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Ecnomic impact: Just the facts, ma’am

Economic impact figures can be a powerful PR tool to promote major sporting events.

They can also be a PR trap.

The media has a great deal of skepticism about economic impact, and understandably so. Event organizers commonly throw out numbers and then fail to back them up with independent research.

In a Sept. 25 Arizona Republic story about Phoenix’s bid to host the NCAA Men’s Final Four, College of the Holy Cross economics professor Victor Matheson said that event organizers announce big numbers “because you’re trying to justify a bunch of public spending on your event.” The newspaper said Matheson and a colleague had produced a study that showed major events have minimal effects on the economy.

Their conclusion is a marked departure from numerous economic impact studies produced by Arizona State University’s respected W.P. Carey School of Business. Those studies provide undeniable proof that community support for major events pays off handsomely.

In 2011, for example, W.P. Carey found that the BCS National Championship Game between Auburn and Oregon generated $188 million in economic impact, $7.67 million in state and local tax revenue and created the labor equivalent of 1,919 jobs.

W.P. Carey’s numbers for the 2007 BCS National Championship Game:

  • Economic impact: $171.5 million

  • Tax revenue (state & local): $10.11 million

  • Created labor equivalent of 3,576 jobs

That’s hardly a minimal impact. But it’s easy to understand why there is so much skepticism about the concept of economic impact.

For starters, some organizations have done a poor job of explaining how they calculate their economic impact figures. If you want the media to take your impact numbers seriously, be transparent. Explain what is counted, and why. Explain what isn’t counted, and why not.

That takes time and effort, but it’s worth it to show reporters why your numbers are valid. It’s not good enough to issue a press release alone.

Too many organizations tout economic impact projections that look wonderful in news reports but have little, if any, basis in reality. Those projections are dangerous because they can create unrealistic expectations. Let’s say someone promises an economic impact of $500 million for an event that generates $450 million. The perception will be that the event failed, even as it poured $450 million into the economy.

That is the definition of “PR fail.”

So what should you tell the media when they ask for economic impact estimates? We’ve found that it’s wiser to provide figures from previous or similar events, or to say that an event will generate “tens of millions” in economic impact.

Those replies may not make great sound bites. But unlike invented impact figures, they won’t come back to bite you.

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