Tag Archives: Tourism

Italy’s “Disneyland of Food” (Revised)

When you think of a theme park, generally you think of roller coasters, waterparks, zoos, aquariums, and other attractions of the sort. In 2015, Italy plans to ditch the traditional theme park style and open up what will become the “Disneyland of Food”. With Italy being famous for its cuisine and culture, the theme park will feature nearly 125 restaurants, grocery stores, food courts, and learning labs. There will even be “live trees” where customers can pick their produce, as well as spaces for kids to play with food.

1

The graph above shows Italy’s gross domestic product growth rate for the past few years. As you can see, GDP expanded 0.1% in the fourth quarter of 2013, which was its first increase in 10 quarters. With this economic downturn that Italy has been facing, creating the world’s largest theme park dedicated to Italian food might just be what the economy needs. Despite the large funds that will go into the development of this project, revenues are expected to be around 86 million euros ($118 million). With revenues like this, the theme park could easily help Italy’s economy start to emerge.

The development of a theme park has different effects and consequences on the economy of the host region. For example, Italy’s “Disneyland of Food” is more aimed towards the potential benefit of creating jobs to ultimately spur consumer spending, creating an educational opportunity for children, and promoting their culture and cuisine. Not only will the park provide a fun way for tourists to get a taste of Italy, but it will also provide a learning experience for young children. With all these goals in mind, Italy has the hopes of attracting some of its yearly tourists to the city of Bologna as a way to boost GDP growth. The theme park isn’t necessarily something that a tourist would visit Italy specifically for; however, if you were already planning to visit Italy, it would be a great addition to the city of Bologna in terms of bringing in extra revenue from tourists looking to experience the culture and cuisine of Italy.

On the other hand, other theme parks such as Cedar Point are solely focused on bringing in revenue for their host city. Sandusky isn’t exactly a city that would attract tourists on its own so building what has become the roller coaster capital of the world was one way to boost consumer spending. Each year, millions of people from all over the world travel to Sandusky specifically to experience the thrill of Cedar Point. After a successful season last year, Cedar Point revenues went up 6%, reaching nearly a billion dollars in revenue. With revenues like this year after year, you can see why Cedar Point is such a huge asset to the economy.

Not only will Italy’s “Disneyland of Food” create thousands of new jobs, providing income to customers which will ultimately spur consumer spending and result in GDP growth, but as the president of the city of Eataly states, “It is an opportunity to show off Italy’s extraordinary biodiversity of resources.” “And to help push us towards our economic potential.” With a little bit of advertising, I think Italy’s theme park of food will be a great effort to harness tourism in Italy to kick-start the economy by creating jobs and spurring consumer spending.

Are big events a really big bucks for host cities?(revised under new title)

Given Michigan’s run to the elite 8 in the NCAA Tournament, I couldn’t help but check out ticket prices to the Final Four.  With a parking pass costing almost $75/game, I think I might be better off saving my money.  But it got me thinking about the economic consequences of events like march madness.  I’m not talking about the billion dollar bounty Warren Buffet placed on a perfect bracket, or to the more then half a billion dollars the tournament generates for the NCAA, or the revenue for the schools themselves, but rather the economic boost for the cities that host these events. Reports put the amount that the Final Four host city can expect at around 70 million.  However, there is research that says these numbers need to be reduced by as much as 90%. It is argued that due to the events size, a great deal of economic activity is displaced, and it must be replaced before actual gains can be realized.  I believe the effects of this “tourism displacement” have been exaggerated.

In order to better study the economic effects of a large sporting event on the host city, data for the Super Bowl will be used.  This is for a few reasons.  Even though the Super Bowl is an order of magnitude larger, since more teams attend the NCAA Tournament, as well as it occupying more nights gives reason to believe that there should be similar levels of displacement.  It is also permissible since we are examining a percentage as opposed to an actual number.  Finally, statistics are much more readily available for the Super Bowl due to its size and the spectacle it has become.

