Economic Impact Study Report. Subject: Proposed Hopkinsville, KY, Sports Center. Prepared by: Pinnacle Indoor Sports. Date: October 2016

Transcription

1 Economic Impact Study Report Subject: Proposed Hopkinsville, KY, Sports Center Prepared by: Pinnacle Indoor Sports Date: October 2016 P I Sports, LLC 2714 W. Rainmaker, Prescott, Arizona Telephone: (928) steve@pinnacleindoor.com

2 1 P a g e Hopkinsville, KY, Court Sports Economic Impact Study 2016 Executive Summary In the spring of 2016 Pinnacle Indoor Sports completed a market study for an indoor sports complex to be located within Hopkinsville, Kentucky based on a request by the City of Hopkinsville. During the summer of 2016 Pinnacle Indoor Sports then constructed Pro Forma Projections for the proposed Hopkinsville, KY, sports complex for the City of Hopkinsville. Utilizing those documents, and state and local sport activity and tourism spending figures, Pinnacle has developed this report on the economic impact projection for the proposed indoor sport complex development. The report includes the estimated economic impact of: tournaments and special events for both local and out-of-town attendees of basketball, volleyball and futsal tournaments (sustainable in Year 3 and beyond) re-occurring programming activities of basketball and soccer (sustainable in Year 3 and beyond) construction impact (one-time impact during construction) on-going payroll and labor (Year 3 and beyond) Pinnacle has calculated an estimated direct and indirect economic benefit to the community of hosting 10 tournaments and eight annual re-occurring programming activities comprised of basketball, volleyball, soccer and futsal plus the benefits of additional payroll and wages at the facility to be approximately $3.4 million per year. This is the combination of: Tournaments and special events $1,969,228 Re-occurring programming $1,160,352 Payroll and labor $270,107 The one-time impact of construction is estimated to be $1,843,200, which is 40% of the total estimated construction budget of $4,608,000. See Attachment A - Economic Impact Calculations for Hopkinsville, KY. Overview of the Economic Impact Study The purpose of the economic impact study is to evaluate the potential contribution of the indoor sports complex for positive economic impact within the City of Hopkinsville. The economic impact and contribution of the sports center has also been analyzed by Pinnacle. Pinnacle assessed the immediate economic impact of these facilities based on an assessment of the facilities projected contribution to tourism through visiting teams and players and increased local spending and payrolls. This economic impact includes an estimate for room nights and daily expenditures. The indirect benefit of the proposed complex would include additional benefits such as repeat/return visits and other positive financial impacts that the advertising and marketing campaigns would have on non-sports tourism visitations. Indirect benefits are the changes in

3 sales, income or jobs in sectors within the region that supply goods and services to the tourism sectors. These indirect benefits come from activities created by the direct benefits. It should be noted that the Economic Impact Study is based on certain assumptions regarding the financing structure, the business and management model, regional and national economic trends, the need to market and effectively manage high-quality programs geared toward sports teams from outside communities, and the competitive landscape. Changes or poor performance with any of these factors will impact results. The projections for economic impact outlined within this document will require the implementation of a comprehensive sports tourism campaign which will require collaboration between conventions and tourism, parks and recreation, and management of the indoor sports facility. When assessing the economic impact of proposed facilities, it is important to recognize that mega-sporting events or large-scale, national tournaments and events should not be the primary focus of optimizing economic impact. For this reason, Pinnacle has focused its economic impact analysis on smaller-scale tournaments and special events and re-occurring programming. 2 P a g e

4 Assumptions and Drivers to Success In short, Pinnacle s findings revealed that the City of Hopkinsville possesses significant advantages and opportunities to attract sports tourism events. Pinnacle s findings have been based on a number of assumptions, outlined below. 1. The financing structure will provide 100% funding and the facilities will not carry debt service. 2. The proposed indoor sports center will be professionally managed by experienced staff, and the facility operating systems, software, marketing and other systems will meet local market standards for excellence. 3. The operating expenses, salaries, fees, and cost of goods sold will meet the revenue-toexpense ratios outlined within Pinnacle s pro forma. 4. The proposed facilities will include the types of sports surfaces, offices, and other program areas outlined by Pinnacle. These facilities meet a set of standards that are critical to tournaments and event competitions. 5. If a private management group is engaged to oversee a portion or all of the facility management, this group will operate in a manner consistent with promoting economic impact within the City and have a performance-based compensation agreement. 7. Conventions and Tourism will play a major role in marketing sports and other group events. 3 P a g e

5 The Real and Potential Costs and Benefits of Sports Facilities Source: Tim Chapin, Identifying the Real Costs and Benefits of Sports Facilities 4 P a g e

