. But it is a small correction to a large rule, not a reason to count every local ticket as new money.
Then come the visitors who would have been there anyway. A summer festival on a busy coast draws a large audience that is already on holiday nearby. A congress in a capital city attracts delegates who live and work there. Some people simply shift a trip they were planning for another month. When event tourism is measured honestly, the question is always the same: how many of these people came because of this event, on these dates, and would not otherwise have been here? A short survey question at registration or at the gate can answer that, and it is still left out more often than it is asked.
What did the event push out?
Displacement is the subtraction people find least intuitive, because it is about spending that did not happen. If a city’s hotels are already close to full in a given week, an event that fills them with its own guests may simply replace the business travellers, tourists and smaller groups who would have taken those rooms. Some of them come another week. Some go to another city. Some do not travel at all.
The streets feel it too. Regular shoppers avoid the center when roads are closed. Restaurants away from the venue have their quietest weekend of the season. A cultural program that normally runs on that date is moved or cancelled. None of this appears on an attendee survey, because the people affected were not attendees.
Displacement matters most in large events and in destinations that are already busy, which is why it shapes so many of the questions a host should ask before taking on mega events. It matters least in the quiet months. An event in the shoulder season that fills rooms which would otherwise be empty displaces almost nothing. That is a strong economic argument for moving events away from the peak, and it belongs in any serious answer to seasonality in tourism.
Leakage starts with the purchase orders
A good part of an event’s money never touches the host economy for longer than a bank transfer. The production company is based in another city and brings its own crew. The staging, screens and lighting arrive on trucks and leave on the same trucks. The headline performers and speakers are paid fees that go elsewhere. Hotels owned by groups headquartered abroad send part of their margin away. Booking platforms take a commission before the guest has checked in.
Go line by line through an event budget and these lines turn out to be larger than they look on the summary page. In a music festival, artist fees and production can take the biggest share of the costs, and much of that may be paid to people and companies outside the region. That does not make the festival a bad investment for the city. It means that counting the whole budget as local impact is wrong.
I see leakage as the subtraction the industry can most directly change. Organizers choose their suppliers, and many of those choices are habit rather than necessity. Asking at the planning stage which services could be bought locally, from catering and printing to transport, staffing and technical support, often turns up more options than expected. Local suppliers then have work, the event has people who know the venue, and the next event in that city finds a stronger supply chain waiting.
Multipliers deserve more suspicion than they get
Once the direct spending is estimated, most reports apply a multiplier to account for the knock-on effects: suppliers buying from their own suppliers, workers spending their wages. The idea is sound. The way it is used often is not.
Multipliers vary a great deal depending on the size of the area, how much of its economy is locally owned and how much it imports. A small district with few local suppliers keeps very little of each round of spending. A large, diverse metropolitan economy keeps more. Using a generous national coefficient for a small coastal district, or applying a sales multiplier where an income multiplier would be appropriate, can inflate the final figure considerably without anyone noticing.
My view is that a report should state which multiplier it used, where it came from and why it fits the area, in a sentence a non-economist can read. If that sentence is missing, I treat the total as an upper estimate rather than a finding.
Why does an honest figure serve the organizer?
It is tempting to think that the organizer’s interest lies in the biggest possible number. I think the opposite is true over any period longer than a single bid.
The people who read impact reports are not naive. Hotel associations know their own occupancy. Sponsors compare figures across events. A convention bureau that has seen a dozen inflated studies learns to apply its own discount to the next one. Residents, who carry the closed roads and the noise (the social impact of events that rarely makes a report), are the most skeptical readers of all.
An impact figure that survives a skeptical question is worth more than a large one that does not.
There is a practical side as well. An organizer who knows the net impact can make better decisions: which dates genuinely bring new visitors, which suppliers to bring in locally, which parts of the program attract people from outside and which mainly serve residents (both are valuable, but for different reasons). The same discipline that goes into event ROI for a sponsor or a client, where the cost line is counted honestly and the return is named in advance, applies just as well when the client is the city.
Counting the slow money: suppliers, skills and return visits
Even an honest, net figure captures only what happened during and around the event days. Some of the most valuable economic effects arrive later and are rarely counted at all.
Local suppliers who worked on a large event come out of it with experience, references and, sometimes, equipment they can use again. Temporary staff who were trained properly are easier to hire for the next one. Delegates and spectators who enjoyed the city return with their families or recommend it to colleagues planning their own meetings. A venue that proved itself becomes easier to sell. These are the economic side of event legacy, and they tend to be strongest for events that return every year and build on what they leave behind.
Measuring them is harder than counting hotel nights, and I do not think every event impact assessment needs to be a full study. But a simple follow-up a year later, asking local suppliers whether the event led to further work, asking the bureau whether any new bids came out of it and asking hotels whether event weeks have grown or shrunk, would reveal more about the real return than most of the reports produced on the closing day.
What I miss most in this whole conversation is ownership.
Who in your city is responsible for asking how much of that money was new?