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SXSW economic impact grows to new high of $355.9 million

Wednesday, October 9, 2019 by Chad Swiatecki

The South by Southwest festivals created an economic impact of $355.9 million this year, an increase of about $5.3 million or about 1.5 percent from the $350.6 million figure generated last year.

In its annual report using data analyzed from Greyhill Advisors, the festival broke down the total figure into a $182.1 million impact from festival attendees and tourism, a $157.1 million impact from festival operations and $16.7 million in other consumer activity. The total impact is the highest in the 33-year history of the mid-March event that spans 10 days and takes over much of downtown Austin.

Greyhill found more than 12,000 individual hotel reservations were booked during the festival, with an average stay of five nights. With more hotel rooms coming into operation in the downtown area in recent years, the average per-night cost slipped by 6 percent to $365 per night, the first decrease in years.

Ben Loftsgaarden, a partner with Greyhill, said the availability of more rooms, especially on the festival’s second weekend, caused rates to drop and created a longer average stay as some visitors found they could afford to book more nights than normal. He said the opening of the Hotel Zaza and a new Marriott property in the next two years could relieve the bottleneck in hotel bookings that some believe has caused the festival’s attendance to plateau in recent years.

“It’ll be interesting to see if there’s another spike up in terms of attracting folks as a result of this,” he said. “Some people might try to find a room and feel like they’re being gouged and it’s not worth it. But if that continues to change as more hotels come on line and we don’t have as much of a supply crunch then possibly we might see a demand increase and see attendance numbers go back up.”

The economic activity model did not take into account the construction and other spending created by SXSW opening a new office building downtown, though the company’s yearly operations expenditures for staff and other overhead were included.

Loftsgaarden said one question mark still lingering in the model is the amount of short-term rental activity that takes place throughout Austin during the festival. That uncertainty comes from the city and STR platforms such as Airbnb and VRBO being at a standstill in terms of the availability of data on bookings in host sites. So in order to make an estimate of STR activity, Greyhill aggregates what data it can from the platform sites as well as surveys completed by festival attendees.

“We know there’s additional economic impact being realized to the city but without hard data … we’re making assumptions on assumptions so we’ve decided and advised South by Southwest to be as conservative as possible and use just the data we are able to collect from websites and survey data,” he said. “We know it’s happening but until we can get a hard data piece we don’t put it into our model.”

Catlin Whitington, chair of the city’s Tourism Commission and an executive with SXSW, said city leaders should reconsider the stalemate with the STR platforms so the city can devise better regulations and collect Hotel Occupancy Taxes from providers.

“If the city is not proactive in having conversations with the short-term rental platforms like Airbnb and VRBO they’re missing out on the opportunity to proactively create appropriate regulations,” he said. “I know that’s not a popular conversation with neighborhood groups and others in the community, but it’s a conversation we have to have or else we aren’t being honest about the market forces that are out there.”

While the availability of STRs has lessened the demand crunch from years of hotel room shortages, Whitington said the biggest limiting factor on the festival’s growth is the availability of convention and meeting space at the Austin Convention Center and in surrounding hotel properties.

He said the festival has not modeled out how its business would grow if the convention center undergoes a planned $1.2 billion expansion, and much of that can be calculated once the configuration of ballroom and meeting areas in the second phase is determined.

Photo by mlhradio made available through a Creative Commons license.

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