DC Caribbean Carnival: Economic Impact Study December 2011
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1 DC Caribbean Carnival: Economic Impact Study December 2011 Presented to the DC Caribbean Carnival Board of Directors Yuvay J. Meyers, Ph.D. Debby Lindsey-Taliefero, Ph.D. Allison J. Morgan, Ph.D. Lynne J. Kelly, Ph.D. Howard University School of Business
2 DC Caribbean Carnival: Economic Impact Study Executive Summary DC Caribbean Carnival, Inc. was developed to celebrate and share Caribbean culture with the Washington Metropolitan Area community. Each year, the organization hosts its Annual DC CARNIVAL Extravaganza Parade and Festival which attracts an estimated 400,000 patrons. The organization is interested in quantifying the economic impact of this event and has requested that the School of Business at Howard University assist in this undertaking. Howard University faculty, staff, and students canvassed the event held this year on June 25, 2011, to gather information from patrons and businesses. Patrons were asked about expenditures made as a result of the event - including travel, hotel accommodations, dining, and other purchases. Local businesses were asked about incremental revenues associated with the event. This information was gathered both during and after the event. Demographic data were also gathered. The study revealed that DC Caribbean Carnival provides increasing returns to scale for the Washington, DC economy. With an estimated 400,000 people attending the DC Caribbean Carnival, the patrons expenditures totaled $21,637,166 with a cost benefit ratio of $39.48 and 1,298,230 dollars were generated in sales tax revenues. These data are summarized in the pages that follow. Event Overview One of the largest Caribbean themed festivals in the United States, The DC Caribbean Carnival annually provides a family friendly event for residents and visitors to the District of Columbia. Dating back to its premiere in the summer of 1993, this event has consistently been a fun-filled, safe, and economic boosting attraction for the city. Led by Loughton Sargeant, Executive Director, and Roland Barnes, President, the DC Caribbean Carnival (DCCC) nonprofit organization, comprising 8 Board of Directors, work to serve this city by providing a multicultural experience that adds to rich history of diversity in our nation s capital. With approximately 400,000 attendees every year, the Washington DC community and the city benefit both economically and culturally from this celebration. Historically, this paraded started at Missouri Avenue NW and ended at Barry Place NW. However, this year, the Metropolitan Police Department, citing the high cost of security coverage required the starting point (Kansas Avenue NW and Georgia Avenue NW) to be moved to an intersection that shortened the route. Even with the change, the DC Caribbean Carnival organization still managed to provide the city with a memorable event. Saturday June 25, 2011 marked the 19 th Annual DC CARNIVAL Extravaganza Parade and Festival. The event, centered on the Georgia Avenue corridor, brings the sights and sound of the Caribbean islands to the center of the District of Columbia. Reminiscent to the carnivals seen annually in major, progressive cities in the Western Hemisphere (e.g. Rio de Janeiro, New Orleans, Toronto), the DC CARNIVAL features a parade that begun at the intersection of Kansas Avenue NW and Georgia Avenue NW and ended at the intersection of Georgia Avenue NW and Bryant Street NW. The focal point of the parade resting point is an international marketplace named DE SAVANNAH. The market venue features international foods, crafts and live performances from local and international artists. Based on the money spent at this marketplace, the money spent along the parade route, and the money spent by patrons 1
3 visiting for the event, it is clear to see that this is a day of revenue creation for the city. Supporting this event in turn supports this city and its small businesses. Global Impact of Cultural Festivals Getz (2005) defines festivals like the DC CARNIVAL as themed, public celebrations. According to the academic literature, festivals have the potential to strengthen a community by uniting people under this premise of (public) celebration for all (Earls 1993). Through increased contact, which reduces prejudice and intergroup conflict (Allport 1954), people in a multiethnic society get a chance to learn about each other and benefit from the experience. According to a study on the value of ethnic festivals, many cities are embracing the promotion of these events as a policy strategy for promoting social harmony and social integration, and celebrating cultural diversity for both ethnic minorities and the dominant population (Lee, Arcodia, and Lee 2010). In an ethnically diverse city like Washington, DC, events like this should be supported by the local government due to the proven ability for ethnic carnivals to foster multiculturalism in a multiethnic