City of Santa Monica. Economics at AECOM & Lauren Schlau Consulting. June 9, 2010 Revised October 11, 2010

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1 Report Economic Impact of Cirque du Soleil on the City of Santa Monica Prepared for: City of Santa Monica Prepared by: Economics at AECOM & Lauren Schlau Consulting June 9, 2010 Revised October 11, 2010 Project No

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3 Executive Summary

4 Executive Summary - Cirque du Soleil Economic Impact Executive Summary Background In recent years the City of Santa Monica has initiated booking various large scale special events to support the city s economic development and cultural arts goals. The City Council adopted a policy and guidelines authorizing licensing a portion of the 1550 PCH lot for extended periods. The Council determined that during off-peak periods, booking events near the Santa Monica Pier that target a regional market was an effective way to draw a larger audience to the area and thereby boost Pier attendance as well as to provide needed revenue for beach maintenance and other public beach amenities. Such events have included the first North American run of Canada s Cirque du Soleil in 1987, regular Cirque du Soliel runs between 1987 and 1999, as well as the Ashes and Snow photography experience in The City recently contracted for a return of Cirque du Soleil (CDS), to perform from October 16 December 20, These events have in common their location, on the 1550 PCH Beach Lot just north of the famed Santa Monica Pier. The 1550 Lot is a primary parking lot for the Santa Monica Pier and for beach goers. The event venues eliminate a portion of the lot s available parking. Recognizing this issue, the City included parking mitigations in their licensing agreement with CDS. CDS patrons were directed to alternative parking, with free shuttle service, in the Civic Center structure or the 2030 Beach lot, a few blocks from the Pier. Pier and beach visitors were directed to additional parking at the Civic Center area (former Rand Lot) across from the Pier. In addition to the parking mitigation efforts, CDS provided a variety of marketing promotions and funds to assist the Pier and Santa Monica Convention and Visitor Bureau. Many Santa Monica businesses support the return of CDS, recognizing that it generates economic and community benefits. However, some of the Pier lessees were concerned that the reduced 1550 Lot parking, despite the City s parking mitigation strategies noted above, would displace its visitors and reduce visitation during the three month CDS run and occupation of the 1550 Lot. One such key Pier tenant was Pacific Park, which expressed concern about potential negative financial impact on its business due to the loss of parking immediately adjacent to the Pier. As such, when approving the CDS license agreement, the City Council directed staff to conduct an economic impact study of the CDS 2009 production run. The City selected and retained the consulting team led by Economics at AECOM (AECOM) to analyze the net economic impact and fiscal benefits of CDS s 2009 performance run of KOOZA. The AECOM team includes Lauren Schlau Consulting (LSC), retained to conduct a visitor intercept survey during the KOOZA event. Purpose of the Study i

5 Executive Summary - Cirque du Soleil Economic Impact The City of Santa Monica retained Economics at AECOM to conduct a comprehensive economic impact study of hosting CDS taking into consideration both positive and negative impacts, based on actual visitor data collected during the event period. In undertaking this study, the City and related parties sought to understand: Overall net economic impacts of the CDS event, including revenues to the City, income to the Pier lessees, and overall economic impacts to the Santa Monica economy; The demographic and visitor profile of CDS and Pier visitors; Whether CDS attracted a broader cross-section of patrons to Santa Monica than would visit otherwise; and, To what extent did CDS s occupation of the 1550 Lot impact Pier visitors parking experience. Analysis Approach The consultant team has devised an analysis methodology that is objective and transparent with the primary aim of answering the questions posed by the City and the Pier Lessees. One of the challenges in an analysis that attempts to quantify the impact of lost revenues is the fact that there is no direct way one can quantify the visitors that did not come. Additionally, any lost business inventory maintained by individual businesses are inconsistent to be used in a comprehensive model. As a result the team s approach to the project involves a creative and robust analytical framework that relies upon consistent data sources. The analysis framework includes the following components to arrive at the final conclusions. a. On-Site and Online Survey AECOM, with the help of LSC conducted a series of surveys targeted specifically at Pier and CDS visitors. The purpose of the survey was to understand the profile of event patrons, Pier visitor experiences and spending patterns. Approximately 300 on-site surveys were conducted at the Santa Monica Pier during November and December of These interviews were spread out during different days of the week and different time of day as well as varying locations on the Pier. In addition an online survey was conducted of more than 1,200 CDS attendees in two waves. A key outcome of the survey was determining the magnitude of sales at the Pier and within Santa Monica that can be attributed to unique CDS visitors. b. Collect CDS Operating Expenditures AECOM collected information on the CDS expenditures as part of the KOOZA event. These were adjusted to account for expenditures that were locally spent by CDS in the City of Santa Monica as well as direct fiscal contributions by CDS to the City. These include expenses related to local contractors, local labor and wages, utilities and other purchases, catering and accommodation etc. ii

