Skip to Content

Support MinnPost

Was a youth volleyball tournament really worth $50 million to Minneapolis?

The Minneapolis Convention Center opened in 1991 and expanded in 2002.

Thousands of young athletes from all over the country converged upon Minneapolis this summer for the USA Volleyball Girls’ Junior National Championships.

During the 10-day event, they came, they ate, they slept, and then, the estimated 13,000 of them plus their 28,000 parents, siblings, coaches, referees and friends went home. In their wake, they left an estimated $50 million in economic impact, according to Meet Minneapolis, the city-funded nonprofit convention and visitors association, which works to draw groups to Minneapolis for events.

It’s not just big events, like the Super Bowl and the X Games that get big economic impact numbers attached to them. In June, Minneapolis had Homebrew Con, with an estimated 2,500 attendees and a $4.5 million windfall. In April, two weekends of volleyball in town for the Northern Lights Qualifier brought in an estimated $16 million.

Visitors bureaus in major cities across the U.S. often tout the economic impact resulting from events like these. Meet Minneapolis says the numbers highlight the importance of tourism in the area. But where some see a number that helps business leaders and policymakers understand the local economy, others roll their eyes and dismiss the numbers as fodder for a sort of convention-industrial complex.

Where the numbers come from

Meet Minneapolis estimates economic impact using a calculator created by Destinations International, a trade group for destination marketing professionals. The economic impact calculator estimates direct impact — the amount of money actually spent by visitors to an event, as well as indirect impact, which accounts for any extra spending, say, local companies have to do and any extra wages paid to employees for extra hours due to demand created by the event.

Some of the main inputs in the calculation are the number of attendees and the number of nights they’re expected to stay in hotels. The tournament was 10 days long, but event organizers did not assume teams would stay for its duration.

The calculator then takes into account the type of event — differentiating between, say, a quilters group, a professional sports event, and a doctors association — the number of attendees local versus non-local, expected hotel rooms booked, expected spending on food, retail, recreation, transportation and other costs, and local tax rates, runs a set of calculations on those numbers, and spits out a pretty precise number. In the case of the volleyball tournament, $52,510,290 in total impact, which is rounded down to $50 million for the press release. That includes $32.7 million in direct spending and $19.9 million in indirect spending. With an estimated $30.6 million spent by attendees directly, that means each visitor would be spending an estimated $750 at Minneapolis businesses, on hotels and transportation over the course of the event in a way that benefitted the Twin Cities.

Kevin Hanstad, Meet Minneapolis’ director of market research and public policy, calculates estimates of economic impact for events using the calculator.

He said the industry’s come a long way in making these estimates. Just over a decade ago, most destination marketing agencies often multiplied overnight visitors by expected spending per visitor to get an economic impact estimate.

He called the Destinations International calculator very good — not perfect, but sophisticated.

“We’re well aware of the criticisms. There are people who specialize in studying economic impact and who have data to demonstrate their point of view that big events like the Super Bowl or big events like conventions don’t actually contribute,” he said. “We would disagree with that, and that’s what’s important about this particular model, is it was created by experts in our industry.”

Hanstad argues that the estimates are useful, because understanding the economic impact of tourism events helps policymakers plan things like tax rates, as local taxes are offset by the sales and hotel taxes paid by tourists.

The gripe

Not everyone agrees. Heywood Sanders, a professor at the University of Texas at San Antonio, wrote the book on convention center math naysaying. Literally — it’s called “Convention Center Follies: Politics, Power and Public Investment in American Cities.”

“It’s essentially impossible to calculate them in any serious way,” Sanders said of economic impact estimates.

He casts doubt on the idea that convention center events generate the kinds of economic boons to cities that they claim, and says that publicly-financed convention centers rarely live up to their promises to revitalize downtowns.

“There’s a public face to this which is this story of economic impact and community benefit and all the rest, but underneath it is a story of, this is one way to create and sustain, or at least to attempt to revitalize your downtown,” he said.

Estimates of the economic impact of big events like conventions are used to bolster the case for convention center expansions and hotels, but they tend to be simplistic and rosy, Sanders said.

“There really is not a very clear description of exactly what local information is used, except that, armed with this information, [destination marketing organizations] are better prepared to make the case to policymakers for the ongoing growth and development of the meeting sector,” he said.

In April, Sanders was staying in downtown Minneapolis for an urban affairs meeting concurrent with the April Northern Lights volleyball event.

“If I could conclude anything from the number of parents or coaches who were riding up in the elevator with three to four pizzas in hand, they weren’t exactly eating out,” he said.

Perhaps by design, event calculators don’t always account for business that’s displaced when there’s a big convention in town, he said, though people in the industry argue that there’s a compression effect – when conventions are in town, people who might have stayed downtown were the rooms not booked might stay in Bloomington or Apple Valley.

There’s also the matter of incentives. Often, cities offer groups planning to host conventions taxpayer-subsidized incentives, which can include discounts on hotel rooms or free of very cheap conference space.

For the volleyball event, Meet Minneapolis’ calculation didn’t include the cost of any incentive. In fact, Meet Minneapolis wouldn’t disclose whether or not there was an incentive offered to USA Volleyball to host its tournament here, citing that the information is competitive. Spokeswoman Kristen Montag said incentives are commonly offered across the industry to convention groups.

