LTC 114-2006 Cirque du Soleil Economic Impact Analysis
~
MIAMI BEACH
OFFICE OF THE CITY MANAGER
NO. LTC # 114-2006
LETTER TO COMMISSION
DATE:
Mayor David Dermer and Members of the City Commission
Jorge M. Gonzalez, City Manager ~ ~
April 19, 2006 0
Cirque du Soleil - Economic Impact Analysis
TO:
FROM:
SUBJECT:
The purpose of this Letter to Commission is to provide you with a copy of the Economic
Impact Analysis commissioned by the City. Convention, Sports and Leisure International
(CSL) prepared an analysis of the potential economic impact of the proposed redevelopment
of the Jackie Gleason Theater for a permanent venue for Cirque du Solei!. The purpose
was to quantify the potential community-wide economic impacts generated by this change of
use. The analysis focused on patron data, patron demographics, length of stay, behavior
trends and spending patterns. The model in the study calculates the resulting total output,
earnings, direct spending and employment associated with the permanent venue in Miami-
Dade County.
As you will note, the estimated net new annual direct spending from all Cirque attendees is
approximately $50 million during a stabilized year (in 2006 dollars). Of this, approximately
$39.8 million is assumed to take place within the City of Miami Beach. Additionally, an
estimated 856 net new jobs are generated. Finally, approximately $4 million in net new tax
revenues for the State, County and City would be generated.
A copy of the full report is provided for your review and reference. If you have any questions,
please feel free to contact me.
C: Hilda Fernandez, Assistant City Manager
Tim Hemstreet, Assistant City Manager
Max Sklar, Tourism and Cultural Development Director
Attachments
JMG/HMF/~
F:\info\$ALL\Max\TCD\L TC\Cirque du Solei! Economic Impact Analysis.doc
J.".9,C'
Jot J;ji) ;:,
1, t',
. \ ,J
00 : \\ \;tV 0 Z hdiJ 90
"',.... ~"""'{ \ .!
03/\\:1~);:iCl
ETI'---'-~-
.." . "': .~. '-r- ' '
(:. i'~' \~ It :\ : b
CSH
~
March 22, 2006
Mr. Max A. Sklar
Director
Tourism and Cultural Development Department
City of Miami Beach
1700 Convention Center Drive
Miami Beach, Florida 33139
Dear Mr. Sklar:
We have completed our engagement with the City of Miami Beach ("City") to prepare an
analysis of the potential economic impact of the proposed redevelopment of the Jackie
Gleason Theater into a venue suited to host a new long-running production of Cirque du
Soleil.
The analysis presented in this report is based on estimates, assumptions and other
information developed from industry research, market data provided by the City, Greater
Miami Convention and Visitors Bureau and Cirque du Soleil. All information provided
to us by others was not audited or verified and was assumed to b~ correct. All primary
research performed for this study was completed by March 2006. The sources of
information, the methods employed and the basis of significant estimates and
assumptions are stated in this report. Some assumptions inevitably will not materialize
and unanticipated events and circumstances may occur. Therefore, actual results
achieved will vary from those described and the variations may be material.
We sincerely appreciate the assistance and cooperation we have been provided in the
completion of this report and would be pleased to be of further assistance in the
interpretation and application of our findings.
Very truly yours,
C'Si 7~~~
CSL International
Conventions, Sports & Leisure International
1907 East Wayzata Boulevard - Wayzata, MN 55391 - Telephone 972.476.5900 -Facsimile 952.476.0005
.
- Table of Contents -
I. Introduction and Methodology ..........................................................................1
II. Economic Impact Analysis ............................... ................ .................................4
III. Fiscal Impact Analysis .............. ......... ....... ............ .............. ...............................8
IV. Analysis of Non-quantifiable Impacts .............................................................\ 0
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Table of Contents
.
Introduction and Methodology
This report is intended to summarize CSL's findings related to our engagement with the
City of Miami Beach to prepare an analysis of the potential economic impact of the
proposed redevelopment of the Jackie Gleason Theater into a venue suited to host a new
long-running production of Cirque du Solei I.
