About Greyhill

Greyhill advises clients on corporate site selection, economic development, and commerical real estate. Our blog covers those topics plus economics, trade policy, manufacturing policy, and other related subjects.

Wednesday
Sep182013

2013 SXSW IMPACT ON THE AUSTIN ECONOMY TOTALS $218 MILLION

FOR IMMEDIATE RELEASE                                                                                                           

CONTACT:
Ben Loftsgaarden, Greyhill Advisors, ben@greyhill.com or 512.786.6100  

Elizabeth Derczo, SXSW, elizabeth@sxsw.com or 512.467.7979                                 

Austin, TX (September 18, 2013) – Greyhill Advisors is proud to present the comprehensive economic impact of the 2013 South by Southwest (SXSW) Music, Film, Interactive, Edu and Eco Conferences and Festivals to the City of Austin. This analysis represents the seventh consecutive study to fully assess the unique nature of SXSW and its beneficial economic impact to the city. The impact of SXSW’s official events totaled $218 million for 2013. 

The Report may be downloaded here: South by Southwest 2013 Economic Impact report

In March 2013, South by Southwest (SXSW) hosted its 27th annual conference, trade show, and festival in Austin, Texas. The event further solidified SXSW’s reputation as the world’s premier gathering of Music, Film, and Interactive professionals. With the recent additions of Education and Sustainability conferences to its portfolio, SXSW also extended its signature event-management expertise to new, innovative domains and broadened its local economic impact on the City of Austin.

SXSW 2013 continued the event’s tradition of offering an unparalleled convergence of the Music, Film, and Interactive industries. For two weeks each March, Austin becomes the global epicenter for engaged creative professionals. The ability of SXSW to connect people across cultures and engage in ideas from a variety of disciplines remains the event’s core value proposition. The sheer scale and density of SXSW provides the opportunity for Austin residents and visitors alike to participate in the extraordinary celebration of creativity and innovation. Both populations introduce and circulate money in the local economy.

 “SXSW continues to be a truly remarkable event for Austin,” said Austin Chamber President Michael Rollins. “This festival not only brings the world’s attention to Austin’s strengths in community, creativity and commerce, but also provides opportunities to spotlight and support our small businesses which work tirelessly to prepare for – and engage with – the festival’s record-setting attendance of over 155,000. Every year we see more quantitative and qualitative benefits from SXSW, and are thrilled to see what the future holds.”

SXSW 2013’s core events set a new record by attracting more than 41,700 registrants. Registrations for SXSWEdu, the Educational spin-off of SXSW, doubled to 4,400 in 2013. Despite phenomenal growth, SXSW has sustained its relevancy for more than a quarter of a century by staying true to its initial origins of creative cross-pollination. In 2013, the number of platinum badgeholders (with access to all events) surged nearly 60%, with a growing number of creative professionals attracted to SXSW’s unmatched depth and breadth of content and activities.
SXSW continues to be the single most profitable event for the City of Austin’s hospitality industry:

     • 9 days of industry conferences, a 4-day trade show, a 6-night music festival featuring more than   2,200 bands, and a 9-day film festival with more than 400 screenings.

     • In 2013, SXSW directly booked 13,000 individual hotel reservations totaling 56,000-plus room nights—a 10 percent increase over 2012. Fueled by limited capacity and an overall increase in spending by registrants the average nightly hotel rate jumped 20 percent to nearly $255.

     • At nearly 155,000, the total number of 2013 SXSW Conference and Festival participants (defined as any individual who attended at least one SXSW activity) exceeded all previous records.

     • SXSW’s popular free-to-the-public consumer events, including the 3-night Auditorium Shores concert series, the 2-day Digital Creatives Job Market, 4-day Flatstock poster art show, 1-day Edu Future Plans Fair, 3-day Music Gear Expo and the 3-day SXSW Gaming Expo, attracted an additional 150,000 participants.
 