society (Wöber 2002). Research Tasks The purpose of this study was to assess the economic impact of the 2011 Annual DC CARNIVAL. The goal of the research project was to improve our knowledge on how the 2011 DC Caribbean Carnival economically impacted the District of Columbia. The research task involves: A survey of event attendees focusing on the specific economic contribution to the District of Columbia. A survey of local small businesses focusing on the economic revenues earned during that event. An economic impact assessment, which involves an evaluation of the direct contribution of the carnival attendees on the District of Columbia. The analysis will specifically look at attendee expenditures, tax revenues, and small business revenue generation. The goal of the study is to provide the following: Estimate of the expenditures of the patrons attending the 2011 Annual DC CARNIVAL. Estimate of the incremental sales tax revenues generated by 2011 Annual DC CARNIVAL. Estimate of the business revenues generated by 2011 Annual DC CARNIVAL. Estimate of the incremental business tax generated by 2011 Annual DC CARNIVAL. Patron Survey Response Results Of the total carnival attendees, six hundred and eighty-five (685) patrons and fifty (50) business owners responded to the survey. The survey was administered in hard copy and passed out to carnival attendees and business owners. The survey was optional and no form of compensation was offered to any respondents. However, an incentive which was used to encourage patrons to complete the survey was an opportunity to win an Apple ipad. Once all of the surveys were completed, the data was entered into a 2
4 database and then aggregated and analyzed using SPSS. The analysis of the patron surveys are presented here. Question 1 asked attendees about the location of their permanent residence. The majority of respondents lived in the metropolitan Washington area with 71.3% of participants reporting this. Less than a third of those completing the survey lived elsewhere. Thus, the typical Carnival attendee resides within reasonable proximity to Washington, DC as shown in Figure 1-1. Figure 1-1 Patron Residence Question 2 inquired about the mode of transportation used by those carnival attendees who reside outside of the DC area. As shown in Figure 1-2, approximately 28% of event patrons live outside of the DC metropolitan area. The most frequently used mode of transportation was the car (40.4%), followed by the train (27.3%), then bus (16.5%), and airplane (15.8%). Thus, travel by car and train make up for more than half of the means of transportation utilized by out of town attendees. 3
5 Figure 1-2 Patron Mode of Transportation to DC Question 3 asked about the type of accommodations utilized by Carnival attendees who reside outside of the DC metropolitan area. The most frequently identified location was with family or friends (46.9%), followed by a hotel or motel (24.6%), and the balance stayed at various other locations. Figure 1-3 Out of Town Patron Accommodations Question 4 inquired on whether Carnival attendees arrived at activities alone or with other family or group members. The majority of patrons attended the event with family and friends (62.3%). Others attended with a group (20.2%), or alone (18.4%). This finding supports the notion that the DC Carnival is a place where families gather to celebrate and support Caribbean culture. 4
6 Figure 1-4 Patron Accompaniment to Carnival Question 5 asked about which events and/or activities Carnival patrons attended while in DC. Almost all of the respondents reported attending the Carnival parade (94.5%). More than half of event patrons visited the International Marketplace (62.9%). Other popular activities included dining out, shopping, attending the theater, movies, or shows, and visiting monuments and museums. Figure 1-5 Carnival Patron Activities Question 6 asked participants how much they expected to spend while at either the parade or festival. Almost half of event patrons expect to spend $25 or less during their visit to the event (43.7%). An additional 20.6% expected to spend between $26 and $50. While a very small minority, 4.8% of patrons expect to spend more than $400. Therefore, most attendees expected the Carnival to be an inexpensive activity. 5
7 Figure 1-6 Expected Patron Expenses Question 7 asked patrons about which types of purchases they made at the Carnival or on Georgia Avenue. During Carnival events, most patrons purchase food and/or drinks (85.2%). Other items commonly purchased included clothing, arts and crafts, and souvenirs. This data shows a significant opportunity for food/beverage vendors at the Carnival. This may also be attributed to the cultural component of the Carnival where people are encouraged to sample foods and beverages from the nations represented in the parade. Figure 1-7 Categories of Patron Purchases Question 8 asked attendees to identify the age range to which they belong. The overwhelming majority of respondents reported being between years old (56.4%). As age ranges increased, the number of respondents decreased. Based on this analysis, more than half of Carnival patrons are under the age of 45. 6