6 Economic Impact Study - Methodology It is important to understand the basis of this economic impact projection, and the limitations inherent in any economic forecast. The practice of calculating the direct economic impact of an entity on the local economy by ascertaining the amount of additional local spending by visitors to an event from outside the immediate area is a longstanding one with near universal agreement that local spending from these outside sources is a direct impact on the local economy that would otherwise not have occurred but for the event. Additionally, the calculation includes annual reoccurring programming activities that will be attended by members of the local populace and result in increased local spending along with the new payroll and wages that will accompany the operations of the proposed complex. Pinnacle utilizes national and regional data compiled by the National Association of Sports Commissions (NASC), which is then localized using direct data gathered from local sources. From those organizations Pinnacle obtained numbers of participants and estimates of the number of participants from out of the area that have attended past meets. Utilizing expenditure averages for lodging, meals and incidentals obtained through the NASC, state of Kentucky and local tourism organizations, and using the known duration of each event, Pinnacle has calculated the estimated amount of direct spending in Hopkinsville. These are conservative figures because direct, local sport tourism spending amounts are not readily available. The Hopkinsville- Christian County Convention & Visitors Bureau provided information noting that the average spent for overnight day visits by all out-of-town guests was $ P a g e

7 Sports Tourism Business Model Sport Tourism State of the Industry The goal of the sport tourism business model is to attract teams, players, and spectators to the market to generate revenue for the facility and to create economic impact through direct spending in the community. According to the National Association of Sports Commissions (NASC) Sport Tourism State of the Industry Report the following are key findings as of VISITOR SPENDING IS ON THE RISE - Estimated visitor spending associated with sports events was $9.45 billion in 2015 ( $8.96 billion; $8.7 billion; $8.3 billion). This is an indicator of the strength of sport tourism industry with growth occurring the past three years. Another similar study by Sports Marketing Surveys USA (SMS) shows that in 2014, there were 34.9 million people who traveled with an overnight stay to participate in or watch an amateur sports event, a figure that has remained fairly consistent going back to While 18 percent of these sports travelers were ages six to 17, about 51 percent were ages 25 to 54, more evidence that families are accompanying their young players to events. On average, according to the SMS study, sports travelers in 2014 spent $256 per person per year which might seem low on the face of it, but that number is consistent with the George Washington University (GWU) study for visitor spending, when you consider spending a night or two at an event, sharing rooms, etc. 6 P a g e

8 Kentucky Tourism Cabinet of Tourism, Arts and Heritage Secretary Don Parkinson announced that Kentucky s tourism industry has experienced the strongest overall economic impact growth rate the state has seen since All nine of the state s tourism regions registered gains for 2015 compared with Kentucky's tourism industry generated $13.7 billion in economic impact during 2015, an increase of five percent over the previous year. The industry supported more than 186,000 jobs, including 6,200 jobs created in Kentucky tourism generated more than $1.43 billion in taxes, with $184.9 million going directly to local communities. These are the strongest overall numbers the Commonwealth has seen in the past 10 years. Hopkinsville-Christian County Tourism Christian County ranks 14th out of 120 counties in tourism, with an economic impact of $143 million for The Western Waterlands, Christian County s tourism region, had a 5.8% increase over 2014, with Christian County having a 4.02% increase. 7 P a g e

9 This increase in general area tourism can be construed to mean that a new, well-marketed sports center could share in that increased tourism trend and attract new, sport team tourism that is not currently in the market due to other attractions and non-sport specific marketing programs already in place. Tourism Analysis Tourism has become an increasingly large part of the Hopkinsville economy. The proposed sports facility will be located adjacent to the current James E. Bruce Convention Center and within five miles of numerous hotels and lodging establishments, as well as a multitude of retail and shopping centers and dining establishments: Lodging (within three miles) Comfort Suites La Quinta Inn Best Western Hampton Inn Roadway Inn Holiday Inn Dining (within three miles) Buffalo Wild Wings (New) Logan s Roadhouse O Charley s El Bracero Buffalo Wings & Rings Zaxby s Holiday Burgers Joelle s Café Senor Lopez Grill & Cantina Little Caesar s McDonald s Taco John s Retail Hopkinsville Towne Center (New) The proposed indoor sports facility will benefit from the close proximity of supporting services such as hotel, retail, dining, and entertainment developments. The presence of these types of establishments will make the facility more desirable for participants and visitors. Furthermore, the proximity of these amenities will make the destination more attractive for tournament and event organizers as well as out-of-town guests participating in tournaments and events. 8 P a g e

10 Assumptions It is important to understand the basis for the projected number of tournaments included in this Economic Impact Statement (EIS). Pinnacle conducted a market feasibility study and financial pro forma of the proposed project in the spring and summer of Pinnacle has based these economic impact calculations on the original market study and pro forma. Pinnacle s tradition of being conservative with projections is of note with these figures and subsequent calculations. Based on national figures, it is Pinnacle s assumption that court sport tournaments will result in an average out-of-town element of 75% of the total number of attendees. It is also important to understand that while the development of a sport complex in Hopkinsville will allow for the hosting of events it cannot host today; it will not automatically confer economic benefits from outside spending since such direct spending will accrue only to the extent that events are successfully planned, marketed, and hosted. Pinnacle has conservatively estimated that 10 tournaments, a combination of basketball, volleyball, could be hosted at a new facility given the current plan for in-house management and marketing, and local and regional teams which expressed an interest and willingness to travel to Hopkinsville. Additionally, the calculation includes eight annual re-occurring programming activities that will be attended by members of the local populace. These numbers could, of course, be higher if a professional, concerted marketing effort and other incentives (hotel rates, meal plans, area attractions, etc.) were utilized to attract outside sport teams and organizations. 9 P a g e