In 2013, SXSW was responsible for injecting more than $218.2 million into the Austin economy:
Operational Output – This is a measurement of the direct, indirect, and induced local economic benefit of the year-round operations of SXSW as well as event-specific expenditures by SXSW and its official parties and sponsors. In 2013, the impact of SXSW operations on the Austin economy was $88.3 million.
Attendance Expenditures – This captures the direct, indirect, and induced local economic benefit of all attendees of the conference and festival. Attendees include official SXSW badge- holders, industry professionals, and wristband holders, festival exhibitors, and single visitors of events such as film screenings and music concerts. In 2013, SXSW attendance expenditures totaled more than $129.9 million.
 
In addition to SXSW expenditures and attendance, the 2013 SXSW economic impact analysis also considered the value of media coverage related to the festivals and conferences. In 2013 alone, SXSW—and by extension, Austin, Texas— achieved over 458 million broadcast, print, and online impressions. Although the media exposure enjoyed by SXSW and Austin comes with relatively little cost to the city, such coverage has enormous value. The positive impact of SXSW is compounded because it contributes to a coherent message about Austin, thereby strengthening the city’s brand identity. In 2013 the value of SXSW print, broadcast and online publications coverage totaled more than $37.5 million. 

"SXSW remains the most important annual event in the city of Austin and its value to the community grows each year," said Rob Hagelberg of Four Seasons Hotel. "The demand for hotel rooms has continued to escalate, particularly for the Interactive conference along with the addition of the Educational conference. This growth benefits not only the hotels, but the associated businesses as well as the city and our workforce. The enormous positive publicity generated worldwide as a result of SXSW supports tourism year-round by reinforcing Austin's image as a global hub of creativity & innovation  as well as a desirable place to visit thanks to its unique sense of place and warm Texas hospitality." 


To read and download the full study, please visit www.greyhill.com/blog or www.sxsw.com/press.

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About Greyhill Advisors:  Greyhill Advisors is an economic analysis, economic development and site selection consulting firm with offices in Austin, TX and New York, NY. Greyhill represents a team of seasoned professionals with hands on experience performing economic analysis, assisting leading companies in their location decisions and working with communities to expand their economic potential. For more information, visit www.greyhill.com.

About South by Southwest: The South by Southwest® (SXSW®) Conferences & Festivals offer the unique convergence of original music, independent films, emerging technologies, education and sustainability. Fostering creative and professional growth alike, SXSW® is the premier destination for discovery.

Year after year, the event is a launching pad for new creative content. New media presentations, music showcases and film screenings provide buzz-generating exposure for creators and compelling entertainment for audiences. Conference panel discussions present a forum for learning, business activity thrives at the Trade Shows and global networking opportunities abound. Austin serves as the perfect backdrop for SXSW®, where career development flourishes amid the relaxed atmosphere. Intellectual and creative intermingling among industry leaders continues to spark new ideas and carve the path for the future of each ever-evolving field, long after the events' conclusion.

Thursday
Oct042012

SXSW 2012 Economic Impact Report

FOR IMMEDIATE RELEASE                                                                                          

CONTACT:

Ben Loftsgaarden, Greyhill Advisors  
ben@greyhill.com or 512.786.6100
Elizabeth Derczo, SXSW
derczo@sxsw.com or 512.467.7979 
Kelly Krause, SXSW
kellyk@sxsw.comor 512.467.7979
     

2012 SXSW IMPACT ON THE AUSTIN ECONOMY TOTALS $190 MILLION

Austin, TX (October 4th, 2012) – Greyhill Advisors is proud to present the comprehensive economic impact of the 2012 South by Southwest (SXSW) Music, Film, Interactive, Edu and Eco Conferences and Festivals to the City of Austin. This analysis represents the sixth consecutive study to fully assess the unique nature of SXSW and its beneficial economic impact to the city. The impact of SXSW’s official events totaled $190 million for 2012. 

The report may be downloaded here - SXSW 2012 Economic Impact Report.

In March 2012, South by Southwest (SXSW) hosted its 26th annual conference, trade show, and festival in Austin, Texas. SXSW has matured over the years into one of the world’s most celebrated gatherings of Film, Music, and Interactive professionals and is now making its mark in the fields of Education and Sustainability. Growth was the theme of SXSW, with the number of official registrants at its core March events increasing by more than 15 percent. While SXSW Interactive was the single largest contributor to the increases in attendance, SXSW Film and SXSW Music also enjoyed significant gains.