Many critics argue that this amounts to the public subsidizing private business. The convention center’s operating subsidy from the city is $16 million a year, not including the cost of debt service, said City Council Member Lisa Goodman, whose district the convention center is in.

“I think there’s a tendency to be overly optimistic about the economic impact in order to convince the public that investments in these kinds of things make sense,” Goodman said.

The Minneapolis Convention Center opened in 1991 and expanded in 2002. When discussions come up to build additional hotel rooms to go alongside the convention center, they're often controversial.

“The convention hotel and convention center game is just basically a race to the bottom. First, there’s a convention center, then there has to be a hotel. Then there has to be an expansion of the center, then there needs to be another hotel,” she said.

Worth the cost?

While some say conventions bring a lot of money into the city, others ask whether tourism is even worth the trouble.

Meet Minneapolis says yes. An economic impact survey by a national group puts visitor spending at $7.6 billion per year in the Twin Cities metro, and Hanstad says 10 percent of jobs in the city of Minneapolis are in the tourism industry.

“It's more than a fun industry, it's a significant business,” Hanstad said.

Art Rolnick, a senior fellow at the Humphrey School of Public Affairs and former senior vice president and director of research at the Federal Reserve Bank of Minneapolis, disputes just how significant the industry is.

He said he’s not opposed to destination marketing organizations putting out numbers on economic impact, but he’s frustrated when he sees them used to build a case that tourism hugely affects the economy.

Yes, Rolnick makes the argument that tourism brings money from outside the state into it, but so do people from outside the state buying goods and services from Minnesota companies like General Mills, 3M and Target.

And when they buy those things remotely, they’re not putting extra strain on infrastructure and crowding up downtown by being here.

“The Minnesota state economy produces something like $335 billion a year,” he said, half of it created by the Twin Cities metro. “So when you talk about this windfall, relative to the state economy and what all the other businesses produce, this is a drop in the bucket.”

“Treat all businesses the same. Don’t try to pick winners,” he said.

DocumentCloud Document: 

Get MinnPost's top stories in your inbox

Related Tags:

About the Author:

Comments (6)

Numbers

The numbers we throw around in these matters don't mean much because they have little or not context. Is a billion a little or a lot? We simply can't answer that question unless we have something to compare it to.

With respect to spending on tourism and entertainment, my basic problem isn't the number of dollars, it's how they are spend, what their impact is. A lot of dollars gets spent on the Vikings, for example, but the average Viking isn't the million dollar Quarterback, it's the interchangeable guy on kickoff returns, or it's the guy selling beer in the stands. The kickoff guy makes minimum wage in the NFL, a significant sum, but he will only make it for a season or two. In terms of cost, how will the long term health care costs generated by his brief stint in the NFL compare with the taxes he pays? If we don't understand questions like this, how can we really evaluate the economic impact of the NFL on Minnesota?

You're right

I think you are absolutely right to say that it would be much more interesting and beneficial to have public goods, investments or income demonstrated as a matrix of outcomes of all the public services in play- a pricing out if you will resulting from the pull and tug of cascading decisions. Hopefully we'll get to the point of identifying the building blocks of such a model so that we can observe and perform the revelant accountings.

What A Scam

First, taxpayers build the convention center, arena, etc. Then we have to further subsidize individual events? How do I get a deal like that?

The point about other customers being displaced is real. When the NHL locked out it's players a few years back, the joints on West 7th reported that overall business was the same. One proprietor speculated that some people just avoid the area during Wild games and concerts. And that's certainly the case for me. My wife & I generally only go there in the summer.

If cities didn't build convention centers on the taxpayers dime, I wonder if private players would enter the market? Wouldn't the Upper Midwest Square Dancers find some way to hold their annual con-fab?

What Scam?

I think you interpreted the title "Was it Really Worth $50M?" as a subsidy. It's a misleading title. The article was actually about economic impact, and how that gets calculated. The subject event generated $52M (or $50M in round numbers) of economic impact from out-of-towners coming in and lodging, eating, etc. Not a subsidy.

I think it would be really interesting to see good economic analysis of the return on investment for the convention center. Yeah, we subsidized that, as well as arenas, etc. It would be good to see a big analysis that examines which of those investments payed off in terms of spurring economic activity...more than just making Ziggy richer, but impact to the metro area and the state of Minnesota.

I Made No Mention of $50M

"There’s also the matter of incentives. Often, cities offer groups planning to host conventions taxpayer-subsidized incentives, which can include discounts on hotel rooms or free of very cheap conference space.

For the volleyball event, Meet Minneapolis’ calculation didn’t include the cost of any incentive. In fact, Meet Minneapolis wouldn’t disclose whether or not there was an incentive offered to USA Volleyball to host its tournament..."

That is what i was referring to. At least we find out about (most) of the upfront subsidy of the venue itself. The subsidy for specific events, we don't even hear about. makes it tough to have a fully informed debate.

Yeah...

Sure, tourism can be a good thing, but conventions are about tourism. Conventions bring people to conventions, and those to attend spend the vast majority of time at the conventions, not "touring" the city or the surrounding area. Meanwhile, the hotel rooms fill up and actual tourists can't find a place to stay.