Estimates of the Economic Impact of the Tour de Paris and the ASA Events on Lamar County

Conducted by Department of Economics and Finance – Texas A&M University – Commerce (March 2014)

The county is located in northeast Texas. The estimated county population is over 48,911 people and includes 907 square miles of land area.   Total employment exceeds 16,691 and is distributed among 5469 establishments within the county.   There are 19,260 households with average household income of $39,630.  This data are presented only to give the reader an idea of the economics of the county.  Selected county demographics are also presented in Table 1.

Introduction: This study focuses only on two tourism-related events hosted within the county: the Tour de Paris and the ASA archery event.   The Tour de Paris is a one-day event and the ASA is a two-day event.  Attendance and room night data were provided to the department for the years 2007 to 2013.   These data were averaged to obtain a typical attendance and room night figure for both events.   

Two different but related estimation methodologies were used to convert this information to visitor spending categories:

a.   Visitor spending category percentages were obtained from national data estimated by the Bureau of Economic Analysis;

b.  Visitor  characteristics  were taken from  the  2013  Impact of  Texas

Tourism conducted by Dean Runyan and Associates.

The model used to estimate predation impacts is the IMPLAN model. IMPLAN is a state of the art Input/Output modeling system.

Economic Impacts (Direct, Indirect, and Induced)

Industries in any county are broadly characterized as either export base or non-basic (support) sectors.  The basic sectors  generally produce products for sale outside of the county and as a result import money into the county.  The non-basic sectors support the basic sectors.  The idea behind this classification is that any economy will grow when it exports goods and imports money.  Recent years have seen an extension of the concept of basic sector to include such activities as health care, tourism, and financial services.

Further, industries are classified by the Federal government’s standard industrial classification system.  This older system of classification has recently been replaced by the North American Industrial Classification System (NAICS).

The associated increases in county wide purchases directly supporting these events are referred to as direct economic effects.

Indirect Economic effects are generated as tourism-related firms alter producer purchases of input supplies from other county industries. Tourism spending from non­ county residents generates additional economic activity within the county. This increased or decreased demand for inputs stimulates additional sectors within the county. In turn, the tourism-related sectors are forced to increase their demand for inputs into their own production process. These indirect economic effects result in additional jobs, increased income for the county and greater tax revenues for community infrastructure development.

The direct and indirect effects resulting from increased spending in tourism-related sectors results in the third kind of effect on the county economy as wage earners, owners or managers spend their earned income and business profits within the county economy. These requirements (demands) placed on the county economy by the personal consumption of residents of the county induces additional activity in other sectors of the county economy as residents purchase goods and services for daily living.   This is referred to as the induced effect.

The total economic impact of these two tourism events on the county is a summation of the direct, indirect and induced effects.    The indirect and induced effects are often referred  to as the secondary economic effects.   Any increase or decrease in tourism-related output or sales may be expected to cause increases or decreases in secondary economic impacts throughout the remaining county economy.

The  magnitude  of  the  secondary  effects  of  these  two  TOURISM RELATED  events within the county depends in large part upon:

•    (1)  whether  the  TOURISM  RELATED   inputs  are  purchased  from  within  or outside the county,

•    (2) whether the TOURISM  RELATED   employees, owners, and managers  spend their wages and profits locally.

Clearly not all the money received from the sale of TOURISM RELATED services nor is income from the TOURISM RELATED all spent in the county. At each successive cycle of economic activity, some money is lost from the county.  Those losses are referred to as “leakages” from the county.

These leakages occur for a number of reasons including:

•    (1) federal and state taxes that must be paid elsewhere

•    (2) the need for specialized equipment  and other goods and services that are not available within the county

•    (3) consumer preferences for shopping at locations outside the county.

In general, the magnitude of monetary leakage from a county decreases as the degree of economic integration and the availability of goods and services increase locally. As an extremely simplified example, suppose a manufacturer sells a product and receives $100.00  for it.  He saves $5 in an out-of-county bank, pays $25 in taxes, and spends the balance of goods and services in the county.   The local marketing company is paid $20, saves  $5 in a local bank,  pays  $10 in wages, and buys supplies from some local companies and some out-of-county companies. The employee buys from a local food store that is part of a national chain, etc. As one can see, the issue of leakages from a county can become a complicated issue. Given the rural nature of the county, we have inputs needed that are not either produced within the county or are not sufficient to meet increased demand, will be imported and thus reduce the impact of the tourism event countywide.

The direct effects of these two TOURISM  RELATED  events were provided to us. However, estimation of the secondary economic effects of an industry on an economy requires the use of sophisticated computer models. Input-output modeling is an accepted methodology for estimating the secondary effects on an economy. We have used the computer-based model IMPLAN (Impact Analysis for Planning).  IMPLAN reflects the 2007 county-level industry activity and the 2007 Bureau of Economic Analysis, accounting of industrial linkages.  Further, we have updated the 1mplan Model to 2010  by a method referred to as ground truthing. This means we have added or deleted firms from the county economy based on current state-level economic data on those counties. Data was provided by the US Census of Manufactures.

The tables below outline the economic impacts of the county and aggregated models.

Table 1: Lamar County Facts

 Table 2: Tour de Paris Assumptions: One Day Event

Table 3: ASA Assumptions: Two Day Event

Table 4: Total Spending Both Events: $1,253,959

The results of our event impact simulation  estimations of employment and spending impacts. There are 13 jobs that exist within the county that directly depend on the Tour de Paris and the ASA archery event. There is a total of $600,000  in additional spending generated within the county that is directly related to these two events. Finally, the food services and drinking places sector and the hotel and motel sector are the sectors most directly impacted.

Further, it is of note that given the rural nature of the county, some spending leaked from the county. Future economic develop strategies that would broaden the economic base of the county economy coul d pay dividends. We have estimated that an additional $300,000 to $400,000 in local impact could occur if the county were more diverse.

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