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Economic Research

Georgia Coast Braces
for G-8 Whirlwind

 

When representatives of the world’s leading economies meet in Georgia this summer, those associated with the Golden Isles’ economy are positioning themselves to reap a windfall.

Photos courtesy of Sea Island Convention and Visitors Bureau
Sea Island, the site of the upcoming G-8 Summit, is a narrow five-mile barrier island and the site of The Cloister, a resort with a reputation for making VIPs feel comfortable. The Cloister is nestled between scenic marshes and the Atlantic Ocean beachfront.

The G-8 Summit will take place this June over only three days at Sea Island on Georgia’s coast, but state officials are working to make sure the event makes a favorable and lasting impression on the local economy.

The June 8–10 summit—which will bring together representatives of eight of the world’s major economies—is projected to boost the state economy by about $250 million to $500 million, said Loretta Lepore, a spokesperson for Georgia Gov. Sonny Perdue. Most of the additional dollars will flow into coastal area hotels, restaurants, and shops. In all, Lepore added, the summit is expected to create an additional 2,500 jobs.

But officials caution that these numbers are rough estimates, based on previous G-8 summits. As a point of reference, Lepore cites a study after the 2002 G-8 Summit in Alberta that assessed the economic impact of that event at US$201.8 million to the Canadian province.

The main point Georgia officials emphasize is that the G-8 event will boost the area economy noticeably and probably raise the profile of Georgia’s barrier islands—or Golden Isles, as residents call them—as a tourist destination.

Jeffrey Humphreys, of the Terry College of Business at the University of Georgia, said the coastal economy stands to gain because many of those coming for the G-8 have generous expense accounts and will freely open their wallets. Savannah stands to get an extra boost from about 100 planning staff who relocate there for several months before the event.

Indeed, projecting how many visitors will show up and then guessing how much of the money in the local economy can be attributed to their presence is a difficult exercise involving several assumptions. But much is at stake in the projections. Meetings and conventions were a $102.3 billion industry nationally in 2001, and spending in the nation’s travel and tourism industry in 2002 was $1.3 trillion, accounting for more than 6.5 million jobs, according to Meeting Professionals International.

Complex logistics
The business of attracting conventions and tourism is extremely competitive, and economic impact projections can help persuade government officials to spend sometimes large sums of money on events and to marshal public support for needed help with logistics.

Major conventions typically involve coordination of many public and private agencies with an interest in maximizing the economic impact on a particular area.

But the G-8 summit is unlike any other large-scale event (see sidebar). It’s a one-of-a-kind whirlwind of activity in which the leaders of the world’s largest industrialized countries meet to discuss political, economic, and other high-level international issues. From the vantage point of the participants, it involves socializing and policy work sessions in a generally formal setting. Outside, the summit produces a potentially volatile mix of protesters and media.

In terms of logistics, G-8 events are complex. Each nation sends a large delegation, and organizers must ensure that everyone’s needs are met in line with formal diplomatic protocols. Plenty of pomp and ceremony are included, and great care is given to managing the arrival of the world leaders along with catering to their personal preferences.

Security is another concern. During the event, U.S. naval vessels and military aircraft will patrol Georgia’s coast, and some 10,000 state, federal, and local law enforcement personnel are charged with protecting the leaders and minimizing disruptions. The U.S. Congress allocated $25 million for G-8 security costs, and the state kicked in $1.3 million to pay for some road improvements near Sea Island and Brunswick.

Sea Island is a narrow, five-mile barrier island and the site of The Cloister, the resort that will host the G-8 delegates. Nestled between scenic marshes and the Atlantic Ocean beachfront, The Cloister is of one of the nation’s top-ranked resorts, with a reputation for making VIPs feel comfortable.

In addition to serenity, Sea Island offers security. The only way to get there on the ground is to cross the marshes via a two-lane causeway, past checkpoints that will be heavily armed during the event.

Protests a wildcard
Protection is needed to insulate leaders from the maelstrom of activity outside the conference. As the only regular gathering of the world’s top leaders, the G-8 is the Super Bowl for protest groups around the world. U.S. organizers are bracing for an influx of thousands of people with a broad array of grievances.

U.S. officials hope protest violence won’t break out in nearby Savannah, with its historic brownstones and colonial-era squares.

Most of the protests at past summits have been peaceful although events on the periphery of prior meetings have gotten out of hand. Some 100,000 protesters swarmed into Geneva, Switzerland, to send a message to the leaders gathered at nearby Evian, France, in 2003. Some of the protesters there went on violent rampages, and at least one death and more than 100 injuries occurred during protests in Genoa, Italy, in 2001.

U.S. officials hope protest violence won’t break out in nearby Savannah, with its historic brownstones and colonial-era squares designed by Gen. James Oglethorpe, the founder of Georgia. The city has become increasingly popular as a tourist destination and is known for attracting hundreds of thousands for St. Patrick’s Day festivities in March.

A grander scale
The G-8 Summit will be by far the largest convention Savannah has ever hosted, said Melissa Yao of the local convention bureau. Press conferences and other activities will take place in the city’s 365,000 square-foot convention center. Organizers also have booked 5,000 of the city’s 11,000 hotel rooms to accommodate credentialed media and government support staff. Savannah tourism officials project the convention’s impact on their city will be $40 million.