8 Figure 1-8 Patron Age Question 9 asked participants to identify their gender. The responses were closely split with 47.4% reporting male and 52.6% reporting female. Therefore, the Carnival appeared to be evenly attended by members of each gender. Figure 1-9 Patron Gender Question 10 inquired from participants about their annual income range. Most event patrons reported earning less than $20,000 in annual income (41.1%). However, 30.7% of respondents reported earning $50,000 or more. In addition, the income range of many participants being reported as less than $20,000 may be correlated with the young age reported in Figure
9 Figure 1-10 Patron Income Question 11 asked attendees to identify their racial or ethnic background. The majority of patrons described themselves as African American (78.0%). The other racial groups reported were White, Hispanic/Latino, Asian, Native American and Mixed Race. The majority of attendees self-identifying as African American is likely connected to the fact that that the DC Carnival is a celebration based on paying homage to the many cultures of the Black Diaspora. Figure 1-11 Patron Race/Ethnicity Question 12 asked participants about their satisfaction with the Carnival Events the Parade, the Marketplace, and the Carnival Event as a whole. The highest report in each category was that of Mostly Satisfied with 68.3% of event patrons were somewhat, mostly, or completely satisfied with the parade. Also, 67.9% of event patrons were somewhat, mostly, or completely satisfied with the Marketplace. 8
10 Lastly, 71.6% of event patrons were somewhat, mostly, or completely satisfied with the total event. Therefore, the overall perception of the Carnival was deemed positive by attendees. Figure 1-12 Patron Satisfaction with Carnival Events Question 13 asked participants for suggestions on how to improve the Carnival and increase the level of satisfaction of attendees. Among the responses, 100% of event patrons would be more satisfied with the event if the parade route were longer. Many of the event patrons also expressed concern about aggressiveness of police officers. Lastly, several event patrons felt that the event could have been better organized. Figure 1-13 Patron Recommendations to Increase Satisfaction Question 14 inquired from attendees about how they learned of the Carnival and associated activities. The majority of patrons heard about the event from friends or family (50.4%) or word of mouth, 46.8%. An additional 40.2% of patrons heard about the event through radio, television, or the Internet. Thus, an individuals personal network appears to be key in learning about the Carnival activities. 9
11 Figure 1-14 Patron Information Sources about the Carnival Question 15 asked participants if they had ever attended the Carnival in prior years. More than half of the event patrons (62.3%) had attended the Carnival before. Therefore, the retention among Carnival attendees is strong. Figure 1-15 Patron Prior Carnival Attendance Business Survey Response Results Fifty (50) business owners participated in the survey. The analysis of the business owner surveys are presented here. 10
12 In question 1, business owners were asked if they were open for business on the day which the Carnival took place. Among the respondents, almost all (95.6%) were open during the event. Therefore, it is reasonable to assume that business can and will continue to operate while the Carnival is taking place Figure 2-1 Businesses Open during the Carnival Question 2 asked business owners if they received additional customers on the day of the Carnival. Of those surveyed, 71.7% received additional customers during the event. Thus, it appears that the Carnival yielded more customers than typically seen by business owners in the area. Figure 2-2 Additional Customers Received during the Carnival In question 3, business owners were asked to report on average how much each customer spent on the day of the Carnival. The majority of business owners (91.9%) reported that customers spent in the range of $50 or less. 11
13 Figure 2-3 Average Customer Expenditure during the Carnival Question 4 asked the business owners surveyed to identify the type of business that he/she operates. Those who participated in the study included convenience stores (25%), restaurants (22.7%), take-out restaurants (15.9%), barber shops (9.1%), nail salons (9.1%), and other establishments. Figure 2-4 Type of Business Respondents In question 5, business owners were asked to consider whether they thought the Carnival helped or hurt their businesses in any manner on the Georgia Avenue corridor. The majority of business owners (91.8%) reported that the Carnival event helped business on Georgia Avenue. This positive perception by business owners is another key indicator about the economic benefit of the Carnival to surrounding businesses. 12