The potential operation of a permanent Cirque du Soleil production in Miami Beach
could create significant impacts on the local community in a variety of ways. The impact
generated by Cirque du Soleil most visibly begins with event attendees purchasing
tickets, concessions, parking, merchandise and related items. Significant impacts also
occur as attendees at Cirque du Soleil events generate spending in area restaurants,
hotels, retail outlets and related visitor industry establishments. The direct spending of
new dollars in an economy begins a series of spending in which the dollars are cycled and
recycled through the economy. The secondary spending represents the impact that the
various rounds of re-spending of the direct expenditures has on the economy of the
greater Miami area, as measured using an input-output model.
The impact model used in this study calculates the resulting total output, earnings and
employment associated with Cirque event activity in the market. In applying the model,
significant amounts of data and conceptualization are required. The variables explained
below are important to the overall study process.
Cirque Attendance Estimates
In any economic impact calculation related to a particular event or activity, it is first
necessary to estimate the number of patrons generating the spending in an area and the
portion of this spending that is considered to be net new. In the case of Cirque du Solei I
attendance, the estimation involves three variables: the number of annual performances,
theater capacity and the annual occupancy percentage. Based on conversations with
Cirque project planners and La Nouba show management in Orlando, the table below
summarizes the assumptions with regard to these variables.
Summary of Event Attendance Assumptions
~~~~ ~?~
415
1,700
75%
1,275
529,125
415
1,700
80%
1,360
564,400
425
1,700
75%
1,275
541,875
425
1,700
80%
1,360
578,000
440
1,700
85%
1 ,445
635.800
Source Cirque du Solei! and La Nouba show management, 2006
Economic Impact Analysis ofa New Cirque du Solei! Production in Miami Beach
Page 1
.
As shown, over time, the number of annual Cirque performances is assumed to increase
from 415 in the first year of operations, to approximately 440 shows, five years later.
Annual occupancy at these shows is expected to range between 75 and 85 percent of total
theater capacity, resulting in total annual attendance projected at approximately 529,000
in the first year of operations, increasing to nearly 636,000 in year five.
A total of ten percent of total Cirque attendees are assumed to be either visiting the
Miami area specifically to attend Cirque or are visiting the area for other reasons but
decide to extend their stay to attend Cirque. In either case, 100 percent of the spending
occurring on the visitor days attributed to Cirque among these categories is considered to
be "net new" to the area, as these dollars would not have been spent in the community
without the existence of Cirque.
In contrast, only a portion of expenditures among the remaining 90 percent of Cirque
attendees is considered to be "net new." In the case of visitors to the area for other
purposes that simply add Cirque to their itinerary (estimated to represent 65 percent of
the total attendee base) only a portion of Cirque expenditures are considered to be net
new. Specifically, we have assumed that 50 percent of expenditures taking place at the
Cirque performance (i.e., tickets, concessions and merchandise) are considered to be "net
new" while expenditures in the other identified categories would have taken place in the
area with or without Cirque and are thus not a primary focus of this study.
The same general concept is true among patrons that reside within driving distance of
Miami (estimated to comprise 25 percent of the entire Cirque attendee base). Among this
segment of attendees, two major assumptions have been made. First, the amount of
spending among those residing within driving distance of Miami that is considered to be
net new is estimated at ten percent. This reflects the fact that some portion of area
residents may have left the destination for entertainment purposes. The existence of
Cirque "recaptures" some portion ofthis spending.
Attendee Spending Estimates
Our overall economic impact estimates rely heavily on assumed per-patron spending
estimates. To assist with these estimations, we have been provided detail by the GMCYB
as to average daily expenditures among overnight visitors to the Greater Miami and the
Beaches area, adjusted to reflect the spending habits of Cirque attendees. This data was
generated as part of the GMCVB's 2004 Visitor Profile and Economic Impact Study.
For purposes of this analysis, direct spending among Cirque attendees has been estimated
for the following categories: Cirque expenditures (i.e., tickets, concessions and
merchandise), lodging, meals, transportation, entertainment other than Cirque and
shopping. GMCVB data specific to Miami Beach were adjusted to a per-person basis
and inflated at an annual rate of three percent to achieve per person expenditure estimates
in 2006 dollars. An additional 20 percent increase was assumed for spending in hotel,
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 2
.
restaurant, retail and entertainment categories to reflect higher than average spending
patterns that may apply to a Cirque patron.
Assumptions relevant to each spending category are further explained below.
