Quantifying the Economic
Impact of Community Events
Steven R. Miller: Director
Center for Economic Analysis
Presented at:
MSU Extension Conference 2007
October 9 - 11, 2007
Michigan State University Kellogg Center
East Lansing, MI
What Community Events Give Rise
to Community Economic Impacts?
Conferences
Trade/Specialty Shows
Arts Fairs
Carnivals and Festivals
Concerts
Home and Garden Shows
County Fairs
Sporting Events
Runs
Charity Events
Any non-continuous event that may draw in outside visitors to the
community, or entice local residents to remain in the area that would
otherwise visit other communities.
Public Budget Concerns
• Program evaluations are more commonly
found today
• Increasing pressure to justify public
investment
• Sound evaluation can be instrumental
in getting public buy-in
• Is it worth the effort?
Economic Impacts of Community
Events
• Can be used to estimate benefit/cost of
public investment
• Can be instrumental in gaining public
support
• Can be used to gain corporate
sponsorship of events
• Can be combined with other studies to
measure the economic impact of tourist
activities within the community
Project Appraisal vs. Evaluation
• Project appraisals: What is expected to
happen
– used in the process of deciding if resources
should be applied to the project
• Project Evaluations: What did happen
– used in the process of reviewing the
performance of a project
Measuring the Economic Impact of
Community Events
• Three components make up an economic
impact
– Direct Impact
– Indirect Impact
– Induced Impact
Direct Impacts of Events
• Purchases directly linked to the event itself
– Local purchases for event
– Patrons’ purchases while at event or within
the event’s host community
– Vendors’ purchases while at event or within
the event’s host community
• All purchases must be directly attributable to the
event and remain within the region
• Purchases that would have taken place in the
absence of the event should be excluded
Indirect Impacts
• Secondary effects that are derived from
the direct impacts
• Direct expenditures lead local suppliers to
purchase more inputs. Some of these
purchases are local.
• These secondary purchases by local
businesses represent the indirect
impacts
Indirect Impacts, Cont’d
• Rodeo event buys $100 worth of feed grain
from a local wholesaler
• Local wholesaler buys $75 of feed from local
farms
• Local farms buy $50 of seed and fertilizer
from local supplier
• Local supplier buys $15 of packaging
material from local producer
• Total impact = 100 + 75 + 50 + 15 = $240
Induced Impacts
• Secondary effects that are derived from
the direct and indirect impacts
• Local business owners, suppliers, and
employees spend the additional income
that they earn. Some of these purchases
are local.
• The secondary purchases from additional
revenues represent the induced impacts
Induced Impacts, Cont’d
• From Rodeo example,
– Feed supply wholesaler is able to pay workers
to work more hours as well increases profits
– Both wholesale business owners and workers
have more money to spend. Some is spent
locally
– Beneficiaries of additions purchases also
have more to spend; a portion is also spent
locally
Total Impact
• Is simply the sum of the three component
impacts
Total
Impact
=
Direct
Impact
+
Indirect
Impact
+
Induced
Impact
• In practice, the total impact is calculated
as a multiple of the direct impact
 Total 
 Direct 

  multiplier  

 Impact 
 Impact 
Total Impact
multiplier 
Direct Impact
Economic Multipliers
• The larger the local economy, the larger the
multiplier
• Some industries have larger multipliers than
others
• Generally generated by computer models
– RIMS II: Bureau of Economic Analysis
– IMPLAN Pro: Minnesota IMPLAN Group
– MITEIM: Daniel J. Stynes, MSU
– Expert Judgment: Any expert near you
Estimating the Direct Impacts of a
Community Event
• Direct impacts
• Must be directly attributable to the event
• Would not have occurred without the event
• An accurate measure of the direct impact
is vital
– facilities preparation
– patron spending
– vendor and exhibitor spending
Direct Impact of Facilities
Preparation
• In many cases, event hosts will
purchase, rent, or hire for site
preparation
– Such purchases meet our criterion
• Directly linked to the event,
• Would not occur without the event
– They should be purchases to local providers
Direct Impacts of Patron
Expenditures
• Patrons will likely spend money both at the
event and in the surrounding community
– Spending by local residents should not be
counted unless they stayed in town because
of the event
– Spending by visitors from outside the
community should be counted
Direct Impacts of Vendors
and/or Exhibitors
• Vendors are also likely to spend money
both at the event and in the surrounding
community
– Expenditures of local vendors should be excluded
while those of outside vendors should be included.
• Vendors also make sales
– Sales of local vendors should be included in in the
direct effect, but sales of outside vendors should be
excluded. Don’t double count patron expenditures
and vendor sales.
Direct impacts of Patron
Expenditures
• Event patron expenditures are generally
measured in common units
– Party-visits may be the best unit of measure
– Party expenditures are generally easier to manage
than person expenditures
 Direct   Number   Average Spending 

