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  • THE ECONOMIC IMPACT OF THE MARDI GRAS SEASON ON THE NEW ORLEANS ECONOMY AND THE NET FISCAL BENEFIT OF

    STAGING MARDI GRAS FOR THE CITY OF NEW ORLEANS

    AN UPDATE OF THE 2009 ECONOMIC IMPACT STUDY

    2011

    Prepared for the Carnival Krewe Civic Foundation, Inc.

    Toni Weiss Senior Professor of Practice Department of Economics Tulane University

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    EXECUTIVE SUMMARY

    Total direct economic impact of Mardi Gras on the New Orleans economy

    $144,091,533

    Total direct and indirect impact of Mardi Gras on the New Orleans economy

    $300,656,546

    Percentage of New Orleans GDP 1.5%

    Net fiscal benefit accrued to the City of New Orleans as a result of staging Mardi Gras including franchise value $13,108,538

    Return on Citys investment in Mardi Gras $8.45

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    Table of Contents

    I. INTRODUCTION.................................................................................................................................... 3

    II. METHODOLOGY ................................................................................................................................... 4

    III. THE NEW ORLEANS ECONOMY............................................................................................................ 6

    IV. AGGREGATE DIRECT EXPENDITURES ................................................................................................... 8

    A. Lodging and Non-Lodging Expenditures .......................................................................................... 9

    B. Food and Alcohol ........................................................................................................................... 11

    C. Merchandise and Services ............................................................................................................. 12

    D. Mardi Gras Krewes......................................................................................................................... 13

    E. Krewe Members............................................................................................................................. 14

    F. Government................................................................................................................................... 15

    G. Summary........................................................................................................................................ 16

    V. Incremental Tourism and Brand Value .............................................................................................. 17

    VI. NET FISCAL BENEFIT ........................................................................................................................... 18

    VII. CONCLUSION...................................................................................................................................... 20

    APPENDIX A KREWE CAPTAINS SURVEY................................................................................................. 22

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    I. INTRODUCTION

    The Carnival Krewe Civic Foundation, Inc. has commissioned this report in order to evaluate

    the economic effects of the 2011 Mardi Gras season on New Orleans. This is an update on the

    2009 economic impact study that was completed two years ago. At that time, a tremendous

    amount of data was collected and analyzed as it was the first time the study had been done in

    many years and the first since Hurricane Katrina. This year, the data was revised using a

    combination of new data and multiple interviews in order to assess the changes that have

    occurred.

    The interesting question this year was whether the current economic situation nationally and to a

    smaller degree locally would affect the ability of Mardi Gras to generate the amount of

    expenditures and the fiscal impact on both the City and the local economy as it had previously.

    The answer is both yes and no. Local expenditures on parading, parties, food, alcohol, etc. were

    stronger in 2011 than in 2009 and this created, obviously, a very positive movement in the

    economic impact of Mardi Gras. Unfortunately, this positive impact was not enough to offset

    the influence that the national economy has on tourist expenditures. Hotel room revenue, while

    achieving enviable occupancy rates, was down 5% from 2009 due to a decrease in average room

    rates of 7%. While this reduction in lodging expenditures was too great to overcome increases in

    local spending the good news is that the overall decline in direct economic impact was minimal.

    Additionally, once tourist dollars rebound there is every reason to believe that future Mardi Gras

    seasons will be stronger than ever.

    While the decrease in average hotel room rates created a downward pressure on the economic

    impact of Mardi Gras there were three positive factors that helped keep the numbers strong.

    First, Mardi Gras day was March 8th; the latest it has been in over 60 years. The later Mardi

    Gras is the better for the economy. The king cake season is longer; people have recovered from

    the Christmas season; Valentines day, traditionally a very strong day for jewelers and florists in

    other parts of the country but often overlooked here, is less marginalized; and the excitement and

    therefore the willingness to spend money has time to build. Second, though related to the first, is

    that the 12 day season corresponded with students spring breaks around the country allowing

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    people to not only come to town but to stay for a longer period of time. Because of this

    occupancy rates were very high especially in the middle of the week between the two main

    weekends and on the evening of Fat Tuesday. Third, Krewes and individual members of Krewes

    increased their aggregate expenditures on throws, events, parties, gifts and balls.

    II. METHODOLOGY

    This report answers two questions. First, what is the net fiscal benefit to the City of staging

    Mardi Gras? And second, what is the contribution of Mardi Gras the event and the franchise

    -- to the aggregate economic activity of New Orleans. The first question is the narrower, and

    slightly easier to answer of the two. Net fiscal benefit is the difference between the increase in

    City revenues induced by the happening of some event and the increase in City expenditures

    associated with the same event. In this case specifically, the City of New Orleans incurs

    substantial costs, but also collects additional taxes, due to the staging of Mardi Gras. The largest

    and most visible expenditure is the overtime payment to the Police Department for traffic control

    and public safety during parades. But there are also substantial expenses involving, for example,

    the Emergency Medical Services, Department of Public Works, the Sanitation Department and

    the Judicial System. This report will show that increases in tax revenues generated by Mardi

    Gras and its associated industry more than offsets these costs, resulting in a net fiscal benefit for

    the City. The increases in tax revenues are generated by tourist dollars that flow in as people

    visit during Mardi Gras as well as those that are attracted to New Orleans year-round by the

    appeal of the City that Mardi Gras helps to create and by large amounts of local dollars that are

    spent on Mardi Gras related items during the season as well as throughout the year.

    The question regarding economic activity is broader and tougher to answer precisely. The

    annual Gross Domestic Product (GDP) of New Orleans is approximately $20 billion.1 This

    report will quantify what percentage of this figure can be attributed to Mardi Gras. There are

    two ways to measure GDP. In the expenditure approach, GDP is the sum of final spending by 1In 2010, the GDP for the greater New Orleans metropolitan area was estimated by the US department of Commerce to be 64.6 billion. I estimate that about 30% of this is generated in the City of New Orleans. This figure was not changed from the 2009 report because there are better population numbers available due to the completion of the 2010 census.

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    consumers, businesses, government, and net exports.2 In the income approach, GDP is measured

    as the sum of the incomes of all the economys participants. I use the expenditure approach to

    both calculate the net fiscal benefit to the City and the economic impact on the City.

    Mardi Gras is unique compared with other festivals in New Orleans, and others around the world,

    in the way that the event and the city are so closely linked in peoples perception. This linkage is

    particularly pronounced among people outside of New Orleans. If a restaurant in, say, Colorado,

    is going to have a New Orleans theme it likely will be decorated in purple, green and gold the

    colors of Mardi Gras. If a tourist is thinking of some place fun to travel, he or she will be

    reminded of Mardi Gras even if it is June as can be evidenced by the sight of tourists wearing

    Mardi Gras beads in the French Quarter during even the summer months. When conventions

    come to town they often participate in mini Mardi Gras celebrations regardless of the time of

    year. Mardi Gras World stages Mardi Gras parades all over the country and people tour their

    facility here in New Orleans year-round. All of these activit