6 Executive Summary - Cirque du Soleil Economic Impact c. Gross Economic Impacts The findings of the above two steps allow us to define the gross economic and fiscal impacts resulting from the CDS event on the City of Santa Monica. While the survey provides an estimate of spending by CDS patrons in the City of Santa Monica (at the CDS event, the Pier and elsewhere), the additional data provides us with the direct expenditures incurred by CDS as part of its event operations. Appropriate economic multipliers are applied to these direct impacts to estimate indirect and induced impacts. AECOM has used the IMPLAN input-output model to derive economic multipliers. Note that this impact number is not adjusted for any potential loss in revenues that Pier businesses may have suffered during the event period. d. Establish Baseline Performance of Pier Businesses AECOM collected actual sales information shared by the Pier Lessees with the City (using appropriate confidentiality protocols) over the past five years. This information was used to establish a baseline performance threshold for Pier businesses. In effect this baseline is the order of magnitude expected business volume of Pier Businesses in the absence of CDS during the months of September through December of e. Determine Change from Baseline Comparing actual sales at the Pier to the anticipated baseline sales for the event period calculated from previous years trends, provide the net change in baseline revenues resulting from CDS. The net change must be adjusted for sales attributed to CDS patrons (from the survey), to estimate the change in baseline (non-cds) revenues during the event period. f. Define Net Economic Impacts Net economic impacts are generated by adjusting the gross impacts calculated earlier for any net reduction of revenues as indicated in the step above. g. Qualitative Assessment of Impacts Although the quantitative analysis is able to determine the overall impacts on the City and the Pier, it is unable to define any of the nuanced implications of the event to the individual businesses located on the Pier. It is unlikely that the impacts are evenly distributed across all businesses and are likely to vary by type of business, their location on the Pier and other factors. The consultant team met with Pier Lessees individually and as a group to understand the event impacts on their individual businesses. The qualitative information gathered through these meetings, interviews and written communications are included as part of this report. iii

7 Executive Summary - Cirque du Soleil Economic Impact Summary of Key Findings Survey Findings The on-site and online surveys were able to uncover a number of key characteristics of Pier and CDS patrons, their spending patterns, and perceptions of the overall experience in the City of Santa Monica. A key finding of the survey was that the CDS attendee and the typical Pier visitor were distinctly different in many respects. Additionally, the survey found that although the share of CDS visitors spent selectively at the Pier was small, those who did spend had a much greater per capita expenditure compared to the typical Pier visitor. Another key finding was that parking was a much lesser concern among the visitors surveyed, both at the Pier and at CDS. Finally, an overwhelming majority of the respondents found their experience in Santa Monica to be extremely satisfying and would visit again. In terms of visitor origin, the typical Pier visitor came from further away compared to the typical CDS attendee. Almost 84 percent of CDS attendees came from Los Angeles County compared to only 50 percent of Pier visitors. In addition, 20 percent of CDS visitors were actually Santa Monica residents, compared to only 6 percent of Pier visitors. Given the $100 ticket price, CDS visitors were older and higher income compared to the typical Pier patron. 16% 20% 12% Pier Visitor Residence 6% 46% City of Santa Monica Other City within Los Angeles County California outside L.A. County Another U.S State outside California Country outside the U.S. Approximately 86 percent of CDS attendees stated that CDS was their main purpose. When this survey figure is applied to the estimated 180,000 actual CDS visitors, CDS induced a total of 155,000 visitors to Santa Monica, and of those 21 percent, or 38,600 visitors ended up visiting the Pier as well this reflects the induced visitation to the Pier as a result of the KOOZA event. Of these CDS attendees who also went to the Pier, Source: LSC, AECOM 60 percent ended up spending at the Pier. On a per capita basis, spending was comparable between CDS attendees who visited the Pier and visitors whose main purpose was to visit the Pier, $29.80 and $30.60 respectively. However, if you consider the per group expenditure of only those who spent money, CDS groups spent $98.50 relative to $75.00 by Pier visitor groups. 13% Cirque Visitor Residence 2% 0% 64% 20% City of Santa Monica Other City within Los Angeles County California outside L.A. County Another U.S State outside California Country outside the U.S. Activities at the Pier were significantly different for visitors whose main purpose was to attend CDS versus visitors whose main purpose was to come to the Pier. As would be iv

