TOUR1004

Economics for
Tourism, Hospitality &
Events

Week 9
Economic evaluation for
special events

Dr Ya-Yen Sun
UQ Business School
Contents of this week’s lecture
1. Some important questions about event and
festival

2. Types of analysis
– Direct Inscope Expenditure
– Return on investment
– Economic Impact Assessment
– Cost Benefit Analysis
Events in Queensland!

https://www.queensland.com/en-au/explore-queensland/brisbane/events
Some important questions to ask

1. More events more merits?

2. Few major events vs. many small events?
3. Public vs. private events?
4. How to carry out an economic evaluation of
special events?
Some important questions to ask

1. More events more merits?

Let us think about benefits of events?

Let us think about costs of events?
 Significance of Events - Potential Benefits
Monetary benefit
• increased visitation in the short and longer term, bringing new money into a
region – business, income, jobs.
• fundraising for community groups, charities.
• a fundamental component of a tourism development strategy.
• generating increased investment in the short and longer term.

Non-monetary benefit
• enhancing the image of a city or region, facilitating business networking
and civic pride.
• recreational opportunities for local residents.
• social and cultural benefits to a destination building ‘social capital’; forums
for cultural expression, continuing education and training, facilitating
technology transfer.
• demonstrate good environmental management
2017 World Championships in Athletics (IAAF), London.
2017 World Para Athletics (WPA), London Source
Significance of Events - Potential Costs

Monetary cost
• add to government debt (opportunity cost)

Non-monetary cost
• adverse environmental impacts such as various forms
of pollution & greenhouse gas emissions
• adverse social impacts such as noise, congestion,
disruption to local business and community backlash
• if poorly run, could damage the image of the region
Some important questions to ask

2. Big events vs. small events?

benefits and costs will be different depending

on the scale of events
Benefits and costs of mega event!

Source
Some important questions to ask

3. Public vs. private events?

Let’s first think about the differences between

public and private events?
• Funding source
• Target audience
public vs. private events

Public events Private events

• Funding source • Funding source
Governments provide financial Private funding
support, including funds to construct
• Target audience
or upgrade the required facilities.
Selected paying audiences
• Target audience
the general public

v They typically do not care about

v Often private firms cannot capture
external benefits or costs.
the social benefits of services
provided as communities may
benefit from direct and flow-on
impacts of events.
Who needs what evaluation?

Private business
Financial analysis – Can we make a profit from this activity? A financial
analysis determines whether a business will generate sufficient
revenues to cover its costs and make a reasonable profit.
Public vs. private events
Public events

The main problem facing any government: what degree of

support, if any, is warranted?

1. Do we want to use tax dollar to subsidize/support around 500 events

per year in Queensland?
2. If Events Queensland only allows sponsoring 100 events per year,
what criteria can they use to decide the final events?
Some important questions to ask

4. How to carry out an economic evaluation of

special events for governments?
Economic Analysis of Events

4. Cost Benefit Analysis More complexity

(CBA) but more informed

3. Economic Impact
Assessment (EIA)

2. Return on Investment
(ROI)

1. Direct Inscope
Expenditure (DISE)
1. Direct Inscope Expenditure
(DISE)

• DISE estimates the level of new money attracted to the

region by event
• Simplest indicator – needs to be accurately measured
• Allows comparison between events

Additional visitor
expenditure = DISE
$ 30 million

$ 10 million

W I T HO UT E V E NT W I T H E V E NT
Fundamentals to any
assessment
Set the system boundaries
1. Define the geographic region
2. What is the time period?
3. What is the baseline (without-event condition)? – What is
predicted to happen anyway? – ‘Business as usual’
4. Describe/predict the difference the event will make and
only measure that. This is called the ‘shock’.
1. Set the regions

• The geographical (economy) boundary of the host

region for the event needs to be clearly defined.
• Distinguishes between local residents and
visitors to the event.
• Defines whether income received and expenditure
made comes from within the region or outside.
2. Set the time period
1. Pre event activity
– can include infrastructure construction, augmentation, marketing
etc.

2. During event
– visitors, supply side activity

3. Post event activity – Legacy

– can include increased visitor numbers, sale of assets
3. Set the baseline
• What is the predicted ‘business as usual’ situation?
E.g. how many visitors were coming anyway?

