The problem with economic impact: the money that doesn't stay

Standard economic impact estimation is not wrong so much as pointed at the wrong thing. It counts the money that flows through a city during an event. That number is easy to produce and easy to celebrate. It just doesn't answer the question a host city actually has, which is whether the event left the place better off.

What the standard method actually counts

The usual estimate takes visitor and organiser spending and totals it up, sometimes with a multiplier on top. It treats every euro that moves as a euro of local benefit. But money moving through a city and money staying in a city are two different things, and only one of them creates local jobs.

Three problems with the standard number

This is not a small measurement error. It is three separate problems stacked on top of each other, and each one inflates the headline.

1. Leakage

Spending inside a city is not the same as spending that stays in a city. Money leaks — to imported goods, national chains, global platforms and profit owners based somewhere else. A visitor's hotel bill can leave the region entirely if the hotel is a national chain. The euro was spent locally. It did not stay locally.

2. The first-transaction stop

Traditional estimates stop at the first transaction and never ask what happened next. But one transaction is spending, not impact. Impact is what happens when that money circulates — when a local supplier gets paid, pays a local wage, and that wage is spent again in the same economy. Stop counting at the till and you miss the only part that mattered.

3. The multiplier on a leaked base

Then a multiplier gets applied to make the number bigger. But a multiplier applied to a leaked base multiplies an empty base. If most of the money has already left, multiplying what's left over-counts a benefit that isn't there. The multiplier belongs on the retained money, not the headline turnover.

The fix: measure retention first

The correction is not an attack on the method. It is a change of question. Estimate how much of the money stays — the local retention rate for organiser spending, visitor spending and supplier spending — and apply the multiplier to that. Retention first, multiplication after. The full comparison is in economic impact versus economic retention, where two events with the same headline impact keep very different amounts.

If you want to see how a headline number and a retained number pull apart in practice, the Sunny Valley story walks a single event through it.

Stop asking how much people spent. Start asking how much stayed — and what grew from it.

The Real Economic Impact calculator runs the estimate this way: retention first, then the value the retained money supports.