SXSW continues to be the single most profitable event for the City of Austin’s hospitality industry. In 2012, SXSW directly booked nearly 11,000 individual hotel reservations totaling 50,000‐plus room nights—an increase of more than 13 percent over the previous year.

The primary components of SXSW (Music, Film, and Interactive) delivered a depth and breadth of creative activity unmatched by any event in the world: 9 days of industry conferences, a 4‐day trade show, a 4‐day music gear expo, a 6‐night music festival (2,200 artists on more than 100 stages), and a 9‐day/night film festival (more than 425 screenings in 11 theatres). At 147,000, the total number of SXSW Conference and Festival participants (defined as any individual who attended at least one SXSW activity) set a new record.

SXSW also hosted numerous popular free‐to‐the‐public consumer events including the 3‐night Auditorium Shores concert series, the 4‐day Flatstock poster art show, and the 2‐day StyleX fashion expo. Turnout at these functions pushed the total number of participants to more than 300,000.

SXSW 2012 maintained the event’s remarkable reputation, offering an unparalleled convergence of the Music, Film, and Interactive industries. For 14 days each year, Austin becomes a global incubator where creative professionals can learn from both emerging leaders and established legends. While the international crossroads of ideas is the core value proposition of SXSW, the diverse conferences and festivals also provide Austin residents with a unique opportunity to join out‐of‐towners in an extraordinary display of creativity and entertainment. Both populations introduce and circulate money in the local economy.

SXSWedu, an extension SXSW Interactive, emerged as an attraction in its own right. Only in its second year, SXSWedu’s 4 days of programming and training emphasizing technology solutions for education professionals attracted more than 2,000 registrants from across the country—a healthy 250 percent increase over its first year in 2011. Last year, SXSW also launched SXSW Eco, a separate event in October dedicated to sustainability. In its inaugural year, SXSW Eco brought together some of the country’s most respected public and private thought leaders to explore challenges and solutions for the environment and civil society.

In 2012, SXSW was responsible for injecting more than $190.3 million into the Austin economy. This impact came from two categories:

Impact from SXSW Operations — This is a measurement of the direct, indirect, and induced local economic benefit of the year‐round operations of SXSW as well as event-specific expenditures by SXSW and its official parties and sponsors. In 2012, the impact of SXSW operations on the Austin economy exceeded $73.7 million.

Attendance Expenditures — This captures the direct, indirect, and induced local economic benefit of all attendees of the conference and festival. Attendees include official SXSW badge‐holders, industry professionals, and wristband holders, festival exhibitors, and single visitors of events as film screenings and music concerts. In 2012, SXSW attendance expenditures totaled more than $116.6 million.

In addition to SXSW expenditures and attendance, the 2012 SXSW economic impact analysis also considered the value of media coverage related to the festivals and conferences. In 2012, SXSW achieved over 392 million broadcast, print, and online impressions. The combined value of SXSW media coverage across television broadcasts, news stories, and sponsor advertising in 2012 was estimated at $34 million. The resulting calculations represent the most comprehensive attempt to properly quantify the fiscal impact SXSW’s “buzz” factor generates for the city of Austin.

About Greyhill Advisors:  Greyhill Advisors is an economic analysis, economic development and site selection consulting firm with offices in Austin, TX and New York, NY. Greyhill represents a team of seasoned professionals with hands on experience performing economic analysis, assisting leading companies in their location decisions and working with communities to expand their economic potential. For more information, visit www.greyhill.com.

About South by Southwest: The South by Southwest® (SXSW®) Conferences & Festivals offer the unique convergence of original music, independent films, emerging technologies, education and sustainability. Fostering creative and professional growth alike, SXSW® is the premier destination for discovery.