Research by Baade and Matheson argue that the benefit of hosting such a mega event is actually between 0 and 25% of what is reported.  They cited displaced tourism as the main cause.  In a report on the Super Bowl held in Indianapolis in 2012, displaced tourism wasn’t neat the drain Baade has made it out to be.  They found that after adjusting for displaced spending of 46.9 million, the super bowl only accounted for 337.2 million.  This is not the large share that was predicted.  However, tourism is not big business in Indiana in February, so lets look at some actual numbers for Scottsdale.  Instead of using the reported numbers from 2008, which are considered too generous by some, we will compare data generated in Scottsdale itself.

In order to estimate the possible effect of displaced tourism in Scottsdale, the host of this year’s Super Bowl, I will consider spending per-person, per-day for each type of consumer.  According to data from Scottsdale, the average visitor staying in a hotel spends about $206 dollars per person per day, and the average day visitor spends just over $41 per person per day.  Similarly, using data from the Bureau of Labor and Statistics on consumer spending in the Phoenix area that could be displaced by a Super Bowl sized event (based on annual Food away from home, alcohol, apparel and services, and entertainment expenses) show residents spend about $24.50 per person per day.  According to data from the 2012 Super Bowl in Indianapolis there was spending of $571 per person per day.  Even though the previous super bowl in Scottsdale made almost $200 million more then the Indianapolis Super Bowl, we will chalk that up to host city being larger and able to accommodate more people.  Because of this, as well as the economy being in the bottom of a recession in 2008, I will consider the Indianapolis spending level as a lower bound. Using these numbers, we see that displaced tourism only eats away at most 36% (206/571) of the Super Bowl spending, assuming all tourism was done at a rate of 206, the scenario where the most local activity could be displaced, since all visitors would be staying in hotels, eating out for every meal, etc.  By assuming full occupancy in both cases, we can compare the per-person, per-day amounts directly.  This assumption is not trivial, as there is no guarantee that the city would be fully occupied with out the Super Bowl. Even with these generous assumptions, the Super Bowl resulted in attracting tourists spending 2.77 times what their local counterparts would.  This is a far cry from the predicted drop off of 75% or more.

This rough analysis has shown that the benefits of hosting a large, high profile event can provide a tangible increase in economic activity.  This is before any hard to quantify benefits like marketing from having such events are accounted for.  The strength of the effect is dependent on the amount by which the fans attending the game(s) spend per day verses the amount spent by the locals per day, which can be most logically attributed to lodging and increased food costs, as ticket revenue isn’t shared with host cities.  Even though tourism displacement is not the over powering force it was made out to be, the boost in activity is temporary, and as such is maybe a questionable use of public dollars.

 

 

 

Italy’s “Disneyland of Food”

When you think of a theme park, generally you think of roller coasters, waterparks, zoos, aquariums, and other attractions of the sort. In 2015, Italy plans to ditch the traditional theme park style and open up what will become the “Disneyland of Food”. With Italy being famous for its cuisine and culture, the theme park will feature nearly 125 restaurants, grocery stores, food courts, and learning labs. There will even be “live trees” where customers can pick their produce, as well as spaces for kids to play with food.

Italy

The graph above shows Italy’s gross domestic product growth rate for the past few years. As you can see, GDP expanded 0.1% in the fourth quarter of 2013, which was its first increase in 10 quarters. With this economic downturn that Italy has been facing, creating the world’s largest theme park dedicated to Italian food might just be what the economy needs.

Despite the large funds that will go into the development of this project, revenues are expected to be around 86 million euros ($118 million). With revenues like this, the theme park could easily help Italy’s economy start to emerge. The development of a one-of-a-kind project is likely to attract tourists from all over the world. And, with tourism being one of the largest industries, it is likely to bring many economic, social, and environmental effects. First and foremost, this “Disneyland of Food” will create thousands of new jobs, providing income to customers which will ultimately spur consumer spending and result in GDP growth. In addition, a food-themed park will encourage Italy to preserve its traditional culture, history, and cuisine. This will not only help generate funding for maintaining its natural resources, but it will create a better cultural understanding for the city’s tourists. As the president of the city of Eataly states, “It is an opportunity to show off our extraordinary biodiversity of resources in this country.” “And to help push us towards our economic potential.”

