The Democratic National Convention is being touted as a big boost for Denver’s economy – one that backers estimate could generate $160 million in spending.
But as recent experience shows, the local business impact of political conventions isn’t always what it’s cracked up to be.
Once the confetti and balloons cleared in Boston after the 2004 DNC, for instance, the net benefits to that city’s economy were only $14.8 million, according to a study from the Beacon Hill Institute at Suffolk University.
And the 2000 DNC in Los Angeles worked out to be a wash, Jack Kyser, chief economist at the Los Angeles Economic Development Corp., estimated a few years back.
The Boston DNC in 2004 generated around $157 million in spending, more than the $154 million planners had anticipated.
Despite that, a decision by Boston officials to discourage outside tourists and commuters from coming into the city wiped out most of the gains.
The cancellation of two events – Sail Boston and the 2004 U.S. Olympic gymnastics trials – cost the city $110.6 million in lost spending, the Beacon Hill study estimates.
Nearly a third of Boston workers stayed away during the 2004 convention, resulting in big losses to restaurants and retailers that served those workers.
The Denver Metro Convention and Visitors Bureau is estimating $160 million in benefits, based on the findings from the Beacon Hill study, said spokesman Rich Grant.
Denver Mayor John Hickenlooper has discussed economic benefits in the range of $139 million to $206 million.
In Boston, about $40 million of the benefits came from attendee spending, $37.5 million from security spending and $20 million from sponsored functions.
The remaining $60 million represented the multiplier effect – or mathematical adjustments to account for how each dollar of outside money generates several-fold in additional spending.
A caterer, for example, will turn to a food broker, who may contract with a farmer, who hires a private trucker.
Multipliers, however, can produce wide ranges.
Any discussion of benefits must also address costs, including lost opportunities, a key reason why official numbers are overstated, said Tucker Hart Adams, a regional economist with U.S. Bank.
“The problem with economic- impact studies is that they always look at the gross impact,” she said. “There are things that don’t happen because of the convention.”
For starters, the convention will displace tourists and business travelers unable to find lodging. In August, metro-area hotels averaged 6,600 empty rooms per night.
Conventioneers will need about 17,000 rooms, pushing out those people who might have otherwise occupied around 10,400 rooms.
At August’s average metro- area room rate of $107 per night spread across four nights, $4.4 million in lodging spending may go elsewhere, along with transportation, meals and other spending. Given that hotel vacancies are higher in late August than early August, the displacement may be somewhat smaller.
“The question will be, ‘Did those visitors come a week earlier or did they go somewhere else?”‘ Adams said.
Denver’s convention host committee has targeted raising $55 million in cash and like-kind contributions for things like golf carts to tote delegates around, receptions, meals, phone service, signage and even flowers.
About $30 million of that is expected to come from local corporations and philanthropists and will be spent locally – in some ways moving money from one pocket to another.
Equipping the Pepsi Center to host the convention is one of the bigger costs. It cost around $13 million to modify Boston’s FleetCenter.
“I don’t see it being much different than what happened in Boston in scope or in cost,” said Mike Benson, senior vice president of business affairs with Kroenke Sports in Denver.
But the costs, still to be determined, represent mostly modifications that must be reversed rather than improvements, reducing their long-term benefits.
Political-convention attendees also tend to spend much less dining out or shopping than expected, in part because they spend so much time at sponsored events where costs are covered, the Beacon Hill study noted.
In its favor, Denver won’t need to sacrifice any major tourist events, given the convention’s timing of late August.
The Nuggets and Avalanche are out of season, and no concerts were scheduled at the Pepsi Center, Benson said.
As a result, Denver’s economy should be able to net a larger share of the convention spending than Boston did, maybe half or more, Adams estimates.
Access to downtown could be one of the largest wild cards in the convention’s hidden costs.
Bob Voltz, manager of the REI Denver Flagship Store, said he is excited about the convention and expects many visitors to buy outdoor gear before heading out of town for the Labor Day weekend.
REI, not far from the Pepsi Center, has done well even during the crush of nearby sporting events. But when the radio stations say to stay away from downtown, business drops.
“The one thing I am a little concerned about is access,” he said.
Access may also be a concern for the 110,000 people, mostly commuters, who work downtown.
If a third of those workers stay away, as they did in Boston, and assuming they would have otherwise spent $10 a day, downtown businesses could lose about $1.5 million in sales over the convention’s four days.
But Peter Meersman, president of the Colorado Restaurant Association, is confident that for every worker who brown-bags a tuna sandwich, there will be a lobbyist buying a steak.
“There will be a lot of entertaining going on; every restaurant in town will be busy,” he said. “You will see the effect from Castle Rock to Boulder.”
Denver’s road and transit system should give the city an edge over Boston in terms of access, said Tami Door, president and chief executive of the Downtown Denver Partnership.
The message she hopes the local public receives from officials is to come, not stay away.
“It is going to work for everybody. If you work and live downtown, you will want to be part of this,” she said.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
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$160 MILLION
Anticipated economic impact in the Denver metro area from the 2008 Democratic convention
$14.8 MILLION
Economic impact in Boston from the 2004 Democratic convention
$0
Estimated economic impact in Los Angeles from the 2000 Democratic convention