Year after year, the event is a launching pad for new creative content. New media presentations, music showcases and film screenings provide buzz-generating exposure for creators and compelling entertainment for audiences. Conference panel discussions present a forum for learning, business activity thrives at the Trade Shows and global networking opportunities abound. Austin serves as the perfect backdrop for SXSW®, where career development flourishes amid the relaxed atmosphere. Intellectual and creative intermingling among industry leaders continues to spark new ideas and carve the path for the future of each ever-evolving field, long after the events' conclusion.

 

Friday
Dec022011

China's US Treasury Invesments

Wednesday
Nov302011

China has Stopped Buying U.S. Government Debt

The U.S. Treasury Department surveys banks, companies, and governments who own U.S. federal debt on a monthly basis and produces a public report. The detail and accuracy of the report have increased over the years and we now have a decent understanding of who owns U.S. debt and how those positions change over time. The most recent report available, with data through September 2011, highlights an interesting shift in foreign holdings of U.S. debt – China is no longer adding to its position in treasuries, and hasn’t in over a year.

The most consistent trend in the treasury market over the last decade, other than the increasing size of the market, is China’s appetite for treasuries. The U.S. trade deficit with China leaves the Chinese government in possession of large quantities of U.S. dollars. China must then invest these dollars into interest bearing assets, and treasuries have been one of their favorite destinations. China’s treasury holdings increased from $61 billion in 2001 to $1.15 trillion this year. The country became the largest foreign holder of U.S. debt and by the end of 2010 owned 13% of outstanding federal debt held by the public. But over the last 12 months, for the first time in a decade, China stopped adding to its position. While they continue to roll over some maturing positions, overall holdings are flat.

What has changed? This doesn’t appear structural, as the China-US economic relationship is substantially the same, with increasing US deficits offering ample buying opportunities and the large trade deficit still sending US dollars to China every month. It’s also not a diversification strategy, as China’s sovereign investments are well diversified with treasuries accounting for one third of assets. Rather, it appears China has reached its appetite for U.S. government debt, at least in the short run. This raises key concerns for the U.S. as the country needs to sell large amounts of additional debt over the next decade. While the current economic crisis has increased global demand for treasuries, losing one of the largest buyers of new debt will have an impact. 

Wednesday
Nov162011

Thai Floods are Serious Risk to Economy 

Most articles about the economic impact of the recent flooding in Thailand focused on quantifying the cost of repairing damage. While certainly meaningful short term cleanup costs are much less important than the damage to the country’s reputation amongst multinational manufacturing firms.

Thailand’s economy is heavily dependent on exports of manufactured goods, primarily by foreign multinational firms. Manufacturing contributes 34% of Thai GDP, much higher than peer countries. Most of this manufacturing base is export oriented, with exports of manufactured goods equaling 71% of GDP, compared to 27% in China and less than 15% in Japan, Brazil, or the United States. Export oriented manufacturing is even more important to Thai economic growth and is easily the largest contributor to growth over the last five years. Manufacturing exports are both the economic base and the main economic driver.  

Any slowdown in foreign investment will directly impact GDP growth. In the near-term through less construction activity, and medium-term though fewer jobs and exports. You can see from the chart below the majority of foreign investment in Thailand is goods for export to other countries. The percentage designated for foreign markets increases as the products move up the value chain with 95% of electronics investment being export oriented.

Plenty of these companies feel wronged by the actions of the Thai government, and they have a point. The Industrial Estate Authority of Thailand (IEAT), a division of the Ministry of Industry, created all 38 of the country’s industrial estates and manages or co-manages all 38. The IEAT and private investors both own industrial estate assets. The government chose the location of the industrial estates, created federal incentives not applicable outside the estates, and provided inadequate flood preparation. Some companies negatively impacted by the floods will be upset and blame the government. Existing firms are not likely to leave, as the relocation costs outweigh the benefits, but they may decide to expand outside Thailand in the future. Companies and site selection consultants are certainly less likely to consider the country when shopping site selection projects among countries in Southeast Asia.