14 Figure 2-5 Business Perspective on Impact of the Carnival In question 6, business owners were asked whether or not they would like to see the Carnival continue. The response from the 100% of local business owners was that they would like to see the DC Carnival event continued. Figure 2-6 Business Perspective on whether Carnival should Continue. Question 7 asked business owners to identify their gender. The local business owners were almost evenly split based on gender 54.3% male and 45.7% female. Therefore, there is no major difference among respondents in relation to gender among the business owners in the Georgia Avenue corridor. 13
15 Figure 2-7 Gender of Business Respondents Question 8 inquired to business owners about their average annual income. The most frequently reported annual income from the business owners was in the range of $65,000 to $79,999. The lowest report from business owners was in the range of $20,000 to $34,999. Thus, the respondents have moderately grossing businesses. Figure 2-8 Annual Business Income In question 9, the business owners were asked to identify their racial and ethnic background. The majority of business owners (59.1%) were African American. Other businesses were owned by those of Mixed race, Hispanic/Latino, White and Asian. 14
16 Figure 2-9 Race/Ethnicity of Business Respondents Question 10 asked about the level of satisfaction among business owners with regard to Carnival activities the Parade, the Marketplace, and the overall Carnival. With regard to the Parade, 76% of business owners were somewhat, mostly, or completely satisfied. In terms of the Marketplace, 80.9% of business owners were somewhat, mostly, or completely satisfied. For the overall Carnival event, 77.1% of business owners were somewhat, mostly, or completely satisfied. Figure 2-10 Business Satisfaction with Carnival Activities Question 10 asked about the level of satisfaction among business owners with regard to Carnival activities the Parade, the Marketplace, and the overall Carnival. With regard to the Parade, 76% of business owners were somewhat, mostly, or completely satisfied. In terms of the Marketplace, 80.9% of business owners were somewhat, mostly, or completely satisfied. For the overall Carnival event, 77.1% of business owners were somewhat, mostly, or completely satisfied. 15
17 Figure 2-11 Business Information Sources about the Carnival In question 11, business owners were asked about which source of information helped them to find out about the Carnival. The majority of business owners (70.0%) heard about the DC Carnival event from friends or word of mouth. So again, in terms of being informed about the Carnival, personal networks played a major role. Cost Benefit Analysis, Estimated Patron Expenditures, and Generated Sales Tax Revenues Table 1 presents a parallel case of the Washington, DC Caribbean Carnival and the Toronto Carnival. This parallel is done with the backdrop that the Canadian governments provide funding and other resources to the production of the Scotiabank Caribbean Carnival. The funding is a part of $100 million dollars stimulus --Marquee Tourism Events Program (MTEP)--to the Canadian tourism industry. This support offers the Scotiabank Caribbean Carnival the opportunity to flourish and provide social and economic benefits to the city of Toronto and Canada at large. Toronto makes $ for every dollar spent and produces total sales-tax revenues of $25,740,000. With minimal resources and limited government support, the DC CARNIVAL still manages to bring in $37.02 for each dollar spent and produces approximate total sales-tax revenues from the attendees of $1,298,230. These numbers certainly would increase with more resource support from the District of Columbia government. The Scotiabank Caribbean Carnival clearly demonstrates that monetary and in-kind (enforcement) support leaves more resources for promotion and event planning to ensure greater attendance, higher levels of event satisfaction, and maximum tourist/event dollars spent by attendees. Table 1: Estimate of DC Caribbean Carnival Cost Benefit Ratio 16
18 DC Caribbean Carnival 2011 Toronto Scotiabank Caribana 1998 Budget* $584,483 $416,250 Number of Attendees 400,000 1,200,000 Attendee Expenditure $ 21,637,166 $198,000,000 Cost-Benefit Ratio**(Expenditure/Budget) $37.02 $ Taxes Earned $1,298,230 $25,740, * Scotiabank Caribana receives federal funding **Cost Benefit Analysis: The value for every dollar spent DC Sales Tax Rate is 6%; Toronto's Consumption Tax rate is 13% Sources: scotiabank-caribana-2010-and-ipsos-reid-release-economic-impact-study-results Table 2 provides a range of estimated carnival expenditures and generated sales taxes based on various numbers of attendees. For example, if 300,000 people attended the DC Caribbean Carnival, then attendee expenditures are $16,227, 875 with a cost benefit ratio of $27.76 and $973,672 are generated in sales tax revenues. On