 Bridget Daldy |
by Bridget Daldy; Senior Lecturer in Economics, University of Waikato. The author was part of the organising committee for this tournament and a participant. The major sponsors of the tournament were Hamilton City and the Lion Foundation. Published in the latest (Aug 2003) "Economic Regional Bulletin" by The Economcis Dept at Waikato Management School. Photos of this Event |
Economic Impact Studies?
A case study based on a recent national sporting
tournament held in Hamilton
Economic Impact studies are designed to measure the economic impact of some event on a region that encourages people to spend additional money in that region because of the event. The idea is to try to estimate what the participants, spectators and organisers spent in the region because of the event. This initial expenditure in turn creates other expenditure and this total impact would not have occurred in the absence of the event. Those sectors benefiting from the total impact can be determined using economic models of the region in question. In order to determine the full economic impact of an event, data is collected on direct expenditure by all those associated with the event. This is then fed into an economic model of the regional economy and through the linkages between various industries in the model, the initial and flow-on impacts can be credibly estimated. There are four main impacts that can be identified: Total Expenditure, Net Household Income, Value Added or Gross Regional Product (GRP) and new full-time equivalent (FTE) employment.
The second impact, Net Household Income, gives us information about the purchasing power of residents ofthe region as it measures household income from wages and salaries after income taxes, superannuation andother savings.
The third impact is of the extra Value Added to the regional economy due to all the direct andindirect expenditures that have occurred only within the region under consideration. If materials or services are required to be imported from another region (e.g. containers), then these will not be included in the estimateof Value Added to GRP for this particular region.
The final impact is full-time equivalent employment. This provides an estimate of how many new jobs have been created as a result of this event. Note that one FTE job means one person working 30 hours or more per week for one year. For example, 12 event organisers may work intensively for one month before and during the event so this activity translates into 1 FTE.
Case Study: Masters Hockey Tournament
The Waikato Hockey Association (WHA) hosted the 2003 National Masters Hockey tournament from 9 – 15 March at the Gallagher Hockey Centre. A total of fifty men’s and women’s teams in seven grades participated. All except six teams were from outside the Waikato region. Traditionally masters’ sportspeople are known to be big spenders when they are participating in events away from home. Many teams stayed in motels for the whole week, although some from surrounding areas did commute daily to their games.
Questionnaires were given to each team manager and three copies were given for players from each team to complete. Forms were also handed out during the tournament to encourage players, umpires and supporters to complete the questionnaire. Each entry entitled them to enter a draw to win sponsors products. The questionnaires asked them to estimate how much they had spent in Hamilton during the tournament in accommodation, food, entertainment, retail goods, movies, bars and restaurants, massage or physiotherapy services and any other general areas of expenditure. We were trying to obtain an estimate of what was spent in the Hamilton region as a result of hosting this tournament in the City. Local participants’ expenditure was also recorded as many of them reported spending more than if they had just had a routine week in Hamilton. Food, alcohol and sports related expenditure were probably higher for Hamilton players even if they stayed at home.
One hundred and four individuals out of approximately 840 possible respondents (12%) returned survey formsand their expenditure figures were then scaled by the number of participants and supporters to obtain an estimate of overall participant expenditure as a result of the tournament. The direct expenditure of the organising committee was also obtained and recorded according to expenditure in various sectors of the economy. These two estimates of direct expenditure were then inserted into the 114-sector regional model of the economy.
Total expenditure in sectors such as Accommodation, Retail Trade etc then drive the final estimates of tota expenditure due to the tournament. The regional model used was constructed from data from Statistics NZ over the 1995/96 period. This data was then updated to 2002 productivity levels and prices and calibrated with New Zealand’s GDP for the year ending June 2002. It is then the combined effect of the direct and flow-on expenditure estimates that are used to obtain the overall total economic impact for the region for each of the four measures.
Table 2 shows the breakdown of combined direct expenditure for tournament participants and the Waikato Hockey Association due to hosting the tournament. The participants’ expenditure has been calculated based on the returns from the survey and scaled up to cover all participants.
As suspected, many individuals underestimated their expenditure at restaurants, bars, and other retail expenditure.This was confirmed by comparing the amount received by WHA for the food, bar and clothing sold at the grounds. For example it was estimated that $83,000 was spent in all bars and restaurants in Hamilton, yet nearly $60,000 was spent at the hockey grounds. This means that the direct expenditure is likely to be underestimated, and resulting total impacts of this expenditure will be conservative.
The information on participant’s and WHA’s expenditure in the Hamilton region was then inserted into the 114-sector economic model of the Waikato regional economy. The model shows the total impact of all the expenditure by everyone associated with the tournament, including the Waikato Hockey Association (WHA), as well as the flow-on (subsequent rounds) expenditure generated mainly in the Hamilton City area before, during and after the event.
The following table summarises the various impacts on the Waikato economy of hosting the tournament inHamilton. Impacts are shown for all four measures as defined above.
There were also the equivalent of just over 11 full-time equivalent new jobs created in the Waikato region as the result of this tournament. Approximately ten of these new positions were created as the result of participant expenditure in the Waikato excluding the amount spent by the organisers.
Overall this tournament generated a significant amount of economic benefit for Hamilton City in particular, andthe Waikato region as a whole. Compared to some of the other events that perhaps relied more heavily on funding from a range of sources, expenditure at this event was based on smaller grants than the other events listed in Table 1. Furthermore, masters aged people often have more financial security and are perhaps keener to spend relatively significant amounts at restaurants, bars and accommodation than would younger spectators that are more likely to attend the X-air event or even the more family orientated Balloons over Waikato event.
One of the main benefits of estimating the economic impact of an event is the ability to use the amount todemonstrate to potential sponsors the flow-on effects of these events to their organisation and to the community as a whole. This may encourage organisers to approach new firms or other organisations to help sponsor the event since benefits for these organisations will follow as demonstrated by the total impact estimates.
There are some limitations to take into account when interpreting the economic impact reports. Firstly, sample size and selection is very important, as this must include a sufficient number of respondents from outside the region. Secondly, there is likely to be some underestimation of expenditure in some categories when respondents are surveyed. They may not be willing to reveal their true spending, or could fail to remember the correct amount. Finally, it is important that the correct regional model of the economy be used to calculate the flowon effects. Some regions are more self-sufficient in that flow-ons from the direct expenditure can be captured within the region conducting the event. Less developed regions may need to import goods and services (leakage) in order to conduct the event. In this respect, the Value Added or GRP impact best measures the extent of the gain for regional employees and business units.