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NJ Daily / CONVENTIONS 2012

Big Cash Windfall Unlikely for Tampa, Charlotte

Lit up: Did 2008 really juice Denver’s economy?(AP Photo/Ed Andrieski)

photo of Niraj Chokshi
August 26, 2012

Cities that host political conventions can rake in as much as a quarter-billion dollars or as little as nothing. It depends on who’s doing the math—and what’s in the forecast.

The 2004 and 2008 conventions contributed anywhere from $155 million to $265 million to their host regions, according to city and political-committee estimates. This year, Tampa and Charlotte expect to see as much as $200 million each from the two conventions, according to officials with the host committees. But outside economists say that such projections may exaggerate gains and fail to count losses. The economic effect, they contend, is probably closer to zero.

“Cities are good at adding and multiplying,” said Victor Matheson, an associate professor at the College of the Holy Cross who specializes in sports economics and the impact of so-called mega-events, such as the Super Bowl or the Olympics. “They’re not good at subtracting.”

 

Matheson suggested that—perhaps ironically—the expected impact from Tropical Storm Isaac in Tampa on Monday might actually underscore the additional economic benefits a convention can bring to a host region. That’s because conventioneers in the Tampa Bay area are “stuck there come hell or high water,” while typical tourists would have left already or canceled their trips.

But it’s unclear how significant the economic benefit could be. The first day of the 2008 Republican National Convention in Minneapolis-St. Paul was delayed by Hurricane Gustav, but there is not much data to determine whether that extra free day actually led to more local economic activity. In Tampa, convention-goers will be forced to spend much of their newfound free time indoors. In fact, Florida Gov. Rick Scott during a news conference on Sunday suggested that some convention attendees limit their travel and movement because local bridges and roads might have to be shut down; visitors wandering the city may not be able to get back to their hotels.

In a 2009 study, Matheson and two colleagues reviewed every national political convention hosted between 1972 and 2004, comparing 14 convention towns with 36 similar regions. None of the 18 conventions over that span had any impact on personal income or local employment in the host city, they found.

“There’s no statistically significant evidence that national political conventions make substantial economic contributions to cities,” said Douglas Frechtling, the chairman of George Washington University’s Department of Tourism and Hospitality Management, who teaches graduate courses on destination economics and reviewed the available literature related to conventions. If anything, Matheson and his colleagues were not conservative enough, Frechtling said.

Criticism of official estimates centers on failures to exclude existing activity or to include losses.

Denver reported that the 2008 Democratic convention, where Barack Obama accepted his party’s nomination, contributed $266 million to the city’s metropolitan area. Included in the city’s math was an estimated $26 million from spending on lodging and accommodations. But the report didn’t account for rooms that would have been occupied anyway, economists say. “It’s not like all the hotels were going to be empty,” said Mac Clouse, a professor of finance at the University of Denver’s Daniels College of Business.

During conventions, local residents also go on vacation or work from home to avoid the chaos, thereby denying expected income to restaurants and other shops, Clouse said. And even the benefits from the influx of visitors can be overly concentrated in certain areas, rather than distributed across a city. “The impact is probably still significant,” Clouse said, “but maybe only a half to two-thirds.”

Even so, there’s no guarantee that whatever money is generated will stay in the area, said Matheson, who conducted the convention study. Hotel and restaurant chains may hire a few additional local workers or pay out more in overtime, but most of the profits likely make their way back to the corporate headquarters.

Still, there are intangible benefits. Conventions can introduce thousands of influential journalists, politicos, and businessmen to a host city and region. And the cities get a chance to prove to the world—and themselves—that they can handle such large events.

Economists agree that such events probably produce some benefit, Matheson said. But they have a rule of thumb: “Take the official estimate and move the decimal point one place to the left.”

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