the other hand, if 200,000 attended, their expenditures are $10,818,583 with a cost benefit ratio of $18.51 and $649,115 are generated in sales tax revenues. Even with lower attendee count the DC Caribbean Carnival provides increasing returns scale to the Washington, DC economy on a whole. Table 2: DC Caribbean Carnival Estimated Patron Total Expenditure and Generated Sales Taxes by Number of Attendees Number of attendees 400, , ,000 Number of Patrons by Category Family and Friends 111,839 83,879 55,919 Group 72,836 54,627 36,418 Individual 80,000 60,000 40,000 Total Patrons 264, , ,337 Average Household Size, DC Average Expenditure $ $ $ Total Expenditures $ 21,637,166 $ 16,227,875 $ 10,818,583 Cost- Benefit Ratio (Expenditure/Budget) $ $ $ Sales Taxes 6% Tax Rate $ 1,298,230 $ 973,672 $ 649,115 Sources: Tax Foundation; State Revenue Departments. taxdata/show/26269.html; US Census Bureau, FactFinder gov/ jsp/saff/ SAFFInfo.jsp?geo_id=01000US&_geoContext =01000US &_street=&_county =&_citytown=&_ state=&_zip=&_pageid=gn8_refshelf& _submenuid=&_ci_nbr=null; and DC Caribbean Carnival Attendee Survey. Table 3: provides insight into the incremental revenues that businesses perceived were a direct outcome of the DC Caribbean Carnival. The incremental revenues here measure the additional revenues made as a result of the 2011 DC Caribbean Carnival. These revenues are over and above the revenues that would have occur on a normal June 2011 Saturday. Business survey participants indicated that on average consumers spent $26.84 dollars and that their business increased by 23% or an average of 28 customers. The estimated incremental revenue per business was $ Depending on the number of businesses 17
19 along the DC Caribbean Carnival parade route or at the marketplace, the incremental revenues range from $75,152 (n=100 businesses) to $300,608 (n=400 businesses). Table 3: DC Caribbean Carnival Estimated Incremental Revenues by Number of Attendees Consumer's Average Expenditure Per Business $ Average Additional Customers 28 Estimated Incremental Revenues Per Business $ Number of Business along DC Caribbean Carnival Parade Route Total Estimated Incremental Revenues along DC Caribbean Carnival Parade Route $ 75,152 $ 150,304 $ 225,456 $ 300,608 Source: DC Caribbean Carnival Business Survey Based on the findings, the DC Caribbean Carnival provides significant economic value to the Washington, DC economy. Recommendations Based on the analysis of survey responses, the following 10 recommendations are suggested for continued success and growth of the DC Carnival. 1. The attendee base for the DC Carnival is local residents. To encourage the expansion of the Carnival, advertising of the event earlier and using larger outlets may help to yield a wider attendee base. In addition, as the Carnival continues to evolve, more residents of other locations may become aware of the Carnival and other associated activities. In addition, capitalizing on the rich cultural experience of the Carnival in conjunction with the myriad of activities, landmarks, and tourist attractions of Washington, DC could improve awareness of the Carnival. 2. The DC Carnival is a family event. Patrons that attend the Carnival from out of town stay with family and friends, attend events with them, and know about the event through them. Therefore, materials promoting the Carnival as well as activities chosen to supplement the Carnival should bear this in mind. The more identifiable the Carnival is as a family event, the more likely people are to attend and encourage others to do so as well. 3. The Parade and Marketplace are successful community events. Through marketing efforts, corporations with a local presence should be made aware of the opportunities available to sponsor the DC Carnival and support this cultural event in the District. In turn, the DC Carnival would get a boost in event advertising through the association with larger companies. 4. Attendees are spending the majority of their money on food and beverage items. Getting additional merchants and businesses to participate in sales of these items may be able to encourage additional individuals to attend the Carnival. Larger food vendors should be marketed to as a way to increase food options and revenue for the DCCC from vending. 18
