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SXSW touts $325M economic impact for Austin

Thursday, September 8, 2016 by Elizabeth Pagano

According to Mayor Steve Adler, South by Southwest is more than just a cash cow. In an evocative metaphor at yesterday’s annual reveal of the festival’s economic contribution to the city, he likened the festival instead to “a herd that comes to our city” every year.

This year, like the year before it and the year before that, the economic impact of South by Southwest increased, bringing an estimated $325.3 million in economic impact to the city, an increase of $8 million over the previous year.

“We keep expecting South By to hit a plateau, but it continues to increase year after year as they add new programming,” said Greyhill Advisors partner Ben Loftsgaarden, who spoke with the Austin Monitor following the presentation of his firm’s economic analysis. “With increases in hotels and convention space, I think we expect to see South by Southwest continue to increase over the years.”

In terms of surprises in the data, Loftsgaarden told the Monitor that SXSWedu increased eightfold this year.

Less of a surprise, but worth noting nonetheless, is the finding that hotel rates were at a record high for this year’s festival, at $350 per night on average, which is a 60 percent increase from 2011 and up from the previous year’s “all-time high” of $330. Though that price has continued to climb over the years, this year’s official report notes that “the trend of rate hikes will prove unsustainable” and will most likely ease as new hotels open downtown. The average registrant stay in those pricey rooms also grew again this year, from 2015’s average of 4.9 nights to 5.2 nights in 2016.

However, according to data from SXSW, the number of rooms booked was actually down, albeit slightly, from 59,813 room nights booked in 69 official hotels in 2015 to 59,376 room nights booked in 64 official hotels in 2016.

The analysis also showed that direct bookings by SXSW alone raised $1.8 million in Hotel Occupancy Tax revenue for the city.

In what is perhaps another non-surprise, 2016 saw an all-time high in the number of festival registrants, with 84,560 credentialed and official participants, up from 81,600 in 2015. Paid music and film festival single-admission ticket sales were down, from 50,200 in 2015 to 46,100 in 2016.

How Greenhill Advisors calculate the economic impact of the festival is complicated. Loftsgaarden told the Monitor that this year’s analysis can be compared to how it has been done in the past couple of years, following the addition of Guest Pass tracking.

The total impact of $325.3 million is derived from a number of things. About $159.7 million comes from people participating in official events and is categorized as “official attendance impact.” About $116.9 million comes from the year-round operations and staffing of the festival. And $48.7 million is attributed to spending by those whose numbers include SXSWeek party and SXSW Guest Pass participants.

In the presentation, festival organizers also broke down how the money enters Austin’s economy. The largest number, $220.1 million, is the direct impact of the official SXSW events during the festival, including spending by sponsors, attendees and exhibitors. Indirect impact, which is increased sales, income and jobs during the festival, accounts for $57.6 million. And “induced impact” is measured at $47.6 million and includes things like “increased spending by individuals who experience increased earnings as a result of the festival and conference.”

The presentation also noted some recent big news for the festival and an increased focus on public policy following keynote speeches by President and first lady Obama. Of course, this includes the recent announcement that the White House will be hosting its own mini “South by South Lawn” in October.

SXSW Interactive Festival Director Hugh Forrest said that SXSW is also working with the mayor to expand the mayoral programming for this spring.

“Overall, it reflects a much bigger presence of lawmakers, of policy makers, of government officials during South by Southwest,” Forrest told the Monitor. “I think that makes sense, when you think of the disruption that is coming from the startup industry. Startups need to understand how lawmakers work, the lawmakers need to better understand how startups work, and if we can be a convening place that helps create some of those relationships and improve some of those relationships, that would be great.”

Loftsgaarden noted that the festival’s economic impact, while comprehensive, only tells part of the story.

“We calculate the quantitative impact, but as the mayor mentioned, some of those qualitative factors (aren’t calculated),” said Loftsgaarden. “South By has really driven all the hotel growth. Large hotel properties – they don’t come here just for South by Southwest, but that certainly is a great anchor to have. Same with the Convention Center. It’s driving related economic benefits that aren’t captured in the numbers.”

Although Wednesday’s presentation was, in fact, all about the numbers, both Adler and Forrest reiterated the point that the festival was more than metaphorical cows. “Even with this economic impact, it’s important, I think, to know and to recognize that we would do South by Southwest in Austin even if it didn’t bring any money into our economy,” said Adler. “South by Southwest is an expression of the city of Austin.”

Following the presentation, Forrest echoed the sentiment.

“What I always say to myself and my staff is: Our goal is to be better. And if we are better, then the numbers will take care of themselves,” said Forrest. “Numbers can be a trap, and what we want to do is create the best possible experience. … If we continue to make improvements, the numbers should be fine.”

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Photo by Geoff Livingston made available through a Creative Commons license.

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