THE ECONOMIC CONTRIBUTION OF FESTIVALS ADELAIDE

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1 THE ECONOMIC CONTRIBUTION OF FESTIVALS ADELAIDE IN 2012 Prepared by Barry Burgan 14 December 2012 INTRODUCTION FESTIVAL CONTEXT Cultural festivals deliver value to their host communities in a number of ways: Value as a part of the cultural infrastructure Their role as an immediate tourism drawcard The capacity for sponsors and corporate to leverage business outcomes The implications for long term tourism and business impacts The impact for the reputation of the state Given that much of the value in this context is a social benefit and extends beyond the private benefit, governments generally have a role in providing underlying support without which many of the events would not occur, and the value would not be delivered. Therefore it is critical that the value contribution of the events is assessed in appropriate ways. In this context it is the second component of contribution as above that has received the most focus in an evaluation context. This is most likely because it is an area where there are accepted methodologies to measure and quantify the outcomes (though as discussed below there are some differing views about aspects of those methodologies primarily with respect to the whole of economy models used). There is a group of major events held within Adelaide annually or every second year which, while independent events, are banded under the banner of Festival Adelaide and represent the larger more significant events. These include: Adelaide Festival Adelaide Fringe WomAdelaide Adelaide Film Festival International Guitar Festival Cabaret Festival Come Out Feast Oz Asia SALA This paper represents a calculation of the economic contribution of this group of events for 2012 (assuming that events held every second year were actually held in that year). This economic contribution considers the

2 impact on economic activity levels primarily the created and retained tourism effect, and not the other elements of value discussed above. METHODOLOGY ISSUES ISSUES AND METHODOLOGY The economic impact analysis of an event focuses on the effect of the event in terms of the creation of regional incomes and employment. This effect arises through the primary expenditure directly associated with the event, and from further rounds of indirect expenditure that this direct expenditure stimulates as it flows to supplying industries and into incomes and consumption. The economic impact of a special event arises from a number of sources, which are tied in with the possibility of earning export dollars for the region, or the replacement of imports. The impacts can be summarised as arising from: - o Dollars spent within a region by attendees and associated visitors. From a South Australian perspective, visitors are attendees from interstate or overseas. This will include expenditure not only to support the event itself, but expenditure on items such as accommodation and other entertainment. The main parameters relevant in determining the amount involved will include average expenditure per day and length of stay. Length of stay data was not collected in this survey and would be useful to allow comparison with average expenditure relative to other events. It is also important to recognise that if the visit is in place of an alternative visit (and has just been re-timed or coincided with the event) the expenditure cannot be truly fully claimed as resulting from the visit. This includes not just the expenditure in the region, but a proportion of travel expenditure associated with getting to and from the region. o o Expenditure of locals in the analysis of the economic impact of events is generally assumed to be transferred from other activities within the region. This assumption means that no benefit accrues from this type of expenditure, despite the fact that local expenditure represents an economic choice that is made which suggests that the benefits outweigh the opportunity cost involved. However in the case of the Adelaide Festival it could reasonably be expected that in the absence of the event in South Australia, a proportion of people would choose to attend the event outside of the State. This reduction in money flowing out of the state is equally a benefit. It is indicatively assumed that their attendances at nonticketed events are not likely to lead to out of state travel, but that 5% of those who attended ticketed events would lead to this outcome (5% is an order of magnitude consistent with other events indeed somewhat conservative). In the general survey, respondents ranked the question I go to Festivals other than the Adelaide Festival as a 3.4 out of 5 in terms of agreement suggesting that there is an inherent interest - but of course those surveys could be within the state. Dollars spent within a region based on sponsorship or contribution from parties external to the region may also be significant and this needs to measured or modelled.

3 The categorisation of expenditure is consistent with the approach adopted for studies of many special events over recent times and has been recognised as the appropriate methodology by the Commonwealth Government (Standing Committee on Sport and Recreation.) and the Bureau of Tourism Research, and in event management and tourism economics literature internationally. The importance of the expenditures identified above is that they will sustain turnover in local industry, and specifically this will support local jobs and incomes. While the total increase in expenditure is interpreted as the increase in economic spend in the region, it is the jobs and incomes that are taken to be the measure of economic impact or benefit, netting out expenditure on imports etc. It is also generally acknowledged that, in addition to the jobs in direct suppliers to the services (eg the event itself, hotels, restaurants), the expenditure has a multiplier effect within the community, extending the spend effect and the impact through the expenditure of wages and purchases of the direct suppliers. The use of an input output table or the multipliers derived from input output tables has become the predominant process for translating the direct expenditure into jobs and incomes, and for establishing the extent of multiplier impact. Use of these input-output based multipliers would therefore allow a reporting to the estimated outcomes of the event in terms of the effect of expenditure or turnover on value added in a regional economy and in terms of job creation. Again, this methodology is generally recognised as the appropriate methodology for event analysis, although there is an acknowledgement that a Computable General Equilibrium model (an economy wide model based on underlying input output tables but with a more advanced framework of demand and supply curves surrounding the economic structure) can be superior in that it allows for supply constraints. It is suggested here that at the regional level, the results of a short term shock as in a major event little in the way of constraints of this nature and therefore the input output model results represent a sufficient order of magnitude estimate. Further there is a school of thought that suggests the results of either input output or CGE based analysis does not allow for the fact that job creation comes at an offsetting cost of foregone leisure time, and therefore impacts should be reduced to reflect this. Given the under-employment opportunities in the arts and cultural industry and the sense of vitality in this area of employment, this argument would seem to be limited in this context, even if given credibility in the first instance. MODELLING OF THE IMPACT OF THE ADELAIDE FESTIVALS Comprehensive and consistent economic impact assessments have been undertaken of three major Festivals the Adelaide Fringe, and Womadelaide over a number of years, and the Adelaide Festival for 2012 (as part of the McCann review). Other Festivals have partial or no evaluations that have been undertaken, and those that have are not generally consistent in their approach. There is however some general information with respect to these events, mainly attendances, ticket sales and administration expenditure in organising the event. Administration expenditure in this context includes programming, general administration and marketing costs as incurred by the organising entity. The objective of this paper is, as noted, to provide a measure of the contribution of the 10 Festivals that are conducted under the banner of Festivals Adelaide with that measure undertaken in consistent ways across the entities. On that basis, the indicative size and scope of the activity levels associated with the Festivals Adelaide events can be summarised as follows:

