DNC

Will the Democratic National Convention really bring $350 million to Philly?

…Really?

The Democratic National Convention is more than nine months away, but officials are already making promises about how much money the city stands to make.

But will this be like the Papal visit all over again?

Whether or not Mayor Michael Nutter wants to admit it, he touted a week prior to Pope Francis’ trip to Philadelphia that the city stood to gain some $400 million in economic impact. Crowds of millions were originally expected and restaurants braced for full houses.

But that didn’t happen, and a number of major business owners and restauranteurs in the city whined that business was slow all weekend and some complained that they were duped by the city into thinking the Papal visit would mean big bucks.

During a press conference Thursday with the Democratic National Convention committee, Nutter stood alongside the CEO of the convention Rev. Leah Daughtry while she said the overall economic impact of next July’s convention could be somewhere around $350 million.

“There’s no question, I would anticipate during that week virtually every, any kind of serious restaurant or other business to pretty much be sold out,” Nutter added.

So DNC officials are estimating $350 million in economic impact, and that’s largely based on what was reported back in 2000 when Philadelphia hosted the Republican National Convention and the host committee said that it injected $345 million into the local economy through both direct and indirect spending.

Taxpayers footed about $40 million of the bill to put on the RNC in Philly that year, but the overall economic impact figures that were released after the convention was over don’t seem to take into account business that was potentially lost because the DNC was in town.

Drexel professor and economist Mark Stehr told NBC that Philadelphia will “probably” make some money on this, but real economic impact is likely to be “nowhere close to the full amount that would be spent.”

Economists often say that host committees largely inflate projections of economic impact when it comes to major events. Robert Baumann, an economist and professor at Holy Cross University, studied more than 30 years worth of data from Democratic and Republican National Conventions. According to an abstract of his findings, “the presence of the Republican or the Democratic National Convention has no discernable impact on employment, personal income, or personal income per capita in the cities where the events were held.”

He explained to Billy Penn in August that most projections for large events use flawed baselines to predict how much cities make when they host mega events. My colleague Mark Dent explains it like this: 

Baumann says many projections compare the anticipated amount of new business from a mega event to zero, as in zero capacity at hotels and and no money made at local restaurants. A city like Philadelphia, with record-breaking tourism numbers in recent years, would probably have hotels at least partially occupied in late September (many of the profits realized by hotels will also go to national or international chains). Our thriving culinary scene already would make significant amounts of money on a normal September weekend.

For instance, in 2004 when Boston hosted the DNC, analysts said after that there was a net impact of just $15 million because of other losses in business that the convention spurred.

The Philadelphia Convention and Visitor’s Bureau and a spokesman for the mayor deferred comment on economic projections to the DNC committee. But the PCVB did release a much more modest projection in February when Philadelphia learned it would host the DNC next summer, estimating an overall economic impact of $170 to $250 million.

In 2012, Charlotte, N.C. hosted the DNC and its projections prior to the event were dubbed “wildly inflated” by economists — they said to expect a $170 to $250 million overall economic impact. That’s obviously much less than the $350 million figure touted by officials here on Thursday. In Charlotte, total direct spending was somewhere around $91 million and some 40 percent of local businesses surveyed characterized the DNC as a negative influence on sales, according to The Charlotte Business Journal.

“Some restaurants won, and some didn’t,” a Charlotte organizer told NBC. “I wouldn’t say that every restaurant and every venue would say it was a home run.”

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