8 Executive Summary - Cirque du Soleil Economic Impact expected, those mainly visiting the Pier engaged in many more activities on the Pier than those who mainly attended CDS, however far more of the CDS attendees ate at Pier restaurants than did mainly Pier visitors. The most significant difference in Pier activities was for Pacific Park where 32 percent of Pier goers went as opposed to only 3 percent of CDS attendees. Clearly, the KOOZA event provided an opportunity to showcase the Pier and the City to a higher end close to home market with some potential for repeat visitation. However given their demographic profile, the primary capture of visitor spending from these patrons is in the eating and drinking category, especially in sit down restaurants. While it was presumed that parking would be a major inconvenience for Pier visitors, due to the closure of the 1550 lot, the survey results did not indicate parking availability next to the Pier was a deterrent to a majority of the Pier visitors. Certainly, the survey could not account for people who did not come at all or decided to turn back after seeing a lack of parking or congestion. The survey also did not account for lost business from special events, film crews, performances which were not booked due to a lack of parking. That said, over three quarters (79%) of Santa Monica Pier visitors who drove, indicated that parking was easier or about the same than when they usually park at the Pier. Only 4 percent of Pier visitors surveyed reported that they typically park at the 1550 lot and were displaced to another location. According to the survey, more Pier visitors parked in the 1550 Lot during the CDS performance than usually parked there. Additionally, 80 percent of CDS visitors parked in locations other than the 1550 Lot and Pier Lot. Pier Visitor Parking Locations during Cirque Relative to Usual Parking Locations Parking Location During Cirque On the Pier Civic Center parking structure Other parking structure or lot On the street or elsewhere Another SM Beach parking lot 1550 Beach Lot 2030 Beach Lot (# 4 South) (Ocean at Bicknell) Santa Monica Place mall Surface lot across Ocean Avenue 13.2% 4.8% 5.0% Cirque Visitor Parking Locations 3.8% 2.7% 5.0% 15.6% On the Pier 1550 Beach Lot Civic Center parking structure 2030 Beach Lot (# 4 South) (Ocean at Bicknell) Other parking structure or lot Santa Monica Place mall Usual Parking Location 22.0% 27.8% On the street or elsewhere Surface lot across Ocean Avenue Another SM Beach parking lot 0% 20% 40% 60% 80% 100% Source: LSC, AECOM v