Another key feature of this theme park that will create a social benefit to the economy will be the educational opportunity available. Not only will the park provide a fun way for tourists to get a taste of Italy, but it will also provide a learning experience for young children. The learning labs will provide plots of land to test and study different varieties of vegetables grown in the country. There will be classrooms available with the goal of “teaching at least 3 million students that pears do not grow on supermarket shelves.”

With a little bit of advertising, I think this theme park will be a great effort to harness tourism in Italy to kick-start the economy by creating jobs and spurring consumer spending.

 

Football fights discrimination with economics

As reported in Wall Street Journal, Arizona’s governor is currently contemplating whether to sign Senate Bill 1062, a piece of legislation that would “allow business owners to deny service to customers based on the owners religious beliefs”.  Personally, I am shocked that this bill even made it to her desk.  If the governor isn’t concerned with human rights or social justice, perhaps she should think about the economic consequences.  One of those is that Scottsdale could lose Super Bowl 49.

If this law is passed, the NFL may very well repeat its actions in 1993, when it took the Super Bowl away from Arizona and moved it to Pasadena due to the legislatures refusal to acknowledge Martin Luther King Day.  After the holiday was finally acknowledged in 1992, the Super Bowl returned to Tempe, Arizona, along with roughly $300 million in economic activity because of it. In 2008, Arizona State found that the 2008 Super Bowl that was held in Scottsdale brought in $500 Million.  When considering the effects of signing the law, the effect of losing the Super Bowl should not be under estimated.  However, there are those that say the numbers above need to be reduced by as much as 90%. Due to the events size, a great deal f economic activity is displaced,  and it must be replaced before actual gains can be realized.  I believe the effects of this “tourism displacement” are being greatly exaggerated.

Research by Baade and Matheson argue that the benefit of hosting such a mega event is actually between 0 and 25% of what is reported.  They cited displaced tourism as the main cause.  In a report on the Super Bowl held in Indianapolis in 2012, displaced tourism wasn’t neat the drain Baade has made it out to be.  They found that after adjusting for displaced spending of 46.9 million, the super bowl only accounted for 337.2 million.  This is not the large share that was predicted.  However, tourism is not big business in Indiana in February, so lets look at some actual numbers for Scottsdale.  Instead of using the reported numbers from 2008, which are considered too generous by some, we will compare data generated in Scottsdale itself.

In order to estimate the possible effect of displaced tourism in Scottsdale, I will consider spending per person, per day for each type of consumer.  According to data from Scottsdale, the average visitor staying in a hotel spends about $206 dollars per person per day, and the average day visitor spends just over $41 per person per day.  Similarly, using data from the Bureau of Labor and Statistics on consumer spending in the Phoenix area that could be displaced by a Super Bowl sized event (based on annual Food away from home, alcohol, apparel and services, and entertainment expenses) show residents spend about $24.50 per person per day.  According to data from the 2012 Super Bowl in Indianapolis there was spending of $571 per person per day.  Even though the previous super bowl in Scottsdale made almost $200 million more then the Indianapolis Super Bowl, we will chalk that up to host city being larger and able to accommodate more people.  Because of this, as well as the economy being in the bottom of a recession in 2008, I will consider the Indianapolis spending level as a lower bound. Using these numbers, we see that displaced tourism only eats away at most 36% (206/571) of the Super Bowl spending, assuming all tourism was done at a rate of 206.  By assuming full occupancy in both cases, we can compare the per person per day amounts directly.  This assumption is not trivial, as there is no guarantee that the city would be fully occupied with out the Super Bowl. Even with these generous assumptions, the Super Bowl resulted in attracting tourists spending 2.77 times what they usually would.  This is a far cry from the predicted drop off of 75% or more.

This rough analysis has shown that the benefits of hosting a large and high profile event like the Super Bowl really does provide a dramatic increase in economic activity.  This effect is present after accounting for displaced commerce and tourism, as well as before taking into account the possibilities for increased tourism/ business due to the marketing opportunities such an event provides its host city.   While the governor has many things to consider before she makes her decision Bill 1062, but she should not under estimate the economic effect of her decisions.