What’s in a number?
Well, quite a bit, if you’re talking about projecting the local economic impact of an event. And that economic impact means even more to local residents and businesses when the event is taking place in publicly funded facilities.
Local residents and business owners, rightfully so, want to know what kind of return on investment they’re getting for their tax dollars.
So when Visit Indy announced this week that the city of Indianapolis had landed the 2016 USA Volleyball Girls’ Junior National Championships and that it would carry a $59 million economic impact, a few eyebrows were raised.
The number is impressive, considering it’s bigger than the typical impact of the Big Ten men’s basketball tournament and football championship game combined.
But how could a youth volleyball tournament have a bigger economic impact than almost any convention the city hosts—including this year’s much-ballyhooed National Rifle Association gathering, which had a pre-event estimated impact of $55.4 million?
Anyone who knows anything about youth sports knows it’s a burgeoning market. Those events are no longer just games for kids. They’re big business.
The city already hosts the Capitol City Volleyball Tournament in March, an annual event that brings in 10,000 competitors and 30,000 spectators and has an economic impact of $21.5 million, according to event organizers and city officials.
But that’s well short of the $59 million impact Visit Indy says the new event—which will be held in the taxpayer-funded Indiana Convention Center—will bring in.
Consider, however, that the Capitol City Volleyball Tournament is a three-day event, while the USA Volleyball Girls’ Junior National Championships—which is expected to attract more than 15,000 competitors and 30,000 spectators, according to USA Volleyball—is held over 10 days.
The disparity between the two Indianapolis volleyball tournaments can best be demonstrated in the number of hotel room nights each consumes. Visitors for the Capitol City Volleyball Tournament use 22,000 hotel room nights, while the USA Volleyball Girls’ Junior National Championships is projected to use 62,580, according to Visit Indy and event organizers.
So it would stand to reason that the USA Volleyball Girls’ Junior National Championships would have a much bigger economic impact than the Capitol City Volleyball Tournament.
But then there’s this: According to New Orleans officials, the 2015 USA Volleyball Girls’ Junior National Championships will have an economic impact of $23 million in the Crescent City. That discrepancy had a few folks commenting to the IBJ web site that Visit Indy had invented and inflated their numbers.
Not so, said Visit Indy spokesman Chris Gahl.
First, it’s fair to point out that officials in Minneapolis, where the event is being held this year, are projecting a $60 million economic impact for the 10-day youth volleyball tournament.
But that doesn’t mean that Indianapolis and Minneapolis hospitality officials didn’t both inflate their estimates. Contacted by IBJ on Thursday, officials for the New Orleans Convention and Visitor’s Bureau were sticking by their number.
To be crystal clear: New Orleans officials confirmed that, like Indianapolis’ estimate, their projection measured economic impact. That’s different from visitor spending. Economic impact numbers take into account some local spending, but a number of other factors as well. (I’ll get into that below.)
Officials for USA Volleyball offered one reason for the discrepancy between estimates from Minneapolis, Indianapolis and New Orleans.
USA Volleyball spokesman Bill Kaufman pointed out that the event has been expanded since it was awarded to New Orleans. With two new divisions added, attendance—participants and spectators—has grown from 38,000 to 45,000. Kaufman noted that the 45,000 could be low for Indianapolis.
“Due to its central location, we expect more people may drive in to Indianapolis for the event than [they would for] a more remote location like New Orleans,” driving up overall attendance, Kaufman said.
Still, Kaufman admitted that a disparity of $36 million between the economic estimates of Indianapolis and New Orleans is a bit of a head-scratcher. After all, both of these cities are experienced event hosts.
“Some cities estimate the impact a little low, and others estimate it a little high,” Kaufman said. “Each [convention and visitors bureau] and sports commission has a different way of calculating economic impact, so it’s difficult to compare.”
Gahl scoffed at the notion that Indianapolis’ estimate was high. He said the method for calculating such impacts is certainly not willy-nilly.
“We have no reason to inflate the economic impact of any convention or event,” Gahl said. “It’s not in our best interest or the best interest of the event.”
Of course, those who want to argue the point will say that Visit Indy could be inflating the figures to justify its existence and the funding it gets from local tax dollars.
But consider this: Indianapolis estimated the economic impact of the 2012 Super Bowl at $337 million. New Orleans estimated the economic impact for the 2013 Super Bowl at $480 million. I suppose you could say there’s more to eat, drink and do in the Crescent City, but c’mon, I don’t think it adds up to $143 million. Those figures would seem to counter the notion that Indianapolis estimates everything higher than New Orleans does.
“Economic impact is a measure to help people understand the scale of an event coming to the city … and it’s something we take very seriously,” Gahl said. “We don’t quote those off the cuff.”
New Orleans, which commissions the University of New Orleans to do its economic impact research, isn’t just throwing numbers around either, said city officials there.
Let’s forget New Orleans for a moment. What they estimate really has no bearing on Indianapolis anyway. What’s more important is the methodology—and the reliability of that methodology—that determines how an event will impact Indianapolis.
Visit Indy commissioned Rockport Analytics—a Pennsylvania-based independent market research and consulting company that specializes in various studies for the travel, tourism and hospitality industry—to develop a calculator for tabulating economic impact for events. Rockport has done likewise for dozens of cities and states across the nation.
Things like estimated attendance, hotel rates, percentage of attendees driving vs. flying to the event, length of event and a bevy of tax rates are all plugged into the calculator developed by Rockport Managing Director Ken McGill. More than 100 variables go into the calculator, explained Gahl.
Rockport also does about 5,000 surveys to help come up with the factors to figure out visitor spending for an event in Indianapolis, McGill said.
Readers of a recent IBJ story on the volleyball championships posted comments asking how on earth each attendee to the event could spend more than $1,000. It’s a reasonable question. The number does seem a bit high to me. I don’t know all there is to know about the hospitality business, but I have covered it for 15 years.
Gahl makes no bones about that figure. In fact, the Rockport calculator shows attendees will spend about $1,170 on average during their multi-day stay in Indianapolis.
Here’s how Rockport’s calculator breaks down its total for economic impact:
Air travel: $2.4 million
Ground transportation: $7.43 million
Food: $13.57 million
Hotel rooms: $15.39 million
Shopping: $10.08 million
Entertainment: $3.71 million
That comes out to $52.58 million in direct visitor spending.
The other $6.5 million, Gahl explained, comes from miscellaneous direct (for example, a visitor's tab at a retail outlet of some type) and indirect (for example, an area meat or produce supplier's revenue) spending due to the event.
McGill, an economist who has been working on such formulas for 25 years, insists Indianapolis’ estimates are “conservative,” noting that factors like property taxes paid and other expenditures that would happen without the event are not included in the formula.
“I constantly counsel my clients that it’s best to take the conservative route,” McGill said. “We know economic impact gets a bad name, because so many factors can be added in. Inflating those figures is like crying wolf, where eventually no one believes what you’re saying.
“I find Visit Indy to be very conservative, and I can’t say that about every organization,” he added. “They have no reason to inflate the numbers for effect. They already have a good story to tell.”