2016-08-09 S&O Agenda Item 8, Attachment 1 - CCIQ Noosa Convention and Cultural Centre Initiative Pre-feasibility Study

CCIQ Noosa #3 Noosa Convention & Cultural Centre Initiative
Pre-feasibility Study                                                                           April 2016




Economic Modelling note:

Application of multipliers

Multipliers are used to assess the extent to which increased spending in the host economy produces
subsequent benefits for that economy. For example, the local businesses benefitting from increased
visitor and organiser spend will use some of this money to pay their suppliers. Assuming that these
suppliers are also locally based, a ‘multiplier effect’ is created. Two types of multipliers are
commonly applied in the context of events - output multiplier and income multiplier. Both these
multipliers are measured in monetary terms but have very different uses. The output multiplier
measures the impact on the total business turnover in the host economy. By contrast, the income
multiplier measures the overall increase in household income of local residents. The value of output
multipliers will tend to be much higher than those of income multipliers, although the latter are
considered to be more 'fit for purpose' in academia.

Regardless of its type, the value of any multiplier is dependent on the size of the economy being
considered. In simple terms, the smaller the host economy, the higher the chance of leakage and the
lower the value of the multiplier. In many cases, multiplier values are borrowed from other studies,
which are far less valid than multipliers that are empirically derived based on the inter-industry
relationships in a given host economy. Empirically derived multipliers are not readily available for
every level of geography. Both the data and analyses required to accurately calculate a multiplier
tend to be fairly complex and are beyond the scope of the guidance in event IMPACTS. A failure to
understand how multipliers are derived (or use of incorrect multipliers) will only serve to mislead
event funders about the value of their investment. Therefore where multipliers are not readily
available, and/or it is considered too costly to derive these empirically, it is recommended that only
the Direct Economic Impact is reported. It worth noting however that the development/application
of multipliers may be of particular benefit in calculating the additionality of the very largest scale
events.

As a final point of note, an event has no bearing on the value of the multiplier. Therefore when
comparing the economic impact of events that take place in different cities or regions, it is not
appropriate to consider multiplier effects and the Direct Economic Impact should be used.

Additional Considerations for Larger Events

For the very largest events, there may be a case that the event exerts an impact on residents’
normal economic behaviour which should also be measured. In some instances there could be
legitimate grounds to claim that a large-scale event has prevented local residents from temporarily
leaving the Host Economy, which in effect represents income retained in the Host Economy. Yet
another consideration (primarily though not exclusively) for larger events is displacement. This is
caused when normal tourists planning a trip to the Host Economy are crowded out by event-related
visitors. An increase in demand is in turn likely to trigger an increase in price levels for certain sectors
of the economy e.g. accommodation (consider introducing a Fair Pricing and Practice Charter.
Congestion coupled with inflated prices could have a detrimental effect on the behaviour of normal
tourists planning to visit the Host Economy during that period. The challenge then in economic
impact terms is to quantify the monetary value associated with the volume of displacement.




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