. Cirque Expenditures - This category includes such items as show tickets and
concessions and merchandise purchased while at the performance. The
estimation of $84 per person applies to both overnight and drive-in attendees and
is based loosely on conversations with management of Cirque in Orlando
. Lodging - Among overnight visitors attending Cirque, we have estimated average
daily per capita hotel expenditures at $78. This figure was derived through
intercept surveys, inflated to reflect a typical Cirque patron, and takes into
account that fact that some visitors will stay with friends or family and thus have
no such costs.
. Meals - Among overnight visitors attending Cirque, we have estimated average
daily food and beverage expenditures at $57 per person. This figure was derived
through intercept surveys and has been inflated to reflect a typical Cirque patron.
Visitor spending on meals among drive-in attendees is assumed to approximate 75
percent of that for overnight visitors.
. Transportation - This category includes visitor expenditures on items including
taxis, car rental, parking, fuel and public transportation. Costs associated with
arriving in the destination (i.e., airfare, fuel) are not included. Among overnight
visitors attending Cirque, we have estimated average daily transportation
expenditures at $22 per person. This figure was derived through intercept surveys
and has been adjusted to a per person basis. Transportation expenditures among
drive-in visitors is estimated at $15 per person per day and includes only parking
and fuel.
. Entertainment (other than Cirque) -It is quite likely that visitors to the area will
experience some form of entertainment other than Cirque while in the area.
Among overnight visitors, entertainment expenditures other than Cirque have
been estimated at $23 per person per day. The initial total entertainment
expenditure figure was derived through GMCYB sponsored intercept surveys and
has been inflated to reflect a typical Cirque patron.
. Shopping/Retail - Among overnight visitors attending Cirque, we have estimated
average daily shopping expenditures at $52 per person. This figure was derived
through intercept surveys and has been inflated to reflect a typical Cirque patron.
Visitor spending on shopping among drive-in attendees is assumed to
approximate $15.00 per person per day.
Economic Impact Analysis of a New Cirque du Solei I Production in Miami Beach
Page 3
.
Multipliers
The input-output model adjusts each successive round of spending, recognizing only the
impact that the spending has on the economy of the greater Miami area. The re-spending
of the dollars is estimated by utilizing economic multipliers and applying them to the
amount of direct, or initial spending.
The multipliers used in this economic impact analysis as generated by the IMPLAN
economic analysis system specifically for the Miami-Dade County area are presented
below.
IInd ustry
Hotel
Restaurant
Entertainment
Retail
Auto Rental
Other Local Transit
Other Industries
Output
1.798
1.851
1.814
1.921
1.878
1.878
1.858
Employment
Earnings
0.690
0.652
0.650
0.858
0725
0.725
0.603
21,346
27.317
21.225
31364
37.820
37.820
18.210
Economic Impact Analysis
Separate criteria for local ("drive-in") and non-local ("overnight") attendees were used to
estimate the economic impact of Cirque du Soleil, that is, to determine what portion of
patron spending primarily represented net new dollars in the community. For local
residents and drive-in attendees, spending that would have the left economy of the greater
Miami area in the absence of Cirque du Soleil event was considered new money. Only a
portion of expenditures made by these attendees is considered new money (assumed at
ten percent in this analysis), as many would have spent their money on other
entertainment within the greater Miami metropolitan area in the absence of Cirque du
Soleil.
For overnight Cirque attendees, if the attendee traveled to the greater Miami area solely
to attend a Cirque du Soleil event, 100 percent of their spending was considered net new
money in the area economy. That is, without Cirque du Solei I event, those individuals
would not have traveled to the destination, and would . not have spent money on
entertainment, transportation, meals, lodging, shopping and other items in the area.
Further, for the portion of event attendees that are in the area for other purposes but
extend their stay to include a Cirque performance, all spending occurring during the
additional time spent in the destination (assumed to be one night) is considered to be net
new.
The direct impact assessed in this report focuses on both Cirque-related spending (i.e.,
tickets, concessions and merchandise) and spending outside Cirque du Soleil at local
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 4
.
businesses such as restaurants, hotels, retail shops and other such visitor industry
establishments taking place before and after events. As previously noted, when possible,
survey results were used to generate data that are needed to assess direct spending and
economic impact within the greater Miami area as a result of Cirque du Soleil.
For purposes of this analysis, the annual economic impacts resulting from the operations
of Cirque du Soleil in Miami Beach have been estimated using the following economic
measurements:
. Direct Spending represents the first round of quantifiable spending and
includes spending by event attendees before and after an event, and spending
associated with Cirque du Soleil operations.
