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The Next Economy | Big Questions

Austin's Weird Festival-Based Economy

How does the home of SXSW deal with the challenges of loud music venues and constantly exploding tourist populations? By recognizing these are good problems to have.

Talib Kweli performs at SXSW in Austin, Texas, on March 11, 2013.(John Sciulli/Getty Images for Samsung)

photo of Elahe Izadi
October 2, 2013

AUSTIN, TEXAS–Austin isn't a city short on mottos. Austin officially calls itself the "Live Music Capital of the World," while bumper stickers demand to "Keep Austin Weird," an homage to the eclectic character of the city. Both sayings speak to Austin's unorthodox economic base: cultural and technological festivals.

The creative sector, and by extension, music tourism, are huge drivers in the local economy. In 2010, more than half of the tax revenue generated by Austin's creative sector came from tourism, according to a study conducted by Austin's city economist. One-in-five creative-sector jobs were in music tourism. South by Southwest—or SXSW, as its popularly known—perhaps the city's most famous festival, injected more than $190 million into the local economy in 2012, according to an economic impact analysis. Even during a recession, the creative sector grew; between 2005 and 2010, the creative sector grew by 25 percent, compared with 10 percent growth for the entire local economy.

That growth doesn't come without challenges. Austin's biggest festivals mean mass movements of people in and out of the city. Trying to run a functioning city that contracts and expands during festival weekends can be a tall order. On top of all that are the large number of new residents moving to Austin, the fifth fastest-growing large city in the country, according to 2012 U.S. Census Bureau data. National Journal recently sat down with Austin Mayor Lee Leffingwell to talk about how the city juggles the demands of all these festivals—and how to keep Austin weird.

 

What role do large-scale festivals and events play in Austin's economy?

They play a big role. You may have noticed an article in today's paper about hotel reservations for Formula1, which is one of our three major events. They're talking about some of these being five-digit per-night room costs, suite costs. That kind of blows my mind to even think about. I'm kind of a Motel 6 kind of guy. All those rooms are going to be rented for the duration of Formula1, and it brings a huge impact. Last year we were estimating an economic impact of about $300 million to the Central Texas region just from that event alone.

SXSW is a 26-year-old event that began as a music festival, but now it's morphed to not only that but film and interactive media festival as well. It continues to grow and attract people from all over the world. And of course, Austin City Limits is still the pure music festival that's here. In 2010 alone, music tourism was responsible for $28 million in tax revenue and 10,000 jobs. So that's a big part of our economy.

What challenges does Austin face in accommodating such large influxes of people and one-time yearly events?

People who live here are oftentimes not too interested in having their normal routine disturbed a little bit, with additional traffic problems and so forth. Sometimes it becomes difficult to communicate the total benefit of events like this. We can sit down and quantify how much sales tax did we get, how much hotel tax, and how much car rental-tax. But the actual impacts are actually far greater than that. As these people come to town, they go out to a restaurant and eat, go to some kind of live music venue and pay an admission charge, go to a hardware store and buy a souvenir. It permeates throughout the economy. It's the total economic effect, and that's sometimes hard to explain.

You mentioned traffic, for instance, being one challenge. How do you manage something like that when you have major events?

With Formula1 last year, there were more gloom and doom scenarios than you could count. Frankly, we were worried. I was worried. People were talking about being stuck in traffic for 12 hours. So we developed a good plan, we enlisted the county, we enlisted some military folks from the [National] Guard, brought in buses from all over the state. But I don't think anybody experienced a delay. Most of them were in the 30- to 40-minute range, or at the most an hour.

What about something like your police force? Is there a mass mobilization of all the city resources to handle the biggest events?

Pretty much. It's kind of a no-vacation time for most of the police officers. [We activate] the emergency-operations center that we have for disasters, to try and coordinate all their efforts and make sure we manage traffic right. So it isn't just something you let happen. It has to be organized.

Are there any concerns that the types of jobs created by the tourism industry are not well-paying enough or long-lasting enough to sustain Austin's economy in the long-term?

There's always been that concern—particularly, that there are so many musicians in and around Austin. But there are a lot of private-sector groups that have sprung up to help, like the Health Alliance for Austin Musicians, providing health  care for folks in that industry who need it. That's supported by the private sector. The city has a very minor role in that, but we try to make it easy for them to do business here.

Usually people think of the creative sector as one that suffers the most during an economic downturn. How has it been able to thrive in Austin, and is there a concern that it could be affected in the future?

It's intuitive to me that a lot of entertainment venues will do well. In hard times, people are looking for diversions. Musicians kind of roll with the punches. They're used to hard times. In many instances, they're dedicated to finding a career in that business and they will endure hardship. But it continues to flourish here in Austin, and as I said, we try to do everything we can to help that.

Does some of that have to do with regulatory environment? What can a mayor do to allow and encourage the creative sector to blossom?

We take a lot of grief for noise, frankly, from music venues. So we've tried to plan and lay out an entertainment district in Austin—which is mainly Sixth Street and Red River Street—and to try to encourage people to [realize] this is not the place to build an apartment building, this is not the place to build a high-rise condo. We also just established a fund for loans to music venues so they could insulate their performance areas and hire experts so that they won't generate noise. It has to do with what direction is the wind blowing and what direction is your stage facing and all those kinds of things. The rollover loan program will help mitigate those, because we have to be responsive to people who live here already and very upset about the noise. Musicians have a tendency to stay up really late at night and play their stuff.

We do have a music office that is part of our economic growth department, with a dedicated employee to work with music professionals and music groups all around the city.

As cities become more popular and attractive, there is sometimes a concern that the cost of living increases and it becomes too expensive for creatives to live and work in those cities. What can Austin do, and what can you do as mayor, to ensure that the unique character of Austin is intact, since that's what attracts so many people to this city?

That's a tough question, because when you look at strong economies anywhere in the country, the cost of living is going to be higher. It's just a natural phenomenon. But we do have programs for city bond money to be spent on affordable-housing complexes. We do a good bit of that, and we have another ballot initiative. Our one last year failed, voters didn't approve it, so it's going to be on the ballot again this year: $65 million, basically for housing for low-income people.

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