Economic impact of 2012 Grand Prix of Baltimore less than 2011

Daily Record Business Writer//November 15, 2012

Economic impact of 2012 Grand Prix of Baltimore less than 2011

By Alissa Gulin

//Daily Record Business Writer

//November 15, 2012

The numbers are in.

Grand Prix of BaltimoreThe 2012 Grand Prix of Baltimore generated less economic activity and attracted fewer spectators than last year’s inaugural race, according to a report by Pittsburgh-based Forward Analytics, despite what seems to be a consensus among attendees and locals that the sophomore year was better executed.

Event organizers aren’t shocked by the numbers, and they’re nowhere near defeated, said J.P. Grant, one of the race’s owners, who took over in May after former organizers dropped out.

The report didn’t illuminate anything Grant’s team didn’t already know — that they need to significantly improve both ticket sales and sponsorship revenue and to further engage local businesses, he said.

“I think we’ve established credibility,” Grant said of Race On LLC, which backed the event financially, and Andretti Sports Marketing, which handled promotions.

“We were working extremely hard, and we’re committed to making this thing a success.”

September’s race produced a total economic impact of $42.3 million for the city, falling short of the almost $47 million from the 2011 race, the study found.

The event was directly responsible for $24.9 million in local spending by out-of-town visitors, vendors and Race On. That money rippled throughout the economy, the study said, producing about $17.5 million in indirect spending.

In addition to the business spending, this year’s race generated about $1.3 million in tax revenues for the city and another $1.3 million for the state.

The 2012 event attracted about 28,500 fewer people — 131,500 compared to 160,000 — which Grant attributed to “overhang” from the poorly managed 2011 race and from having less time to sell tickets.

“We were the third group to come in and say we were going to do a race,” he said. “No one really believed it. There was healthy dose of skepticism.”

Once construction began, he said, ticket sales picked up.

For the 2011 impact report, which was paid for by the city, Forward Analytics surveyed a random sample of race attendees to learn the actual amount they spent on dining, lodging, retail, transportation and other attractions in Baltimore.

Race On commissioned Forward Analytics to do another impact report for the 2012 race — but after the event had ended, which Grant said was an oversight that won’t happen again. Because the firm didn’t conduct new surveys, researchers based some of their conclusions on the spending habits of 2011 attendees.

Fifty-eight percent of attendees traveled from outside the Baltimore metro area, the report said, and injected an estimated $22.2 million directly into the city. Most of that money — $7.2 million — went to hotels, with $4.4 million spent at restaurants and $3.1 million spent on retail.

The study used data from 2012 ticket transactions, including sales at box offices and online at Ticketmaster and on Living Social. The report found 64 percent of ticket revenues came from nonlocal spectators, which likely indicates that out-of-towners purchased pricier admission packages.

Vendors from outside Baltimore added $969,400 to the total direct impact, from the expenses of travel, lodging and the costs of providing their goods and services.

Race On contributed about $1.7 million to the direct business impact, from contracting businesses based in Baltimore and Baltimore County to provide construction, landscaping, signage and other professional services.

The event was mostly funded privately, but Grant and O’Neill received an estimated $824,000 from sponsors based outside of Maryland, according to the report. Sponsorships comprised less than 10 percent of their total operating budget, Grant said, and they hope to boost that number by signing corporate partners earlier.

In a statement, Mayor Stephanie Rawlings-Blake lauded the “terrific” race weekend for the activity it generated.

“Today’s report shows the great opportunity for growth in the years ahead now that the event has been stabilized and as Race On has more time to plan, market and conduct the event,” she said in the statement.

Other economists were less enthusiastic.

Dennis Coates, an economics professor at the University of Maryland, Baltimore County, who specializes in the economic impact of sports on local economies, said many people formed preconceived, rosy pictures of the race.

“City officials, they knew the answer before they did any studies,” he said. “You know — it’s going to cure cancer and make us all healthy, wealthy and wise.”

Coates and others at UMBC released an independent study of the 2011 Grand Prix, which found a more modest total impact. Although, Coates praised Forward Analytics’ methodology, he said it’s too soon to tell if a Baltimore race has lasting promise.

The Grand Prix’s actual effect on the economy was the topic of much debate before, during and immediately after the race. Event organizers, backed by several city officials, insisted it would create significant benefits for local establishments, but reactions of the business owners themselves were a mixed bag.

Grant has said he tried throughout the race weekend to emphasize “Baltimore is open for business,” and to encourage visitors to patronize local establishments. And while some business owners said they did experience surges in profits, others reported feeling left out of the economic boom.

At the time, many restaurateurs said race organizers seemed to put serious effort into considering the effects on surrounding neighborhoods — especially compared to the former owners.

A different group, Baltimore Racing Development LLC, financed the inaugural race in 2011, but its organizers left the city with millions in debt and unpaid bills. For the 2012 race, another group of financiers had been lined up, but they lost their contract with the city in February after failing to meet deadlines.

So in May, with only a few months until race day, Grant and his partner, Greg O’Neill, took over. They and their marketing team, Andretti Sports Marketing, have repeatedly said that given the short time frame they had to work with, they were particularly satisfied with the event.

“When you compare the numbers that we put up in 100 days versus what occurred in 2011, we performed — and we performed at an extremely high level,” Grant said. “Heading into 2014, we’re looking at further success. …This year was what I hope will be the worst case. We proved we can handle a first-rate event even under enormously trying circumstances.”



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