. Total Output represents the total direct, indirect and induced spending effects
generated by the project. This calculation measures the total dollar change in
output that occurs in the local economy for each dollar of output delivered to
final demand.
. Personal Earnings represents the wages and salaries earned by employees of
businesses associated with or impacted by the project. In other words, the
multiplier measures the total dollar change in earnings of households
employed by the affected industries for each additional dollar of output
delivered to final demand.
. Employment represents the number of full and part-time jobs. The
employment multiplier measures the total change in the number of jobs in the
local economy for each additional $1.0 million of output delivered to final
demand.
The exhibit below summarizes the overall economic impacts associated with a permanent
Cirque performance at a redesigned Jackie Gleason Theater in Miami Beach, utilizing the
assumptions presented throughout this report, in a full year of stabilized operations, based
on the application ofthe IMPLAN multipliers.
Economic Impact Analysis of a New Cirque du Solei! Production in Miami Beach
Page 5
r-----~ ~-i
csn
D: ____-1
Estimated Annual Economic Impacts-
Upon Stabilization of Operations (in 2006 Dollars)
Direct Spending
Net New Spending
$50,017,000
~
Total Output
Earnings
Employment
Net New Output $91,555.000 Net New Earnings $28,945,000
Net New Employment 856
As presented in the exhibit, the estimated net new annual direct spending associated with
total spending among all Cirque attendees is approximately $50 million during a
stabilized year of operations in 2006 dollars. The new spending originates from patrons
that travel to the Miami area specifically to attend Cirque (40 percent), patrons that
extend their stay in the destination to attend Cirque (20 percent), and new spending from
residents and visitors that would have left the market without the existence of Cirque (40
percent).
An industry breakdown of the $50 million in net new direct spending associated with a
permanent Cirque performance at a redesigned Jackie Gleason Theater in Miami Beach is
summarized in the exhibit on the following page.
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 6
\- .--.-- -- - -----,
tSH
I 1
L_____. __ _._ ..1
Estimated Annual Economic Impacts -
Upon Stabilization of Operations (in 2006 Dollars)
Retal
10%
Trans./Parkilg
5%
Hotel
15%
Entertanment
58%
Total Direct Spending
Net New Spending
$50,017,000
Of the estimated $50 million in net new direct spending in a stabilized year of Cirque
operations, more than $28.9 million, or approximately 58 percent takes place in the
entertainment industry, the largest of the five identified industry sectors. Spending for
Cirque performances represents the largest share of this category. Direct spending in
hotels is projected to account for an estimated 15 percent of all net new direct spending,
translating to an estimated $7.4 million annually in 2006 dollars. This compares to
approximately $6.2 million being spent in the restaurant industry annually. The
remaining 14 percent is spread across such sectors as, retail and local transit/parking. It
should be noted that expenditures on alcohol are distributed among two spending
categories: restaurant and entertainment spending.
I
, .
Of the more than $50 million in net new direct spending associated with a permanent
Cirque performance, approximately $39.9 million, or approximately 80 percent, is
estimated to take place within Miami Beach. An industry breakdown of this spending is
presented in the following exhibit.
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 7
.
Annual Net New Direct Spending Estimated to take place in Miami Beach -
Upon Stabilization of Operations (in 2006 Dollars)
Retail
8%
Transportation &
Parking
1%
Hotel
11%
EnlertaiYnent
71%
Total Annual Direct Spending (in Miami Beach)
Net New Spending
$39,861,000
Of the estimated $39.9 million in net new direct spending assumed to take place within
Miami Beach, more than $28 million, or approximately 70 percent is comprised of
expenditures related to Cirque expenditures (i.e., tickets, concessions, merchandise) and
spending at other entertainment establishments in the Miami Beach area. Direct spending
in hotels is estimated to account for an approximately 11 percent of all net new direct
spending taking place in Miami Beach, translating to nearly $4.5 million in a stabilized
year of operations. This compares to approximately $4.3 million in food and beverage
expenditures. Total annual net new retail expenditures estimated to take place in Miami
Beach as a result of Cirque patronage is estimated at $3.1 million, or approximately eight
percent of all direct spending associated with the potential project.
Fiscal Impact Analysis
Beyond spending, output, earnings and employment data, the addition of a permanent
Cirque du Soleil production in Miami Beach will generate incremental tax revenues for
the State, County and City. The revenue generated from these taxes are used in funding a
wide range of tourist-related facilities, promoting tourism, providing cultural grants and
other various uses.
