Economic Impact Analysis: A Look at Useful Methods

The total number is a useful figure, but does not show where or how money is spent within the region. Therefore, asking users to list their expenses within several expenditure categories is usually recommended. At a minimum, separate categories for transportation, admission fees, food and beverage, souvenirs, and overnight accommodations should be included. However, any number of categories can be utilized to determine very specific expenditure patterns that may be of interest to sponsors or other special interest groups. The main advantage to this method is that the information collected is specific to the site or event where it is collected, and thus should offer very accurate and relevant data on the resulting economic impact. Additionally, non-economic questions concerning satisfaction, knowledge of other events, and a variety of other variables can be collected at the same time for little or no additional expense.

Determining economic impact through the direct collection of data, however, can be a time consuming and expensive endeavor due to the need for collection and analysis of expenditure and behavior data derived from a sample of visitors. These data parameters can become increasingly difficult when there is very little time to collect data, and when little or no existing baseline data is available for the specific set of visitors in question. Furthermore, if the economic impact to be assessed is for a project or facility that is in the proposal stage, collection of data from visitors is not always possible. One possible solution to this problem is to estimate the economic impact using secondary data sources. This involves the extrapolation of spending averages from previous studies to a new site of interest, and does not require that empirical data be collected. However, it does involve an extensive review of existing data and literature, which may still require a significant commitment of time and effort.

Estimating economic impact from secondary sources requires a three-step process (see sidebar). The first step is to conduct a review of previous studies to identify economic impact analyses that have been completed at other areas. It is important that these areas are as similar as possible to the project under investigation to avoid making inappropriate comparisons. For example, a special event in a small community should not expect to produce a comparable economic impact as a special event in a large city. Similarly, a new softball complex is not likely to produce results similar to those for a recreational trail. The second step in the process is to determine the average expenditure from the studies that were examined in the first step. Although this seems relatively simple, some studies look only at direct expenditures made during visits, while others are more comprehensive and may include spending for durable goods related to recreational use (Moore, Gitelson, & Graefe, 1994). Even within studies of direct expenditures, the spending categories and units of measurement (e.g., per person per day versus per group per trip expenditures) often are not consistent. Thus, determining an average spending pattern from existing data can be complicated and must be done with care to insure that comparison of data is appropriate. Finally, the average spending data should be extrapolated to an estimate of the number of visitors/users that do or are projected to exist for the facility or event under investigation.