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City, businesses work to offset economic impacts of SXSW cancellation

Monday, March 9, 2020 by Chad Swiatecki

With the cancellation of this year’s South By Southwest festival, some local businesses and charitable organizations have launched fundraising drives in an effort to provide support to businesses and employees impacted by the loss of 10 days of high-volume tourist activity.

On Saturday, Mayor Steve Adler, Travis County Judge Sarah Eckhardt and Sen. Kirk Watson announced the launch of Stand With Austin, a fund managed by the Austin Community Foundation that will direct donations to “individuals and small businesses most negatively impacted by the cancellation of SXSW.”

That follows the launch of Banding Together, a fundraising drive created by businesses in the Red River Cultural District that will direct money to artists, events and venues impacted by the festival’s cancellation.

Adler told the Austin Monitor that residents need to do their part to make up for the economic blow of scrapping an event that generates nearly $360 million in economic impact each year. He said the Community Foundation is working on establishing the criteria for how to allocate the money raised through the Stand With Austin campaign.

“There are those questions on who decides how much someone gets, and everyone wants to take the lessons learned from the funds that were created after 9/11 and the Boston bombing, to not repeat the mistakes that were made with those,” he said. “There’s not going to be money coming to people overnight, but it’s exciting to see so many people stepping forward and trying to do what they can to help.”

Leaders in the city’s hospitality and entertainment industries have taken action to replace as much of the business they would normally see during SXSW, which by many estimates generates 20 to 30 percent of some business’ annual revenue in one 10-day stretch.

Clubs in the Red River Cultural District held a summit of about 50 owners, bookers and production staff on Saturday to plan on rebooking as many of the festival showcases as possible while adding other new concerts to fill their day and evening calendars. Those shows will require traditional tickets or door charges with the goal of generating admission and bar revenue to pay bands and employees.

Cody Cowan, executive director of the Red River Merchants Association, said the clubs will manage as best they can, building on the collaborative agreements instituted in recent years for the yearly Free Week and Hot Summer Nights district festivals.

Cowan said he and other stakeholders in the local music industry will spend the months after the normal SXSW period pushing Adler and members of City Council to do as much as possible to solidify the economic strength of music venues that may face insolvency in the coming months.

“I think it’s the moment now for the music industry, and the service industry, to ask, all right mayor and Council, where are we? Because whatever we’re doing for music or restaurant people now will have a great effect, but it’s going to be a long-term game in terms of the economic ramifications,” he said. “My job in music is to educate and advocate for that as strong as we can and not let up on the pulse of the city, so they know this is now a top priority for the mayor, Council and city. How are we as Austinites going to adapt the Live Music Capital of the World to the loss of South By and to COVID-19?”

Another expected longer-term economic impact from the festival cancellation will be a decrease in Hotel Occupancy Tax revenue because of the loss of bookings during the busiest time of the year for downtown hotels.

That revenue pool has grown to more than $100 million in recent years, with the money committed to repaying bond debt for the Austin Convention Center, as well as cultural arts, historic preservation and programs in support of local tourism.

Catlin Whitington, chair of the city’s Tourism Commission, said it’s reasonable to expect a 20 percent drop in hotel tax receipts through a combination of the SXSW cancellation and an overall decrease in business and tourism travel due to the virus.

One possible option to make up some of that decrease would be striking an agreement with short-term rental booking platforms, which currently pay no hotel tax revenue to the city because of the terms offered by companies such as Airbnb and VRBO.

While the Tourism Commission asked Council last year to take another look at bargaining with those companies, Whitington said the city would be giving up too much in possible future revenue if it entered into a quick agreement in the wake of the virus scare.

The city is reluctant to forge an agreement similar to the one Houston recently reached with STR platforms because of the companies’ wish to keep owners and operators’ information confidential. That structure would prevent the city from enforcing a license requirement for STR sites.

“There are a lot of issues regarding the structure and the nature of agreements made with other cities that the city is nervous about entering into,” he said. “Should they revisit it and look at a way to capture that? Yes, but not if it’s going to tie their hands in the future. It’s a double-edged sword. Yes, you can go after the money, but we’d be doing so at the risk of sacrificing our future options.”

Photo by Ian Aberle made available through a Creative Commons license.

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