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Thursday, July 22, 2010

Is Hosting the Democratic National Convention Economically Beneficial for Cleveland?

Posted By on Thu, Jul 22, 2010 at 2:51 PM

Would this create millions of dollars or just cost millions of dollars?
  • Would this create millions of dollars or just cost millions of dollars?

There's oodles of upside to hosting a national political convention. At least that's how the prevailing wisdom goes. Raise the profile of your city, rake in millions of dollars, boost hotel and restaurant revenue, and get the whole country talking about your little city for weeks at a time. Hell, even the hookers make bank.

But do conventions actually bring the dollars in droves? Or is the initial outlay and loss of business enough to make the money negligible at best and in the negative at worst?

The Denver Business Journal writes today about the fuzzy math in declaring conventions economic successes. As Cleveland, Charlotte, St. Louis and Minneapolis salivate over the prospects of hosting the 2012 Democratic National Convention, the Business Journal looks back at the reports from Denver's turn hosting a convention.

Cities touting conventions as economic moneymakers are throwing around profit margins between $150 and $180 million. After the convention in Denver, a report was released $266 in regional economic boosts.

According to this story, that number didn't account for numerous factors that would leave the supposed number much, much lower. In fact, there's evidence that these large conventions don't have a positive economic impact at all.

Not everyone is dazzled by such appraisals of a convention's positive impact. In May, Philadelphia withdrew from consideration as a Democratic convention site. "Such an effort will not come without significant costs, including financial obligations to be incurred by the city, impact on local residents and businesses, and diversion of attention and resources from key initiatives of my administration,” Philadelphia Mayor Michael Nutter wrote in a letter to party officials.

Back in 2008, I spoke with some economists who study “mega-events,” such as political conventions as well as Olympic Games, who said local planners often fail to fully account for lost business and other offsets when figuring the economic benefits of such events.

They and others often point to the case of Boston, host of the DNC in 2004. The city of Boston estimated shortly after its convention that the city’s economy gained $163.3 million from the DNC. The study did factor in $43 million in estimated economic losses from the convention from displaced events, lost tourism and fewer commutes into the city to reach its estimate of net benefit.

But then, a separate, independent study — by the Beacon Hill Institute at Suffolk University in Boston — found that the Boston DNC triggered $141.9 million in lost business, a much higher figure than the $43 million cited by the city of Boston. As a result, Boston’s net gain from the 2004 convention was just $14.8 million, according to the Beacon Hill study.

That's close to the argument McCrory made to Spanberg: That while national political conventions bring plenty of delegates, politicians and media personnel to town, they also may force some downtown workers and residents to flee and businesses to cut hours or close.

(Via Crain's Cleveland Business)

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