The art of economic spinoffs

The value of tourist events should be measured by the benefit they bring to the public — not their economic spinoffs.

Summer, the peak season for festivals and tourist events, is drawing to a close. The sun shone and the beer flowed. Unfortunately, an unwelcome visitor showed up for the celebrations: the inevitable study on “economic spinoffs.”

Whether it be the Montreal Grand Prix or a music or comedy festival, it’s the same old story. With a grant in mind, an organized group pays for a study to explain how each dollar spent on its project will make three appear in the economy. The rationale is as follows: you order a meal at a restaurant and pay $60 to the owner of the establishment. The next day, the owner spends that amount at the hair salon or bakery. With this money, the hairdresser buys a steak from the butcher, and so on. Add it all up and abracadabra! Your initial $60 generates $180 in economic spinoffs.

In so doing, we are doubling or tripling what is in fact a simple movement of money. Regardless of its nature, your initial spending will always create spinoffs, festival or not, 365 days a year.

For example, economic spinoffs are often cited when it comes to attracting a professional sports team and promoters want to build a venue. Yet, if a hockey enthusiast buys tickets for $200, he has $200 less to spend at the movies or a restaurant. The money spent on hockey tickets, taken from the entertainment budget, comes at the expense of other local attractions. In other words: there’s a cost to everything.

I challenge you to find any activity that doesn’t result in economic spinoffs. Even fraudsters and criminals generate some.

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Consider the Montreal Grand Prix, which costs taxpayers in Montreal, Quebec and Canada about $20 million each year. No matter, we are told, since the event will generate $89 million in annual spinoffs. Yet, according to a study conducted in June, based on a more robust methodology than that used by past governments, actual spinoffs total $42.4 million, or half as much. Mere peanuts.

Regardless of the amount put forward, we must remain vigilant. First, year in, year out, more than two-thirds of spectators come from Quebec (48%) or other parts of Canada (20%). Without the Grand Prix, these people would not be throwing their money out the window. They would be spending it on other things — movies, restaurants, concerts, trips at home, etc. — and would create as many economic spinoffs and jobs. This is exactly what happened in 2009 when there was no Grand Prix.

As for tourists, do they give us their dollars or euros for free? No. They exchange them for food, hotel services, transportation and more — goods and services our businesses must produce with resources (labour, raw materials). The tourism industry must be seen as an export business — like Bombardier or Magna International — nothing more, nothing less, to the extent that it also sells a product to customers, possibly foreigners. Accordingly, it should not be given special treatment.

Of course, the Grand Prix’s international visibility can attract investors and provide a certain amount of pride, but at what cost? We could allocate our resources, local talent and grants to other things. Education? Health? Public transit? Take your pick.

As a Montreal Jazz Festival aficionado, I recognize these types of events are part of the summer experience, while providing immense value for the communities involved. And that’s just it: the benefit of public spending must be measured by the value, in the eyes of the public, of the good or service it provides.

So, by all means, feel free to boast about the merits of each project or festival for its intrinsic value, but please, spare us the studies on economic spinoffs.

About the Author

David Descôteaux


David Descôteaux is a Montreal-based business columnist.

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