Writing Economic Impact Stories Minus the Hype

By Jonathan Higuera
December 5, 2007 01:45 PM

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With the teams selected for this year’s college football bowl games, it shouldn’t be too long before business reporters start getting called on to do stories on the economic impact of the game from the visitors it will bring to a city or region.

For the most part, the reports generally amount to the same conclusion and headline: “Bowl game pumps millions into local economy.”

To be sure, anytime out-of-town guests visit your city, stay in your hotels, eat at restaurants and buy souvenirs to take to back home, there is a financial boost, particularly for those in the tourism and retail sector.

But before you start quoting figures from the reports and become the new best friend of the local chamber of commerce or convention and visitors bureau, you might want to take some time to figure out the source of the figures and how they arrived at the numbers.

The reason: more often than not the benefits are overstated.

To help you keep it real for your readers, here are some suggestions you might want to consider as you pore over the finer points of the study:

1. Many economic impact studies don’t factor in what it costs to host such an event. It’s simply not part of the equation. The Super Bowl may bring in a ton of guests but if the report doesn’t calculate the outlay by taxpayers to build facilities, pay overtime to traffic police and provide other essential city or state services, it’s not giving the full picture.
2. Keep an eye on the multiplier used to come up with indirect revenues. Often, economic impact studies will use an unrealistic multiplier. In general, a multiplier of more than 1.4 is way too much, says Allen Sanderson, a sports economist with the University of Chicago.
3. In a post-911 world, security costs are now a much bigger consideration. See if the report includes any of those costs. If not, ask why.
4. Many reports will list the number of jobs created. But they may not disclose whether most of those jobs will be full-time or part-time. Just to pick a figure, an event could create more than 2,000 jobs but if each worker averages less than 10 hours per week, the economic impact is obviously much less.
5. While out-of-town guests provide the greatest economic impact because they bring in new dollars to a local economy, some studies lump in anticipated spending by locals. That can disingenuous because local spending often means that those entertainment dollars won’t be spent elsewhere in the local economy. In other words, they may go to the college bowl game but it probably means skipping a concert or play. “People have fixed leisure budgets,” says Andrew Zimbalist, a sports economist at Smith College.
6. For the most part, there is no set methodology for an economic impact study. Authors are usually free to emphasize the figures they choose. This latitude often can result in reports with wildly differing conclusions and final projections.
7. Finally, keep in mind that economic impact studies are forecasts. As such, they don’t figure in uncertainties such as weather or other events that could lower the anticipated impact. For example, the 1996 Olympics in Atlanta didn’t anticipate a bombing incident.

These points are not to discourage anyone from filing stories on economic impact forecasts. But before you conclude that everyone is a winner, make sure the assumptions match the reality.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism