In my prior articles, we looked at how to creatively get financing for a seasonal business and how to start a side summer seasonal business to generate supplemental income. However, many small businesses already operate under “seasonal conditions”—time periods in which demand fluctuates based on external economic conditions surrounding the business.
These external economic conditions, such as regulation, the weather, or—what this article focuses on—local major events, can create changes in consumer demand. Let’s look at how major local events—such as a sporting event, recreational event, or another type of media-frenzied event that attracts tourists to the local area—create a major, positive economic impact and pump up the sales of businesses that cater to the consumer demand.
The Hospitality Industry
Tourism is one of the biggest industries in the world. The hospitality industry, which includes tourism, generates $2.3 trillion in economic output annually in the United States, and employs about 16 million people, according to the Bureau of Labor Statistics. The hospitality industry can be organized into three main categories:
• Accommodations: This includes hotels, motels, bed and breakfasts, resorts, and more.
• Food Services: This includes restaurants, bars, pubs, clubs, casinos, cafes, and more.
• Tourism: This includes travel by air, bus, train, taxi, and car rental, along with tour operators.
The Ripple Effect on Event Spending
If you have a small business operating in one of these three main categories, then you know that a local major event can increase consumer demand for the hospitality services that you offer. Although some economic impact studies look at total spending, others focus solely on the spending by tourists, visitors, and companies coming to the local area to participate directly or indirectly in the major event. Their spending on hospitality-related services have “ripple effects” in terms of money flowing through the local economic area.
For example, if a small restaurant or club near the major event has an increase in sales due to a major event, that will also increase the sales of the vendors that serve said small business, as well as increase hiring, even though it might be temporary, to help serve the consumer demand. The increase in local business activity will also increase local tax revenues, which help to invest in the future stabilization of the city or town.
How These Major Events Had an Impact
Hospitality-based small businesses located near the action can receive a significant boost in sales leading up to and during the major event, creating a seasonal “high” period. Here are some examples of major events and their economic impact:
• The Super Bowl: The Super Bowl routinely brings in at least $300 million in economic impact—2015’s Super Bowl XLIX created at least $719 million in economic impact.
• Political Conventions: The 2012 Democratic National Convention created $164 million in economic impact for the Charlotte, N.C.-area, while the 2012 Republican National Convention created over $400 million in economic impact for the Tampa Bay area. Most major party conventions usually produce at least $50 million to $100 million in economic impact.
• Wrestlemania: From 2004 to 2015, Wrestlemania created over $700 million in economic impact, with 2015 bringing in $139 million in economic impact alone, according to Forbes.
• The NBA Finals and The World Series: Each NBA Finals or World Series game averages $3 million to $7 million in economic impact for the host region of the series.
• Major Parades: Major parades, such as the Mardi Gras in New Orleans, the Macy’s Thanksgiving Day Parade in New York, the NYE Countdown in Times Square, and more, all produce notable economic impact for the host region due to the attraction of tourists to the special event.
Planning for Seasonal Events
If you have a small business operating in the hospitality industry and prepare to take advantage of local major events, you can hit the jackpot if your area attracts a Super Bowl, NBA Finals, or even a major political convention. Here are some recommendations:
• Keep an Eye Out: Keep an eye out for upcoming events in your area that might increase consumer demand for your hospitality services. This helps you create a plan for hiring, buying in bulk, marketing to get both local residents and tourists to choose your establishment, and other needs.
• Creative Financing: From 0% interest business credit card promo offers, to a merchant cash advance, to asset based lending, make sure to have alternative resources lined up for creative financing to help fund your marketing plans, inventory bulk purchases, hiring and other related operational needs in case your traditional sources are unavailable.
• Help Lobby to Bring Major Events to Your Area: During your free time, invest time by helping your local officials lobby to get major events to the area. Not only does it build your community, but it helps build your business through the increase in activity.
• Location, Location, Location: Try to set up your hospitality business around areas that attract major events. This helps reduce your marketing costs, as the location being near the major event will draw people to your location for convenience.