20 5. The largest age group of Carnival participants is on average between 18 and 45. This is understandable based on the event being outdoors and a great deal of walking being involved. However, the Carnival might be attractive to individuals in other age brackets if there were designated places to sit along the Parade route. This could be accomplished by adding tents with folding chairs at designated intervals along the parade route as well as in the Marketplace for a premium price. 6. The amount of money which individuals expect to spend at the event in conjunction with the most frequently reported annual income is appropriate. Patrons on average do not expect to spend more than $50 at the event, which can be categorized as affordable. With the ability to enjoy watching the parade for free, all costs associated with attendance are expenditures that the attendees choose to purchase in order to make the experience more enjoyable, such as food, beverages, artwork, and apparel from local businesses along the route. The DC Caribbean Carnival, Inc. should continue to ensure that the event remains a low cost entertainment option for attendees. 7. Participants strongly believed that the parade route was too short. To the extent that the committee has control over this aspect, extending the parade route could be of great benefit to attendees and businesses. 8. Security at the Carnival was also a major area of feedback. Police presence in the area is mandatory for an event of this size, but some participants felt that law enforcement was aggressive to attendees. Possibly utilizing a civilian security detail could minimize part of this problem. Or working with the city and the police force on cultural sensitivity may be necessary. 9. Strategic viral marketing campaigns should be a key method of event advertising moving forward. Word of mouth was the foremost utilized method of communication about the Carnival. This is a major area of opportunity for the Carnival. There are many vehicles that could be used more effectively to advertise the Carnival. First, having an identified date early makes providing information about the Carnival easier. Next, utilizing a fully functioning Website where people can access information on the Carnival and associated events and schedules, learn about sponsorship activities, make donations, and sign up to participate/work with the Carnival would be useful. We acknowledge that the Carnival has a Website in existence, but some of the aforementioned items could improve the presence of the Website. Also, it is of critical necessity to utilize social media technologies to advertise. Facebook, Twitter, and other social media outlets are available, low cost methods to reach a wide range of people and have been useful to many organizations in informing the public about events. Lastly, identifying and providing businesses in the target location and demographic printed materials will also be useful in providing information about Carnival activities and possibly soliciting sponsorship. 10. Working with the local businesses before the event is essential. Businesses operated during the Carnival and saw a significant increase in customers on that day. This finding is important for two reasons, 1) The Carnival itself does not prevent any businesses from operating, and in fact the businesses are eager to operate, and 2) Businesses have the opportunity to make additional revenue as well as reach a customer base that may not have under any other circumstance been aware of the business. Thus the Carnival serves as important economic stimulus event for local businesses within the vicinity of the Carnival. Especially given the current economic climate, this is a prominent reason to keep the DC Carnival in existence. 19
21 Overall, the DC Carnival is a festive, revenue-generating family event which has the potential to become a highly recognized staple in Washington DC. By harnessing the positive attributes of being low-cost, family friendly, service-oriented, and culturally enriching, the DC Carnival can make a significant impact on the Washington metropolitan area, the Caribbean community and many others. It is of major importance to create a well-defined communication plan to inform, educate, and advertise to government organizers, potential attendees and sponsors. In addition, by communicating early all of the positive attributes of the Carnival, participation can be increased. To the extent the Carnival can work to extend the length of the Parade route that would also be of benefit to the reputation of the event. Based on the analysis, those who have been to the Carnival are more than likely to return. Therefore, the challenge to the DC Caribbean Carnival, Inc. is to make a dedicated effort to reach those who are unaware of the Carnival and all that it has to offer. References Allport, Gordon (1958). The Nature of Prejudice. Garden City, New York. Doubleday Anchor Books. Earls, Z. (1993). First night celebration: Building community through the arts. Festival and Event Tourism, 1, Getz, D. (2005). Event Management and Event Tourism (2d ed.). New York: Cognizant. Lee, Insun, Arcodia, Charles and Lee, Timothy J. (2010), The key characteristics of multicultural festivals: A critical review of the literature. In: Rhodri Thomas, Events and Festivals Research: State of the Art.. Global Events Congress IV: Festivals & Events Research: State of the Art. Incorporating the 8th AEME Events Management Educators' Forum, Leeds, U.K., (1-10) July Wöber, Karl W. (2002), City tourism 2002, Proceedings of European Cities Tourism's international conference in Vienna, Austria,
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