4 Attendance at Festivals Adelaide events in 2012 was estimated as 2.82 million of which 590,000 were ticket sales. There were an estimated 650,000 in scope attendees were paid events. It is estimated that of these attendees there were 63,850 visitors to South Australia. In addition there were an estimated 2,870 visitors to the state who participated in the event (artists and media) for a total of 50,830 visitors to the state linked to the event. These visitors are estimated as generating a total of 304,100 visitor nights (an average length of stay of 6 nights in the state). The average interstate visiting respondent who visited because of the event spent an average of $118 per visitor night The Festival Adelaide events had operating expenditure estimated at $34.4 million, with a $13.4 million of that provided through State and Local Government sponsorship. It is generally recognised in event studies that this total expenditure involves transfers of expenditure that would otherwise occur. Some visitors to the state made the trip anyway and time it so as to access the event, and locals spend money on the event that they would otherwise spend on something else. The survey data is used to identify the extent of this transfer effect, and the estimated created benefits (ie new expenditure in the state) from the visitor spend is estimated as follows: It is estimated that for 25% of visitors, attending the event had no impact on their trip (ie 75% made the visit because of the events or stayed longer). Therefore the number of visits impacted by the event (ie came because of the event, or a longer stay) was 47,860. Including the participants the total impacted visitation to the state was 50,830. These visitors generated 304,100 visitor nights. Expenditure (excluding tickets) associated with these new visits to the state is estimated at $36.0 million. Additional operating expenditure in the administration of the Festivals with $4.0 million estimated as new to the state (ie funded by external sources, including visitor spend on tickets) This new expenditure is estimated to have directly created new incomes in the state (contribution to Gross State Product) of the order of $41.5 million and created of the order of 514 full time equivalent jobs directly and indirectly. Much of the job creation impact will be in part time and casual work spreading the influence of the event in an economic context. However in major events of this type it is also generally acknowledged that local residents who attend those who place very high values on the ability to attend the event would look to achieve this elsewhere if not for the event, and in this context the event represents import replacement. Further, much of the operational spend in facilitating the event can be considered to be funded by resources external to the state and as such generated additional impacts. So if the estimated relevant local expenditure is added in, along with the induced or flow through benefits, the economic impact of the event newly created economic activity is estimated in total as: Total created visitor related expenditure (excluding tickets) within the state of $58.1 million. This amounts to $36.0 million of attendee and participant expenditure and an estimated $22.1 million of retained local expenditure.

5 The impact on the economy of this new expenditure estimated at $62.9 million in new incomes, and the creation of 790 full time equivalent jobs (of course many of these jobs are part time and short term in nature).

6 APPENDIX METHODOLOGY FOR ESTIMATING EVENT ECONOMIC IMPACT AT STATE AND REGIONAL LEVEL Aggregate Event Attendance Number of Participants/Media/Volunteers Event Budget Replacement Spend - spend by locals which been spent on something else, so no created impact Attendance by Locals Retained Spend - propn of locals who travelled out of state/region - assumed spent same as visitors to state Replacement trip - trip occured anyway, so no created impact Visitor Attendance Created total attendee based expenditure Event "Caused" Visit X Ave nights = Attendee Visitor Nights X ave daily spend = Created visitor spend (Encore model equivalent) X Ave Nights x assumed "new" visits Participant nights created X ave daily spend = Created participant spend Estimated visitor nights Total Created Expenditure Created ticket spend Visitor Ticket Spend + Sponsorship/Grants sourced from outside region + Other revenue sourced from outside region = Propn of revenue sourced externally Propn of expenditure that occurs locally Event created Operational Spend ie local expenditure financed by external revenue Local ticket spend and sponsorship - replaces spend on other activity, so no economic impact Economic Model (RISE) Direct Income and Employment + Induced Income and Employment = Total Income (contribution to GSP) and employment