By Jamie Smith Hopkins, The Baltimore Sun
9:49 PM EDT, November 4, 2011
City officials are calling the Baltimore Grand Prix an economic success, but a new study conducted for the city's tourism arm suggests that it funneled far less money to local businesses than race organizers predicted.
The report for Visit Baltimore, released Friday, estimates that spectators from outside the Baltimore region, non-local vendors and race promoters spent almost $28 million in and near the city during the Labor Day weekend event. Baltimore Racing Development, the financially beleaguered race organizer, issued its own report last year that projected about $70 million in race-fueled spending.
The total economic impact — including the ripple effect of the new money recirculating in and around the city — was about $47 million, according to the new report by Pittsburgh-based Forward Analytics. Race organizers had put the figure at nearly $120 million.
The study also shows city tax revenues falling short of projections, coming in at about $1.7 million rather than more than $2.2 million.
The report was seized on by critics and supporters alike Friday. Some said the figures prove that the street racing extravaganza wasn't worth city government support, while others said that even the smaller-than-expected impact was bigger than any other event in Baltimore.
"Am I disappointed with having a $50 million weekend? No, I'm not," said Tom Noonan, president and chief executive of Visit Baltimore, a quasi-governmental agency that works to increase tourism and conventions in the city. "If we have five years of that, that's a quarter of a billion dollars."
Labor Day weekend is normally a quiet stretch in Baltimore as Marylanders head for the beaches one last time, he said. Weddings and similar gatherings are just about all downtown hotels can expect. The Baltimore Grand Prix changed that calculus completely, Noonan said.
But Dennis Coates, a sports economics professor who estimated somewhat less spending on the race in an October study, said city logistical support for the event and $6.5 million in road improvements were justified by big economic-benefit projections that did not prove accurate.
"Is this really what we mean by success?" said Coates, with the University of Maryland, Baltimore County.
The study Coates co-authored estimated that the race prompted $25 million in spending, about $10 million of which "would likely have occurred in Baltimore or Maryland even without the event."
He thinks the new estimates are overstated because the report doesn't account for how much extra was spent in the area by out-of-towners compared with a normal Labor Day weekend. And he pointed out one apparent discrepancy: The report says the Baltimore Grand Prix produced $440,000 in admissions and amusement tax revenue for the city, but state comptroller records show that amount is about as much as it collected for the city from sales of tickets and other taxed items during the entire month of September.
And the figure is down more than 30 percent from collections a year earlier.
Ian Brennan, a spokesman for Mayor Stephanie Rawlings-Blake, said Friday that he asked the Finance Department whether Baltimore Racing Development had indeed turned over the admissions taxes but had not yet received an answer.
It's not yet clear how much the city spent on the race beyond the money to repave roads. City Councilman William H. Cole IV, who represents downtown, said a final number should be available soon to account for setup costs, police overtime and other expenses. Baltimore Racing Development is supposed to reimburse the city for up to $500,000 of those costs.
The company's financial woes have cast a shadow over the future of the event. Baltimore Racing Development is struggling to pay contractors, has missed a loan payment to the state and is under pressure to reorganize. Leaders there did not return telephone calls Friday, though they said earlier this week that next year's Baltimore Grand Prix is on track.
"The fact that the race was so successful from a pure numbers standpoint, ticket sales and everything, [means] they've got to figure out a way to work this thing out," said Cole, the councilman.
Brennan said the new survey results bode well for the future because nearly nine in 10 of the spectators surveyed said they are likely or "very likely" to attend next year's race.
"In addition to the $47 million economic impact for the city, the fact that almost all of the 160,000 race attendees had a positive experience and plan to return, makes clear this is a valuable event with growth potential," he said in a statement. "It is easy to see a scenario where this event's economic value will eventually overcome any short-term financial challenges."
The new study by Forward Analytics called the event "a real win" for the city, even as it noted that downtown hotels lost out on some bookings to suburban competitors with fewer restrictions. Noonan, with Visit Baltimore, said both hotels and restaurants can do better next time after learning what worked and what didn't.
One problem: Local residents fled, not wanting to battle the crowds. Traffic jams Thursday night "scared a lot of people away from downtown," said Michael Evitts, a spokesman for the Downtown Partnership of Baltimore. Friday was very quiet.
"We had restaurants calling us, saying, 'Please spread the word there's no traffic,'" Evitts said. "They had a lot of reservations canceled after that apocalyptic Thursday."
Sergio Vitale, co-owner of the Little Italy restaurant Aldo's and the Harbor East restaurant Chazz: A Bronx Original, said it would help to next time have groups working together to persuade people from the region to come to Baltimore even if they're not watching the race. He'd also like organizers to set up a pavilion for local restaurants to sell food to racegoers, who showed a tendency to stay put in the race area.
Vitale says his businesses had — if anything — an even slower Labor Day weekend than normal. The race didn't send much business his way, but it kept regulars from showing up.
"If you were within the confines of the race, you did super," he said. "If you were east of President Street, the race didn't impact you at all — if it did at all, it was negative."
But he's a supporter of the Baltimore Grand Prix and thinks these issues will be ironed out over time. "That's part of the learning curve," Vitale said.
Downtown hotel occupancy averaged 70 percent from Friday through Sunday that weekend, up only slightly from last year — in part because a Navy-Maryland football game in Baltimore on Labor Day 2010 gave an unusual boost to hotel bookings that Sunday. Decisions by many downtown hotels to require minimum three-night stays also pushed some spectators to suburban hotels, including ones near the airport, the economic-impact report said.
But Visit Baltimore said downtown hotels made much more money than normal for the weekend, with average room rates around $180 rather than $120 a night.
Jason Curtis, general manager at the downtown SpringHill Suites by Marriott, said his hotel charged twice as much as it typically does for the weekend and sold out on Friday and Saturday. He's happy about the race ripple effect.
"I don't understand why some people are complaining," he said. "I think part of it is, people had such high expectations of what the Grand Prix was going to do."
Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute, wasn't surprised that the race's impact doesn't appear to match up with organizers' initial expectations. An economic impact figure produced before an event occurs "always tends to overstate," he said.
Clinch, who looked at the new Visit Baltimore study at the city's request but was not paid to do so, said the methodology looks sound and the decision to exclude spending by Baltimore-area spectators means the figures shouldn't be unrealistically positive.
"I doubt it's a game changer," Clinch said of the race, "but I don't think it was a waste of funds, either."
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