• A mega event spans a long time from inception to legacy

• What is the projected economic, employment growth
anyway?
e.g. for the London Olympics 2012 – predicted economic growth over
2005 to 2012 was estimated as the baseline
DISE = ‘New’ or ‘Inscope’ expenditure

• Only that proportion of expenditure which represents an

injection of ‘new money’ into an area due to the event

• Covers the event-induced expenditure made by: visitors,

spectators, participants, competitors/entrants, team
managers/support staff, officials, media, VIPs, event
organisers, corporate incentive groups, friends/family of
those connected to the event.

• ‘New expenditure’ is that which would not have occurred

in the host region had the event not taken place.
 DISE inclusions & exclusions
Expenditure by Include
1. Residents
2. Residents retained
3. Visitors
4. Visitors – casuals
5. Visitors – time switchers
6. Organisers & sponsors
Who attend event, buy merchandise; $s would have
No
been spent in region anyway (transferred)
Exp by residents that would have occurred outside
Yes
region if event held elsewhere. Difficult to identify.
Yes Visit for the event
No Would have come to region anyway
Just changed timing of visit, would have made it
No
anyway
Yes New money to region for the event
2. Return on Investment (ROI)

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• May want to report on ROIs for:

– separate public and private components of cost
– separate event operational costs and infrastructure
capital costs
• Often used to assess performance of government
investment
• Used to compare events
2. Return on Investment (ROI)

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event operational costs and

infrastructure capital costs

1. Often used to assess performance of government investment

2. Used to compare events
Need for transparency &
accountability
Tourism industry growth and development
Queensland Audit Office, Report to Parliament 3 : 2012-13

• ‘Events Queensland cannot adequately

demonstrate that it is providing value for
money from the public funds it receives’ .

• ‘Events Queensland overstates its share of

the return on investment when reporting
internally on major event results.’
3. Economic Impact Assessment

Flow-on effects Economic impact:

(direct, indirect and induced): GDP
Direct In-scope
Jobs
Expenditure
Income
Economic impact
analysis Tax
Economic impact assessment of
Victorian Grand Prix

• Impact of the 2011 Grand Prix on the Victorian economy

• Inscope expenditure:
1. interstate and international visitors (came for GP)
2. retained expenditure (Victorians who would travel to alternative
GP location)

https://youtu.be/3KTT0QCuVXg
Economic impact assessment of
Grand Prix –results for 1 year
• 26,699 visitors from interstate, 89% due to GP
• 11,740 international visitors, 73% due to GP
• Increased Victorian Gross State Product (GSP) by
between $32 million and $39 million
• Created an additional 351 to 411 jobs in the State.

(Tourism Victoria 2011)

Full story on Grand Prix?
Limitations of economic impact assessment:

1. Does not show national or other states’ impacts (loss of

expenditure)
2. Does not show cost to Victorian Government (in 2011
was reported to have risen to $50 m)
3. Does not show costs and benefits other than visitor’s
expenditure
Summary
Positive monetary effects Positive non-monetary effects

DISE
EIA
ROI
Negative Negative
Monetary effects Non-monetary effects
Benefit Cost analysis (B/C)
• Benefit Cost analysis (B/C) – Which alternative policy will
generate the highest net benefit to society over time?

• A B/C analysis estimates the relative economic efficiency of

alternative policies by comparing benefits and costs over time. B/C
analysis identifies the most efficient policies from the perspective of
societal welfare, generally including both monetary and non-monetary
values.

• CBA is concerned with:

– Benefits and who gets them
– Costs and who bears them
– Environmental or social benefits and costs are also included where possible
Events and festivals
Positive monetary effects Positive non-monetary effects

B/C B/C

Negative Monetary effects Negative Non-monetary effects

B/C B/C
REVIEW
Let’s go back to those important
questions

1. More events more merits? No

2. Few major events vs. many small events? This can
be assessed through the CBA analysis
3. Public vs. private events? A balance is required
4. How to carry out an economic evaluation of special
events?
Private events – financial analysis
Public events – DISE, ROI, EIA, CBA
Key points for people working in
events
• Transparency and accountability is vital, especially where
public funds involved

• Evaluation is key to arguing for events and gaining public

funding
1. Simple evaluation focuses on “Inscope expenditure”
2. Return on Investment used by governments to evaluate
alternatives
3. Economic impact assessment based on “Inscope expenditure”
4. BCA is comprehensive, should be used if significant public
funding or significant social or environmental impacts possible.