June is a popular time to visit coastal Georgia, and hotel rooms during the G-8 week along Coastal Georgia will be scarce. Officials said they are trying to relocate or reschedule weddings and other events planned for that time.

As a coastal island with limited access, Sea Island provides an ideal location for the G-8 Summit, which requires high security for attendees.

The plan is for the official G-8 delegations to arrive from overseas at nearby military bases and then take a helicopter flight to Sea Island. Increased traffic also is likely at the commercial airports in Savannah and Jacksonville, and some G-8 visitors are expected to fly into Atlanta and make the 300-mile road trip to the coast.

Courting the media
Altogether, about 7,000 official staff and personnel are expected for the G-8, and that number does not include as many as 3,000 credentialed media and their staff. At any one time, only about 150 media staff will be at the summit on Sea Island. The rest will be in Savannah, filing stories and following up on press releases.

Georgia officials are trying to make the most of the worldwide media exposure, valued at an estimated $10 million. They plan to emphasize Georgia’s unique coastal environment with the goal of boosting tourism and investment over the long term. Already, plans are afoot to build a memorial to the three-day G-8 event near a historic lighthouse on St. Simons Island, adjacent to Sea Island.

Because the visiting media may have some downtime, Georgia officials have devised a plan to keep them busy. They have recruited several executives to speak with reporters and are offering tours of key areas of interest, from the Okefenokee National Wildlife Refuge to Gulfstream Aerospace Corp.’s manufacturing facilities in Savannah.

“Most people around the world don’t even know that Georgia has a coast,” said Barry Bennett of Sea Island Summit, a planning organization.

“There will be a really positive economic impact,” said Humphreys. But the University of Georgia economist wonders whether some media and visitors will be deterred by the isolation of the summit, with the leaders sequestered remotely on Sea Island. Also, the actual numbers may not be as large as projected, he added. Still, with the eyes of the world on Georgia’s coast in June, there is little doubt that the region will enjoy a globally heightened profile that could bring enduring economic benefits.

Factoring Economic Impact of Events an Inexact Science

In addition to the G-8 conference, the Southeast has hosted more than its share of big events over the years, from political conventions to large-scale trade shows to sporting events. These events, particularly high-profile national sports events, give officials plenty of cases to study how visiting crowds influence a local economy. But measuring their true economic impact presents some challenges.

The ultimate sports event in terms of dollars is the Summer Olympics, which boosted Georgia’s economy by a whopping $5.1 billion between 1989 and 1996, when the games took place. University of Georgia economist Jeffrey Humphreys calculated the Olympics’ impact to include related visitation over seven years, the formation of the Atlanta Committee for the Olympic Games, and the cost of various major construction projects.

Four years later, the Super Bowl gave the Atlanta area an economic boost. The 2000 NFL championship pumped an estimated $292 million into the local economy, said Matt Garvey, director of communications for the Atlanta Sports Council.

Aside from the Olympics, the Super Bowl’s impact is “far and away the biggest of any sporting event,” Garvey noted. The weeklong event generates a lot of money for the local economy because the vast majority of fans are from out of town, and many arrive several days before the kickoff and spend lots of money.

“The biggest single driver for the local economy is out-of-state dollars,” Garvey added, noting that the impact of a Falcons game is relatively small because the vast majority of ticket holders live in the area and would have spent money in the local economy in any event.

An event, particularly if it is large enough to matter, will displace some activity that otherwise would have taken place.
Tom Cunningham
Associate Director of Research
Federal Reserve Bank of Atlanta

College football games also draw big crowds in the Southeast. The annual Georgia-Florida game in Jacksonville is dubbed “the world’s largest cocktail party.” Citing informal estimates, the event attracts 50,000–60,000 people to the area for the weekend and adds $18 million–$25 million to the local economy, said Michael Sullivan, director of sports development for the Jacksonville Economic Development Commission.

Another high-profile event in Atlanta was the 2003 NBA All-Star Game, which added $34.2 million to the Atlanta economy, Garvey said. Although it took place in Philips Arena, with a capacity of only 18,000, the game attracted some 30,000 to the Atlanta area, with non-ticket holders jamming area streets for much of the weekend.

In calculating the economic impact, the Atlanta Sports Council hires economists and other experts to count and then analyze the money spent on transportation, lodging, meals, retail sales outside the arena, and sales at the event such as tickets and programs. The Atlanta model also factors a multiplier of about 1.4 to project how the money moves through the economy.

“It’s an inexact science,” Garvey said. “You take your best guess and do what you can with it.”

But some economists believe that there are problems with this type of measurement. Tom Cunningham, associate director of research for the Federal Reserve Bank of Atlanta, cited one such concern: that not all of the countable economic activity associated with an event is a net gain to the locality.

“An event, particularly if it is large enough to matter, will displace some activity that otherwise would have taken place,” he said. “The hotel or restaurant that is completely filled because of a Super Bowl would not have been completely empty otherwise. Single big events may push out many smaller events. So even at the local level where the positive economic impact is most concentrated, the net overall gain may be considerably less than the spending generated by the event.”

Clearly, large-scale events have a real economic impact on the area where they are held, but measuring their effect is difficult.

 

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