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Monday, March 07, 2005

Another bogus(?) economic impact study

Over at The Sportseconomist, the Eclectic Econoclast discussed the mayor of San Francisco's prediction that hosting this year's MLB All Star game would yield a tourism effect of 250,000 visitors to his fair city. The Econoclast rightly asks whether the numbers are valid.

Of course they are probably not. This doesn't mean that there wasn't a study that predicted such numbers, but it likely included (implicitly or explicitly) the thousand or so economists that will show up for this year's Western Economic Association meetings. Most impact studies associate all tourism in a given location to a specific event or set of events, regardless of the true reason a person shows up as a tourist.

Enter Exhibit C in this continuing saga of bogus impact studies (for me, Exhibit A is the economic impact study solicited by the city of Arlington and the Cowboys about the new stadium we are building [available here]). This new study proports to find that Disney Land contributes something close to $3.6 billion (!) to the southern California economy.
As the No. 1 theme park destination in the western United States, Disneyland Resort in Anaheim contributes $3.6 billion in annual economic impact and supports about 65,700 jobs in Southern California, according to an economic impact study released Friday by Disneyland Resort. The research was conducted by CB Richard Ellis, CBRE Consulting and Allan D. Kotin & Associates.

Specifically, the study reveals that the resort generates $3.6 billion in third-party annual economic impact to non-Disney business throughout Southern California and that resort visitors who stay in Anaheim hotels and surrounding locations generate $225 million in taxes to Southern California cities and counties.

Hmmm. Roughly ten million people a year visit Disney Land? Okay.

Here in Arlington we have Six Flags, a Water Park, and the Rangers and the city claims 6 million tourists a year. The entire Arlington economy is roughly $4 billion, and while there is a lot of leakage in the case of Arlington (after all there are a lot of neighboring cities that people either stay or come from), I am not sure that Disney Land contributes the equivalent of the entire economy of the 49th largest city. The number doesn't pass the smell test.

I haven't seen the actual study, but using the simple multiplier story almost universally used in these studies, we can do some back of the envelope calculations. If we use a range of 0.5 to 2.0 for the multiplier effect (studies usually assume a large multiplier effect) and assume no leakages from spending in the SoCal area (again, a usual assumption) then $3.6B = (1+M)D, where M is the multiplier effect and D is the direct spending. The direct spending is then somewhere between $1.2 Billion and $2.4 Billion.

If ten million people a year visit Disney Land (I would wager this is turnstile count not individuals), then the average expenditure per person is then between $120 and $240 per turnstile count. Even if all people come from out of town, stay in hotels, eat, and there are no leakages and substitution effect, maybe this range would be reasonable. However, there are leakages (all money spent in the area does not stay in the area) and there are substitution effects (not all spending is "new" spending).

A family of four, in town for a day at the park would spend between 4x130= $520 and 4x260=$1040 on the excursion per day - not counting transportation to and from the area. In 2004, Disney's adult one-day admission was $50 and a child's one-day admission was $40. It would seem there could be considerable leakage from the $180 spent on admission to the park for a day.

A couple of questions.

1. Anybody out there taken the fam to Disney Land?


2. Can we get a moratorium on economic impact studies?

Hi -

Yep, we took the kids to Disneyland last year, 33 years to the day that I went there.

Cost us, exclusive getting to LA and accomodations, around $300 for the day. Entrance was around 1/3rd of that, the rest was in food and drinks - got keep hydrated in a place like that, it was August 2002 and nary a cloud in the sky - and loot.


PS: No moratorium on economic impact studies, just a moratorium on letting any dweeb with an abacus from doing them. Which, unfortunately, seems to be the case.
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