Reputational risk is even more pronounced for the Ayutthaya Province and its large industrial estates. The historic province, once the seat of the Ayutthaya Kingdom, is one of Thailand’s economic drivers with four large industrial parks popular with multinational manufacturing firms. Manufacturing accounts for 85% of the province’s GDP and 11% of the country’s total manufacturing output.  

The government needs to develop a credible plan convincing investors this won’t happen again. Any plan must address improvements in country wide flood management systems and in specific industrial estate defenses. Any plan needs to convince an uninvolved third party the industrial estates will be better prepared next time. 

Tuesday
Nov152011

Flooding in Thailand and Site Selection Due Diligence

Thailand provides a compelling value proposition for manufacturing firms, particularly as an alternative to China, India, and Malaysia. The country offers a strong workforce, solid infrastructure, and foreign firms may own 100% of their local operations, which is typically not possible in many competing locations. Thailand is politically stable (as it relates to foreign manufacturing firms) and has a long history of friendly relations with the West. Of course recent widespread flooding highlights one of the less appealing aspects of central Thailand. Which begs the question, why did so many sophisticated companies locate important facilities in the flood prone Chao Phraya River basin?

Disasters happen, and one can’t mitigate every risk, but the majority of are predictable and can either be avoided or properly planned for. The flooding Thailand appears to be an example of poor site selection and poor disaster planning and preparation. Thailand and greater Bangkok are prone to flooding. Much of the country is low lying land with large volumes of rain concentrated in a handful of months of the year. The Ayutthaya Province, home to over 11% of Thailand’s manufacturing, is particularly disposed to flooding. The Chao Phraya River bifurcates the province and the Province’s average elevation is only 20’ above sea level. According to a 2009 World Bank study, “In the Chao Phraya River Basin, there were exceptional large floods in 1942, 1978, 1980, 1983, 1995, 1996, 2002 and 2006.”

The 1995 floods were quite severe, with most of the Ayutthaya Province inundated. Existing industrial parks were threatened during these floods but escaped without significant damage.  The attached map shows the extent of flooding in 1995, with areas surrounding the industrial parks under between six feet and 10 feet of water.

The current floods impacted thousands of firms including large multinational manufacturers, including Honda, Nikon, and Sony. These firms are a microcosm of Japanese manufacturing, companies that face rising costs and a strong Yen at home and have aggressively expanded production to other nations. Interestingly most of the firms impacted are Japanese, while many of the South Korean and American firms were located in other areas of Thailand.

Large organizations, government of private sector, disincentivize risk. The adage, “you don’t get fired for hiring IBM” is still pretty true today. In site selection, many companies follow their peers when siting new projects, particularly in foreign markets. This manifests itself in Thailand with most foreign corporations locating in state-sponsored industrial estates (as industrial parks are commonly called) located in 3-4 central provinces. The Thai government further drove this consolidation with incentives tied to locating in these industrial parks. Good reasons exist to locate near suppliers and competitors, but it shouldn’t take the place of proper due diligence. 

Friday
Nov112011

Market Access in China

The famous auto executive Bob Lutz was on Charlie rose last night and he made an excellent point about China’s development strategy. Mr. Lutz said;  

“China, when they developed their auto industry, they welcomed partnerships with western companies, especially American ones. The Japanese and the Koreans were absolutely mercantilistic and kept everybody out until their industry was big and powerful.

Everybody says, well aren’t you afraid of the Chinese? I’m not afraid of the Chinese because as the Chinese automobile industry develops General Motors is one of the biggest players.”

It’s an excellent counter point to the criticism many raise about market access in China. Opening large sectors of the Chinese economy to foreign firms, even with local partnership requirements, is better for the U.S. than the closed development model favored by Japan and South Korea.

Japan and South Korea closed their domestic markets to foreign competition, built up a competitive domestic industry, and then slowly opened their markets. Imports blocked with punitive tariffs and foreign companies were not allowed to build local manufacturing plants. Those restrictions were relaxed over time but foreign firms hold very little market share in either country.

China encourages foreign investment in the auto sector but requires a partnership with a local firm. They are using foreign expertise to build the domestic industry. Foreign firms maintain strong market share that Mr. Lutz believes is long-term sustainable as Chinese auto companies become more competitive. The Chinese model seems better for the U.S.