  
  

 Effect   of Visits   per Visit

Estimating the Number of Visits
• Gated Events
• Non-Gated Events
• Single-Venue Events
• Multi-Venue Events
Estimating the Number of Visits,
Cont’d
Estimating the Number of Visits,
Cont’d
• Augment counts with
– Vehicle counts
• If you find that there are 20 people per car,
something’s amiss
– Vending sales
• If you find that vending sales per person is $100,
one must wonder…
• Local businesses can be queried as well
for indication of patron activity
Using Surveys to Estimate Patron
Spending
• Surveys are a flexible means toward
understanding
–
–
–
–
visitor spending
characteristics
experience
perceptions
Using Surveys to Estimate Patron
Spending, Cont’d
• Two vital questions must be addressed for
patron surveys
– Where do you live?
– How much did/will you spend on X while in the
community?
• Three vital questions must be addressed for
vendor surveys
– Where do you live/do business?
– How much did/will you spend on X while in the
community?
– How much did you sell?
Using Surveys to Estimate Patron
Spending , Cont’d
•
We need to separate local patrons from
tourist-patrons
1. Tally attendees
2. Include this as a question on survey
•
Requires a representative sample of
attendees
– All attendees have an equal chance of being
surveyed
Selecting Sample Size
First estimate the variance of spending by visit, if one is not already known.
  
2
 estimated  1
1Expenditure 
2

  625  
 $200  $100
16  16Range 
 variance 
Then estimate the total number of samples needed to be within a range or
tolerance.
4  variance
4  $625
n  25 
tolerance
$1022
Since we are only using tourist spending to form direct impacts we need 25
completed tourist surveys. If we expect 1 out of ever 4 visits to be tourists,
will need 100 completed surveys to get 25 completed tourist surveys.
100  25 / .25
Selecting the Method of Survey
• If contact information is available for all
attendees, a phone interview or mail
survey may be best.
• If not, on-site contact is required.
– Conduct on-site surveys
– Collect representative sample of contact
information
Selecting the Method of Survey,
Cont’d
• Off-site
– Mail Surveys
– Phone Interviews
• On-site
– Self-Administered Surveys
• Completed at event or mailed upon return
– Interviews
• Combined On- and Off-site
Writing Surveys
• There exists several resources for writing surveys
– Julie Leones, A Guide To Designing and Conducting Visitor
Surveys
• http://www.ag.arizona.edu/pubs/marketing/az1056/
– Daniel J. Stynes, Guidelines for Measuring Visitor Spending
• http://www.msu.edu/course/prr/840/econimpact/pdf/ecimpvol3.pdf
– Mike Woods and Suzette Barta, Estimating Impacts of Tourism
Events: Methodology and a Case Study
• http://www.ag.iastate.edu/centers/rdev/net2002/handouts/woods.pdf
– Steven Miller, Quantifying the Economic Impact of Community
Events
• http://www.cea.msu.edu/
Writing Surveys, Cont’d
• Michigan Tourism Spending and Economic
Impact Model (MITEIM) has the following
spending categories
•Motel, hotel cabin or B&B
•Camping fees
•Restaurants & bars
•Groceries, take-out food/drinks
•Gas & oil
•Other vehicle expenses
•Local transportation
•Admissions & fees
•Clothing
•Sporting goods
•Gambling
•Souvenirs and other
expenses
Direct Impacts
• Extract direct impacts per visit from surveys and
per vendor as the average total expenditures by
spending category
– Each spending category has a direct Impact
calculated as
 Direct   Average Expenditure   Number of 

  
  

 Impact   per Tourist Visit   Tourist Visits 
• Collect the event preparation impacts and
assign them to spending categories
Using Direct Impacts
• Direct Impacts must be adjusted to reflect the
regional area capture rate of spending category.
• Capture rate represents the proportion of local
expenditures that will have a direct impact on the
local community.
– The MITIEM model does this automatically. Hence,
the user need only add the direct impact as calculated
above.
– IMPLAN has the option to apply its own capture rates
or customized capture rates
– RIMS II requires users to estimate capture rates
Using Direct Impacts from Surveys,
Cont’d
• Each spending category has a total impact
calculated as
 Total 
 Direct 

  multiplier  

 Impact 
 Impact 
• Were direct impacts are adjusted for the local
capture rates
Total Community Economic Impact
of Event
• Add up the total impacts of each spending
category to get the total community impact
of the event
For Further Information
• Daniel J. Stynes’ web site (MITEIM Model)
– http://www.msu.edu/~stynes/
• The Center for Economic Analysis
– www.cea.msu.edu/