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What Is Best Way To Measure Grand Prix's Economic Impact?

August 13, 2013

By Marty Conway

The best professional race-car drivers, when asked about their success, often refer to having a feel for the road or the racecourse. While the average drivers on these professional circuits use their eyes to stay off the concrete barriers, racing legends such as Mario Andretti and Ayrton Senna have talked about a feel for the fastest groove around. It's a sensation and perception that complements the other human senses. Although drivers do trust their eyes and what they see, being able to absorb and feel their surroundings was another important sense they relied on.

When it comes to assessing the economic impact of the 2013 Grand Prix of Baltimore, presented by SRT, having that driver's sense of feel may be just as important as what is in a written report several months after the event.

This year's event, scheduled for Aug. 30-Sept. 1, is expected to draw crowds of at least 131,000, the number of spectators reported for the 2012 event. According to a report published by Forward Analytics, a consulting firm race organizers hired, the 2012 Grand Prix of Baltimore generated $42.3 million in economic impact for Baltimore. The study cites nearly $25 million in direct impact to Baltimore, made up of $22 million in spending by non-local spectators, $1.6 million in spending by race organizer Race On LLC and $950,000 in spending by non-local vendors.

The gap between the $25 million in direct spending and the number cited in overall impact, $42.3 million, is attributed to what is known in economic terms as the multiplier effect. It accounts for the impact that those who receive the direct benefit will, in turn, spend with other suppliers and vendors throughout the area on materials, labor and services, to name a few examples.

Not everyone can agree about the impact that events such as the Grand Prix of Baltimore have on the local economy. Dennis Coates, a University of Maryland Baltimore County economic professor who studies sports events, released a report after the 2011 Grand Prix that indicated the impact was approximately $20 million less than the $48 million the 2011 race organizers, Baltimore Racing Development, had said it was. Coates' argument centered on the $10 million that his study found would have occurred in Baltimore anyway, without the race, he told The Baltimore Sun in October 2011.

How can these differences be settled? Rock, paper, scissors? Challenging each other to a duel, something such as economists walking 25 paces on Pratt Street, turning and throwing the findings of their studies at one another?

Despite what the numbers in one particular study may show, people may have to rely, as did these great drivers, on the feel of this event being in Baltimore. That is, walking around with eyes and ears open, listening to the spectators and visitors and observing their behaviors from close range. Tim Mayer, general manager of the Grand Prix of Baltimore, added another factor to the question of impact.

"Cities have reputations," Mayer said, "and those reputations include how effectively they can sustain events, like sporting and entertainment events."

Mayer's point goes to level of diversity, a city and region's ability to maintain and grow its economy from a diverse set of citizens, corporations, sports teams, events and attractions. Event weekends, such as the Grand Prix of Baltimore, fit into one of those slots that, when knitted together, tell the story of a community. Outsiders see the story, but just as importantly, the community tells the story, with pride, to those outside.

"It's an event, not the event," Mayer said, "It's adding another layer to the cake, metaphorically speaking. You have the Orioles and Ravens, the Preakness, the National Aquarium, Under Armour, the Convention Center and more."

Each of those, respectively, drives a Baltimore City service economy industry of $1.4 billion, according to the most recent census data.

The city of Baltimore and the state of Maryland have gotten behind the Grand Prix, with the event weekend an important part of the marketing efforts from organizations charged with both tourism and economic development. Karen Glenn Hood, spokeswoman from the Maryland department of business and economic development, said that organization had given a $420,000 grant Visit Baltimore for marketing activities related to the race, bringing influential meeting planners and leaders from around the country in to Baltimore to witness the city at its best, firsthand.

"The grant is one of the largest available, and due to the size of the city and the potential impact, we anticipate a strong turnout," Hood said. "This event occurs at a time when not too many people from out of town would otherwise think about Baltimore and what it has to offer."

Hood compared the Grand Prix with the Preakness in terms of the attention it draws nationally and the showcase it provides for Maryland.

With the economic scars in the community barely healed after the inaugural race promoters, Baltimore Racing Development, left the city and many vendors unpaid, an obvious question would be, "Can this event break even, or even pay for itself?" J.P. Grant and Greg O'Neil lead the new organization backing the event, RaceOn Baltimore, and they have provided a sturdy financial foundation upon which to build the future. Though admitting that a profit may still be years in the future, Mayer referred to a phrase used in Great Britain, "It washes its face," meaning that apart from the question of direct or indirect impact, at least, this event will pay for itself.

The Grand Prix of Baltimore is one of two events during the year that bring two of the top auto-racing series to one location. The American Le Mans Series joins IndyCar in the sports car-racing series. The Long Beach Grand Prix, held April 19-21 in Long Beach, Calif., is the only other event that pairs these two series during the same weekend.

The Long Beach Grand Prix, in fact, may be the model Baltimore can look to as experts wrestle with the question of economic impact and benefit to the city. The 2013 Long Beach Grand Prix marked the 39th year of that event, which is a fixture on the racing circuit and showcases the city around the world on television each April.

Before hosting the Grand Prix, Long Beach was largely known as a Navy town, and sat in the shadows of Los Angeles. Since the Grand Prix took hold in the city, the revenue generated has been reinvested in the services sector of the economy, and now the Grand Prix, along with its Celebrity Race, generates interest worldwide. An economic impact study from 2006 reported that the Grand Prix had generated more than $40 million in benefits to the community. With an event now approaching its 40th anniversary, impact studies are less important than the observations of those involved.

Long Beach Convention and Visitors Bureau spokesman Bob Maguglin told the Long Beach Press-Telegram in April, "Some spectators come for the racing, some for the music, entertainment and special events, but everyone gets to see Long Beach at its best."

During the weeks and months after the Grand Prix of Baltimore is over, the streets will be returned to normal left and right turns, the concrete barriers and fencing will come down and the trash will be all picked up. Elsewhere, the economists will huddle in conference rooms, using green eyeshades to look over reams of data gathered from the weekend, trying to assess what impact the Grand Prix of Baltimore had on the city and surrounding area.

Whether the data reveals $25 million or $40 million, or somewhere in between, in terms of financial benefit, those who live in the area will come to know what the greatest drivers in the sport know -- a person's sense of feel can identify the impact of events such as the Grand Prix of Baltimore.

Issue 188: August 2013