The Problem with Economic Impact: Does the Money Really Stay in the Community?

Many cities around the world compete to host large-scale events like sports competitions or concerts. When planning these events, the economic impact is often a key selling point. The projections are usually optimistic: reports suggest that tens of thousands of people will flood into the city, spending money at local restaurants, hotels, and shops, which will boost the local economy.

But are these economic impacts really telling the whole story?

Often, the calculations of economic impact focus on how much money circulates during the event. This includes spending by the event organizer, wages paid to workers, and the spending of attendees. The numbers can look impressive on paper, showing millions of euros flowing through the local economy.

But where does this money actually go?

The Importance of Retained Money in the Local Economy

If the event organizer is an external entity, perhaps based in another city or even country, a large portion of the revenue generated by the event leaves the area. Wages paid to workers and any profits made by the organizer may flow back to where the company is headquartered, meaning the local economy doesn’t benefit as much as it could. Even though the event takes place in the city, the purchasing power that comes from wages and profits is often spent elsewhere, outside the local community.

Additionally, a significant part of the purchases made for the event—such as technology, equipment, and services—are often sourced from companies whose headquarters are located elsewhere. This means that much of the money spent on these essential goods and services doesn’t stay in the city where the event is held but flows to other areas where those companies pay taxes and reinvest profits.

The situation becomes even more complex if the majority of the event’s attendees are locals. While they may fill seats and spend money during the event, they don’t bring new money into the area. Instead, they’re simply shifting existing local money from one place to another, which doesn’t generate the same economic growth as an influx of spending from outside visitors.

Why Measuring Retained Money Matters

Retained money is the true engine of local economic growth. It’s the money that stays with local businesses, which can then be used to pay employees, invest in new projects, and expand. When workers spend their wages locally, that money continues to circulate within the community—into restaurants, shops, and services—generating new demand and helping businesses grow, hire more people, and invest in future opportunities. This kind of multiplier effect strengthens the local economy over time and improves the long-term vitality of the area.

When money stays in the local community, it drives sustainable economic growth that benefits residents and businesses alike. That’s why it’s critical not only to measure economic activity but also to understand how much of that money stays within the local economy.

How Many Cities Are Measuring This?

While the economic impact projections are often promising, the real question is: how many cities are calculating how much money stays in the local area? How many are assessing the retained money—funds that remain in the hands of local businesses and residents and continue to circulate through different sectors of the local economy?

Has your city considered what the true economic benefits are after the event ends? One thing is clear: the importance of retained money shouldn’t be overlooked when evaluating the benefits of large-scale events. It’s the key factor in determining whether events create lasting economic growth or whether they are merely a temporary boost, with most of the money flowing out of the city’s borders as soon as the event is over.

This plays a crucial role in the event bidding phase, where potential bids are assessed as part of the Event Due Diligence process. Discover the winning formula for successful event bidding.