Interview with Mr. Lutz below.

Tuesday
Nov082011

Flooding in Thailand - Ayutthaya Province

The Ayutthaya Province is the backbone of the Thai economy and accounts for greater than 10% of the country's manufacturing output. The province is home to large concentrations of electronics and automotive manufacturers with Honda, Sony, Nikon and Western Digital among the hundreds of multinationals operating in the province. The two images above use "false color" to help accentuate the extent of the flooding, green is land and dark blue is water. As you can see, the significant majority of the province is inundated, including four of the largest industrial parks in the country. The disaster provides a real world case study on the importance of natural disaster risk mitigation in site selection. We'll discuss in more detail tomorrow.  

Red Cross of Thailand - http://english.redcross.or.th/home

Photo Source: NASA Advanced Land Imager - http://goo.gl/M4uYG 

 

Tuesday
Nov012011

Why Greece Should Default and Devalue - in Three Charts

The headline is superfluous, as Greece defaulting on its debt is a mathematical certainty. The only alternative is for another country to pay the debt, which is more likely than Greece paying the debt off, but not much. While default is a certainty, the Eurozone seems to be avoiding the issue entirely. More importantly, after default Greece will leave the Euro, adopt the New Drachma, and rebuild its economy. I believe this is not only likely to happen, but the only sensible choice. Greece leaving the Euro allows Greece to survive and the Euro member states to allocate limited resources to shoring up countries more likely to avoid default. 

Most important for Greece is that leaving the Euro and adopting a devalued local currency is a strategy than can work. Argentina defaulted on its debt and devalued the local currency in 2002 and here are the results. 

Unemployment Rate

 

GDP per Capita (PPP)

Industrial Production 

Default is not an ideal situation, but history shows a country can survive it. I'm not sure Greece can survive another decade of 20+% unemployment. 

Monday
Oct312011

Local Government Finances

The New York Times article on Rhode Island’s pension system “Little State with a Big Mess” is an excellent read. Rhode Island is a microcosm of the national issues of public sector debt, pensions, and the political difficulty in rebalancing government finances. Rhode Island’s pension problem is best articulated through three facts. First, the state has more retirees than current state workers, a problem facing many old industrial firms in the U.S. Second, and more importantly, the Times stated,

In each of the last 10 years, the state pension fund paid more money to retirees than the fund collected from state employees and taxpayers combined.”

Lastly, the state pension fund assumes annual returns of 8.25%, versus the actual return of 2.4% a year over the last decade. Clearly not a sustainable path for the state. The situation in Europe and Greece reinforces why this is an important issue and one best tackled in a timely manner, before it becomes a crisis. My friend Bill says, “Bad news doesn’t get better with age.” Not only will the cuts be more painful in a crisis, but the political calculus becomes more complicated. Europe has been fighting to solve the crisis for Greece with half measures and the situation threatens to boil beyond their control.

The article reminded me of the role local and state government finances play in corporate site selection. It’s an important issue that doesn’t get much coverage. Site selection consultants evaluate state and local government credit ratings and overall finances during the site selection process. If the client cares about tax rates, they certainly care about the potential for future tax rate increases. U.S. states are generally considered low risk by the rating agencies as you can see from the map below. Although it is worth noting California’s credit rating is lower than the recently downgraded Italy.

 

A state with serious existing fiscal problems, which is cutting services and raising taxes, is less appealing than the alternative. A looming fiscal problem is a forecast for service cuts and tax increases. The political process to solve a serious fiscal problem is never fun. The ensuing fight will only worsen political infighting and corporate end-users are sure to be targeted for tax increases.  When has a tax increase not caused trouble?

Locations of most concern:

  • States and cities downgraded or put on a ratings watch by a major credit rating agency.
  • Company towns or small cities with a concentrated tax base.
  • Cities and states with limited flexibility in budgeting or taxing.

Resource: http://www.municipalbonds.com/  Excellent site. Free registration provides access to state and municipal bond ratings, current yields, and related research.