The fallout from the Las Vegas Grand Prix has sparked conversation about just how much the event benefits local tourism. Although early reports indicate huge revenue increases, independent analyses present a more complex story. Understanding just how valuable the Saudi deal is for Las Vegas requires examining the numbers and flow of revenue in more detail.
Dissecting the Numbers of Las Vegas Grand Prix
The Las Vegas Review-Journal reported that the Grand Prix delivered a net $1.5 billion economic impact. But Berry College Economics Professor Frank Stephenson took a closer look. He discovered that the hotel boost on race day reached only between $60 million and $70 million, by his estimates. Occupancies also fluctuated throughout the week, revealing underlying vulnerabilities.
Hotel Revenue, ADR, and Occupancy Trends
Occupancy rates were down 20% on the Monday, Tuesday and Wednesday prior to the event, Stephenson said. While it got a slight bump on Saturday, the weekly occupancy overall remains mired. Those figures hint that any race day gains might have been canceled out by sluggish business earlier in the week.
Where Does the Revenue Go?
One of the big issues Stephenson brought up is where the revenue goes. He pointed out that much of the extra hotel revenue ends up at corporate headquarters, not locally reinvested. That means that, while the Grand Prix has benefits, most of those benefits will not directly benefit Las Vegas Grand Prix businesses or residents.
Skeptical About the Reports of Economic Impact
In particular, many economists have seen red over reports on how much economic activity will be generated by large events, especially when they’re used to justify public subsidies. A firm that is often hired to assess these sorts of events, Applied Analysis, has faced scrutiny. Critics say their projections can be unduly sunny, which are crafted more to justify funding requests than to give evenhanded information.
The Need for A Broader Perspective
These conflicting assessments highlight the challenges in judging events such as the Las Vegas Grand Prix. Stakeholders need to see beyond the headlines and hyperbole. They need to look at how revenue gets distributed and whether local communities benefit in a tangible way. Enquiries regarding public officials and investors alike use data to determine whether an event will be hosted in the future.
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