11 Economic Multipliers The calculation of direct economic spending due to identified events is not controversial and is universally well-accepted. This cannot be said about the common practice of applying a multiplier to the direct spending to obtain the expanded economic impact (indirect impact) of outside dollars spent in a local economy. The theory is that some identifiable percentage of direct spending, such as renting a hotel room and patronizing a local restaurant, will in turn be spent locally by the hotel and the restaurant to obtain goods and services locally, such as labor for cleaning and food ingredients for prepared meals, and that this multiplier effect is necessary to recognize the full extent of the value of outside dollars injected into the local economy. Economists differ strongly on the validity of such a multiplier effect, and those that endorse the concept differ widely on the extent of that effect. The average multiplier used is approximately 1.7 times the amount of direct spending. The range is roughly from 1.2 to as high as 4 times the amount of direct spending. For the purposes of this report Pinnacle has included an additional calculation with a multiplier of 1.7 as shown in Attachment A Economic Impact Calculation. Conclusion There are a number of considerations that should be understood in conjunction with the attached economic impact calculation. The estimated economic impact of nearly $3.4 million is projected due to an assumption that the City of Hopkinsville will employ a professional sport-sales staff member who can successfully market and host a minimum of 10 annual tournaments with an additional eight annual reoccurring programming activities with accompanying payroll and wages to support that programming. To the extent that a significant number of these events do not materialize, the total calculated estimated direct economic impact will be significantly reduced. 10 P a g e

12 Attachment A Economic Impact Calculations of a Proposed Sports Center in Hopkinsville, KY 11 P a g e

13 Economic Impact Summary for Hopkinsville, KY, Indoor Sports Center CY 2020 Sustainable Year Economic Impact From Tournaments & Special Events $1,969,228 From Local Programming $1,160,352 From Payroll/Labor Wages $270,107 Total Economic Impact $3,399,687 *Note: The construction cost estimate that is in the pro forma was $4,608,000. Labor income typically comprises approximately 40% of the cost of this type of recreational construction; the remaining portion represents the cost of materials. The one time economic impact from construction is $1,843,200

14 # of Tournaments & Speical Events # of Event Days per Tourney # of Teams per Tourney # of Players per Tourney Guests per Player Total Event Attendees Number per Family Unit % Local Attendees # Local Attendees % Out-of-Area Attendees # Out-of-Area Attendees Avg. Length of Stay (days) Room Nights Average Daily Hotel Rate Average Hotel Expenditure Economic Impact Calculations for Hopkinsville, KY, Indoor Sports Center Local Out-of- Area Average Average Direct Daily Daily Economic Expenditure Expenditure Impact Total Direct Total Direct per Family per Family (excluding Economic Economic Unit for Out Units for hotel) from Impact from Impact from Economic Total Economic of Area Local Out of Area Hotel Out of Area Local Impact Impact (1.7 Event Attendees Attendees Attendees Expenditures Attendees Attendees Multiplier multiplier) Year Sustainable Year Volleyball % % $ 110 $ 220 $177 $67 $28,140 $73,920 $102,060 $3, $179,880 Volleyball % % $ 110 $ 110 $177 $67 $90,048 $36,960 $127,008 $7, $228,670 Basketball % % $ 110 $ 220 $177 $67 $150,080 $197,120 $347,200 $10, $607,249 Basketball % % $ 110 $ 110 $177 $67 $270,144 $73,920 $344,064 $15, $610,422 Futsal % % $ 110 $ 110 $177 $67 $135,072 $55,440 $190,512 $11, $343,006 Tournament Totals: ,480 8,512 2,128 6,384 $1,969,228

15 # of Reoccurring Programs/Sessions # of Teams # of Games Per Session # of Players per Team # of Player Days Guests per Player Total Event Attendees Number per Family Unit % Local Attendees # Local Attendees % Out-of-Area Attendees # Out-of-Area Attendees Average Daily Rate Economic Impact Calculations for Hopkinsville, KY, Indoor Sports Center Local Out-of-Area Economic Impact Multiplier Total Economic Impact Event Year Sustainable Year Basketball Leagues , , % 27,648 0% 0 $ $587,520 Indoor Soccer Tournament , , % 4,838 0% 0 $ $102,816 Indoor Soccer Leagues , , % 22,118 0% 0 $ $470,016 Re-occurring Programming Totals: ,752 54,605 54,605 0 $1,160,352