Big events like the upcoming national political conventions are often praised by organizers as big money makers for the local economy. But do promises of huge financial benefits always come to fruition?
Committees for the Democratic and Republican conventions expect Charlotte, North Carolina, and Tampa, Florida, each to profit between $150 million and $200 million this year.
Another report from Tampa-based research firm Jones Lang LaSalle estimates the host city for the RNC can expect $140.6 million in total direct spending, while the Democratic National Convention should bring $122.1 million in direct spending to Charlotte.
The economic boost for these host cities is expected to benefit hotels, restaurants, recreational areas and metro-area businesses. The GOP convention in 2008, held in Minneapolis/St. Paul, attracted 50,000 visitors to the city, the same number Tampa expects next week, and brought in $168 million in direct and indirect spending, according to a report from the Host Committee.
But some economists are saying not so fast, some of these estimates -- reported by organizers of the event -- may be a bit skewed since they did, of course, come from those in charge of the event.
The estimates leave room for debate. For instance, if the estimated financial benefit of a large event for a local economy includes government spending on security and transportation, some question whether that money could be spent elsewhere or possibly left in the taxpayers’ pockets for them to spend however they choose.
Estimates for big events often apply what’s known as multiplier effects, which refers to the idea that when jobs are created around the event, the people who fill them then spend money at other local businesses, so the initial spending effect is multiplied. But the local benefit may not be so great when workers from out of town come in and fill those temporary positions, or when profits made from inflated hotel rates go to big out-of-town corporations.
But the host committee for the GOP convention coming up in Tampa says the estimated economic impact of $175 million to $200 million is based on “hard numbers” -- funds raised by party donors or specifically allocated by the RNC or the Department of Homeland Security. That estimate does include spending by visitors to the city, but doesn’t include multipliers, which makes the expectation more realistic.
But the report from Jones Lang LaSalle shows that conventions may not be so directly beneficial to local businesses. Worker displacement can have a huge negative effect on businesses in the area. For example, Bank of America, Wells Fargo and Duke Energy employ more than 35,000 workers in Charlotte’s Uptown area (where the convention will take place) and most of them take advantage of nearby shops and restaurants for meals and other daily errands. But a lot of them won’t be there the week of the DNC, as some companies will close downtown branches during the event.
So if all of those workers aren’t there, what do local businesses stand to lose? If each worker spends an average of $12 a day in that area, and none of these employees came into work for a week due to the convention, then local businesses in the Uptown area would be missing out on $420,000 a day. Then there are thousands of employees who commute to the area everyday and spend money at nearby businesses, and if they also avoid the area, that’s even more of a loss for local business. Jones Lang LaSalle estimates a total loss of $585,000.
Businesses in Tampa’s downtown area may also tell workers to stay away during the RNC. There are about 25,000 office employees in that downtown area, and once more access points are closed for security, the loss for local businesses could be big. Jones Lang LaSalle estimates a $150,000 total loss. And on top of that, since the Democratic convention will overlap with one of the busiest travel weekends of the year, Labor Day weekend, Charlotte will lose potential visitors and tourists. The average price of airline tickets to and from Charlotte for that weekend is much higher than usual and an increase in the cost of travel to the city could deter potential visitors.
The large number of people the conventions attract to these cities does benefit hotels in the area. According to a TNS Travel America Survey and Charlotte Regional Visitors Authority, in 2011 the average length of stay for visitors in Charlotte was 3.78 days and the daily hotel rate was about $133.76. Many visitors coming for the Democratic convention will likely stay five nights, from the kick-off event to President Obama’s acceptance speech, and a lot of hotels will reap the benefits of that longer-than-usual stay.
For the first week of September, 15,000 rooms in 150 hotels have been contracted out for people directly involved with the Democratic convention. If the rooms are discounted 10% below the 2011 price of $133.76, the hospitality sector in Charlotte could bring in $1.8 million of revenue for the hotels each night, according to estimates from Jones Lang LaSalle. That would be a total of $9 million in revenue for the week.
And of top of that, there are visitors in Charlotte during the convention and they also need a place to stay. Visitors are expected to book another 27,500 rooms and those rooms most likely won’t be discounted. Visitors could potentially spend more than $12 million on hotel rooms during the week, which means the Democratic convention could potentially bring in more than $21 million for Charlotte’s hospitality sector.
At the same time, there can be other financial benefits to hosting a convention besides money spent directly in the area by the host committee and visitors. Hosting a national convention means there will be a lot of press about the city itself, what’s going on there and what the city has to offer. Hosting an event that big also then opens up more opportunities for the city to host other large events. And cities that host national conventions most often benefit from the lasting improvements related to the event. Conventions usually don’t just roll into town one day and out the next. A lot of preparation typically goes into these events including landscaping, improved telecommunication systems and other infrastructure projects that will benefit the surrounding community for a long time.
Companies like AT&T will invest in improvements in Tampa in an attempt to attract more business once the convention is over. Rich Guidotti, vice president and general manager of AT&T, told the Tampa Bay Business Journal that the company plans to expand its Wi-Fi coverage and install 1,500 miles in new cell sites in Tampa, which will cost about $20 million.
“We’ve redirected a lot of capital dollars that were going other places to make sure that Tampa has the best wireless connectivity that we can possibly provide to those coming to the meeting at the end of the month, but more importantly the folks who are going to be here afterward,” Guidotti said.
Overall, the conventions should have a positive financial affect on both Charlotte and Tampa. Jones Lang LaSalle researchers found that the Democratic convention in Charlotte will not only provide a boost for the local economy, but it will put the Southern city in the worldwide spotlight. After analyzing the effects of crowding, worker displacement, host committee spending and visitor spending, the total economic impact of the convention on the local economy should be about $128.7 million.
Tampa can expect an even better economic benefit. After combining the negative and positive financial effects on the area, the Republican National Convention is expected to bring in $173.3 million to Tampa’s local economy.