Cities Say Tourism Is Worth Billions — Here’s What Those Economic-Impact Numbers Actually Measure

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Nearly every major tourism destination publishes an annual “economic impact” figure — Charleston claims billions, Nashville claims billions, even mid-sized cities regularly announce tourism impact studies showing hundreds of millions of dollars flowing through their local economy. These numbers get repeated uncritically in local news coverage and city council presentations, but the methodology behind them involves assumptions that inflate the real economic benefit substantially more than most readers realize.

How the Standard Model Actually Works

Most tourism economic impact studies use a model built around “direct spending” — money visitors spend on hotels, restaurants, attractions, and transportation — and then apply a “multiplier effect” that estimates how many additional times that money circulates through the local economy as businesses pay employees who then spend their wages locally, and so on. The multiplier is where most of the inflation happens: multipliers of 1.5 to 2.5 are common in commissioned tourism studies, meaning a claimed billion dollars in direct visitor spending becomes a headline figure of two billion or more in “total economic impact.

Economists who study regional impact modeling, including researchers affiliated with organizations like the American Economic Association, have long noted that many of these multipliers are drawn from generic input-output models like IMPLAN, which are legitimate economic tools but are frequently applied with assumptions — like the share of visitor spending that would not have happened anyway through local resident spending — that tourism boards and destination marketing organizations have a direct financial incentive to set generously.

The Specific Ways the Numbers Get Inflated

• Failing to subtract for “substitution effect” — money residents would have spent locally regardless, simply redirected toward visitor-facing businesses during events”,
• Counting spending by local residents attending local events as new “visitor” spending rather than money that would have been spent in the local economy anyway”,
• Using outdated or generic multipliers not specifically calibrated to the actual local economy’s structure”,
• Commissioning the study through an entity, often the tourism board itself, whose funding depends on demonstrating a strong return on marketing investment”,

Who Actually Audits These Numbers

Very few tourism economic impact studies receive independent academic review before being publicized. Most are commissioned directly by convention and visitors bureaus, chambers of commerce, or state tourism offices, then produced by consulting firms that specialize in this exact kind of study and have a repeat-business incentive to produce numbers the client will be pleased to publish. University economics departments occasionally conduct independent reviews of specific major events — Super Bowls being a particularly well-studied and consistently debunked example — and those independent academic studies have repeatedly found actual economic impact to be a fraction, sometimes as low as 10% to 25%, of what official pre-event or post-event tourism board estimates claimed.

Economists Philip Porter and Robert Baade have published extensively on the gap between claimed and actual economic impact for major sporting events specifically, generally finding that independent analysis using actual tax revenue and employment data shows dramatically smaller effects than industry-commissioned multiplier studies predict.

Why the Inflated Numbers Persist Anyway

Cities and tourism boards have strong institutional incentives to publish large impact numbers regardless of methodological rigor: it justifies continued public funding for tourism marketing budgets, supports arguments for hotel tax increases or convention center expansions, and generates positive local media coverage that reinforces a destination’s brand as economically vital. There’s rarely a countervailing institutional incentive pushing toward more conservative, independently verified numbers, since no city government benefits politically from publishing a smaller tourism impact figure than a neighboring competitor city.

None of this means tourism doesn’t provide real economic benefit — it clearly does, generating real jobs, real tax revenue, and real business activity. But the specific dollar figures cities publish should be read with real skepticism about the multiplier assumptions baked in, and readers encountering a headline tourism impact number are usually looking at something closer to a marketing document than an independently audited economic analysis.

A Better Way to Read These Numbers

The more reliable figures to look for, when they’re available, are direct tax revenue collections — hotel occupancy tax receipts, sales tax data specifically from tourism-heavy zip codes, and airport passenger counts — since these are independently collected by government agencies for reasons unrelated to tourism marketing and are far harder to inflate through selective assumptions. Comparing year-over-year hotel tax collections tells a more grounded story about whether a destination’s tourism economy is actually growing than any headline economic impact figure ever will.

Some cities have started publishing more conservative, methodologically transparent tourism data in response to years of criticism from local economists and journalists, disclosing the specific multiplier and substitution assumptions used rather than just a final headline number. That trend remains the exception rather than the rule, but it represents a meaningfully more honest approach than the industry standard, and it’s worth specifically seeking out cities and destination marketing organizations that have adopted it.

Academic economists who specialize in regional impact analysis, including researchers at university economics departments who occasionally conduct independent reviews of major convention centers, stadiums, and tourism initiatives, consistently recommend that local journalists and city council members request the underlying IMPLAN or equivalent model assumptions before repeating a headline number, a step that happens rarely enough that most published tourism impact figures go entirely unchallenged in local reporting despite the significant public spending decisions they’re often used to justify.

None of this is unique to tourism — economic impact studies for stadiums, film production incentives, and corporate relocation deals face the exact same methodological critique from economists, and tourism impact figures are simply one of the more visible, frequently repeated examples of a much broader pattern in how local governments justify public spending using consultant-generated numbers that rarely receive the scrutiny applied to, say, a corporate earnings report. Readers who want a genuinely comparative sense of a destination’s tourism scale are usually better served by looking at raw visitor counts and hotel room inventory growth over time than at any dollar-denominated impact figure, since those raw numbers can’t be inflated by multiplier assumptions the way a modeled economic impact total can.