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 8
.
The following assumptions were made in preparing such estimations:
. It is estimated that 95 percent of restaurant and hotel sales are taxable; reflecting
the fact there is occasional event activity from tax exempt organizations.
. Approximately 70 percent of entertainment expenditures are subject to tax,
reflecting the tax base specific to various entertainment activities.
. Approximately 90 percent of auto rental and retail industry transactions are taxed.
. Eighty percent of local tran~it, including gasoline sales which are not included in
the State tax base, is assumed to be taxed.
. Fifty percent of spending in other industries is assumed to be taxed as general
sales.
. Thirty percent of indirect spending (total output less direct spending) are assumed
to be taxed as general sales.
. We have assumed that approximately 60 percent of overnight Cirque attendees
will stay overnight in Miami Beach, while the remaining 40 percent will stay
overnight in Miami and surrounding areas.
Tax rates utilized in this analysis are as follows:
. 6.0 percent State Sales Tax
. 1.0 percent County Sales Tax
. 3.0 percent Convention Development Tax (Miami-Dade County)
. 3.0 percent Resort Tax (City of Miami Beach)
. 2.0 percent Food and Beverage Tax (City of Miami Beach)
Based on the assumptions outlined earlier and the application of State, City and County
tax rates to the spending associated with Cirque du Soleil performances in Miami Beach,
the following tax estimates have been calculated.
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 9
-----... -... - i
CSH
Summary of Net New Tax Collections Generated by Cirque Operations -
Stabilized Year of Operations (2006 Dollars)
Current Net New
Tax Rate Tax Collections
6.0% $2,381,000
6.0% 743,000
3.0% 212,000
1.0% 399,000
1.0% 125,000
3.0% 127,000
2.0% 74,000
18,000
$4,079,000
State Sales Tax - direct spending
State Sales Tax - indirect spending
Convention Development Tax (Miami-Dade County)
County Sales Tax - direct spending
County Sales Tax - indirect spending
Resort Tax (City of Miami Beach)
Food and Beverage Tax (City of Miami Beach)
Allocation of State Sales Tax to Miami Beach (1)
TOTALS
(1) This allocation is applied only to state sales tax collections in Miami Beach.
As noted, the net new tax impacts of a permanent Cirque du Soleil production in Miami
Beach are estimated at approximately $4.1 million during a stabilized year of operations
in 2006 dollars. These calculations do not include positive impacts on property tax
collections or other tax sources in Miami Beach and throughout the destination that will
be impacted. These impacts are difficult to measure due to unforeseen changes to tax
base, but are likely significant.
Analysis of Non-quantifiable Impacts
In addition to the quantifiable impacts related to a permanent Cirque du Soleil production
in Miami Beach, the project could have several non-quantifiable impacts on the local
community as well. In an effort to gauge the effect of Cirque du Soleil on the quality of
entertainment in the greater Miami area, intercept surveys were conducted with nearly
170 attendees of Cirque's recent touring performance of Varekai in Bayfront Park in
downtown Miami. As presented in the exhibit below, attendees were asked to rate the
effect of Cirque du Soleil on the quality of entertainment in the greater Miami area.
Economic Impact Analysis of a New Cirque du SoleiJ Production in Miami Beach
Page 10
1----1
CSH
L_________I
Summary of Cirque du Soleil's Effect on the
Quality of Entertainment in the Greater Miami area
80%
72%
30%
25%
70%
60%
50%
40%
20%
10%
0%
3%
0%
Slgrificonllyposlhe....et SlghllyposllMl ellocl
Noe_
Neue1Mlelleet
Source: Custom Intercept $oIudorw, 2006
As presented, nearly three-fourths of those surveyed feel that the presence of Cirque du
Soleil results in a significantly positive effect on the local community. In sum, these
results are representative of the fact that while Cirque du Soleil would have measurable
effects on the local economy in terms of direct spending and economic impact associated
with Cirque patronage, the presence of this production could also generate lasting effects
on the local entertainment industry, thereby positively affecting the appeal of the
destination to visitors to the community, as well as the quality of life among local and
regional residents.
Economic Impact Analysis of a New Cirque du Soleil Production in Miami Beach
Page 11
i---t-:-l
CSH
L ___ __ __ ____ J