9 Executive Summary - Cirque du Soleil Economic Impact Gross Economic Impacts Gross economic impacts from the CDS event are driven by three specific components Direct onsite impacts from CDS o CDS operating expenditures, adjusted for local spending o In tent spending by CDS patrons Direct offsite expenditures by CDS attendees at the Pier and elsewhere in Santa Monica The above direct expenditures are organized by spending categories and appropriate economic multipliers are applied to determine gross impacts to the city of Santa Monica. In order to make conservative estimates of the impacts, AECOM uses the expenditure approach and does not include ticket revenues as a local impact to the city of Santa Monica. Onsite Impacts CDS spent a total of $4.2 million as part of their operations in the City of Santa Monica. Approximately 40 percent of this amount included event organization and management related expenditures such as rent to the City, public safety costs, traffic and parking management plan and shuttle services. It also included a $100,000 grant to the Pier for the Centennial Celebration and $100,000 to Pacific Park to assist in marketing. In addition, the survey data reveals that CDS attendees spent an average of $18.45 per capita at the event. This results in an in tent spending of $3.2 million throughout the event period. Adjusting this amount for retail margins to account for local spending the total direct impact of in tent visitor spending is $2.1 million in the City of Santa Monica. Total direct or on-site impact from CDS is $6.3 million. Of this amount $1.3 million was paid as earnings to employees supporting an equivalent of 42 jobs in annualized terms. ONSITE DIRECT IMPACTS Output Earnings Jobs Cirque Expenditures $4,170,000 $490, In Tent Visitor Spending $2,100,000 $770, Total Direct Impact $6,270,000 $1,260, Source: AECOM Offsite Impacts CDS attendees spent $4.6 million elsewhere in Santa Monica in addition to what they spent at the event. CDS visitor spending by category is presented in the figure below: vi

10 Executive Summary - Cirque du Soleil Economic Impact Santa Monica Revenues Generated by Cirque Attendees Food and Beverage $604,000 $2,636,000 Santa Monica Accomodations $420,000 Parking Gifts, Souvenirs, and Other Retail $344,000 $100,000 $251,000 Rides, Arcade Games, & Other Entertainment Transportation $61,000 $14,000 $172,000 Pier and Pacific Park Remaining Santa Monica Of this total, Santa Monica Pier captured a little under 20 percent, while the remainder of the expenditures occurred elsewhere in Santa Monica and for parking. After further adjusting for local retail margins, the total direct impact from offsite spending in the City of Santa Monica is estimated to be $4.4 million, with $1.6 million in wages generating 59 jobs in annualized terms. OFFSITE DIRECT IMPACTS Output Earnings Jobs Pier & Pacific Park $710,000 $260, Santa Monica $3,330,000 $1,210, Parking $320,000 $110,000 1 Total Direct Impacts $4,380,000 $1,570, Source: Economics at AECOM Total Gross Impacts Combining the above two components, the total direct impact from the CDS event to the City of Santa Monica is approximately $10.7 million. These direct impacts generated an additional $6.5 million of indirect and induced economic activity in the City of Santa Monica with total gross economic impact of $17.2 million. Of this total impact approximately $5.3 million was in wages supporting 156 annualized jobs. GROSS TOTAL IMPACTS Indirect & Direct Impacts + Induced Impacts = Total Impacts Output $10,650,000 + $6,530,000 = $17,200,000 Earnings $2,830,000 + $2,400,000 = $5,250,000 Jobs = 156 Source: AECOM vii

11 Executive Summary - Cirque du Soleil Economic Impact Fiscal Impacts The event also resulted in a substantial fiscal benefit to the City of Santa Monica. The largest portion of fiscal impacts came from the rental contribution by CDS of $955,000 for use of the 1550 Lot. With adjustment, we include total direct benefits of $920,000 and $130,000 in other induced sales taxes, transient occupancy taxes and other taxes. CDS produced a total fiscal impact of $1.1 million, which can be directly attributable to the special event. FISCAL IMPACTS Source Receipts Direct Benefits from Cirque du Soleil $920,000 Tax Benefits Sales Tax Receipts $60,000 Transient Occupancy Tax Receipts $60,000 Additional Taxes $10,000 Subtotal Tax Benefits $130,000 Total Fiscal Impacts to the City of Santa Monica $1,050,000 Source: AECOM Reduction in Economic Activity and Net Impacts In aggregate, the businesses located at the Santa Monica Pier generated approximately $40 million in total revenue in This was a 4 percent increase from the previous year even when the overall economy shrunk by 2.5 percent (in terms of GDP) during the same period. It is, however, not uncommon for local attractions, such as seaside piers, to have improved performance during economic downturns. These attractions provide a more economical alternative to more expensive theme parks and out of town trips, and are able to capture a larger share of local residents during harder economic times. In addition to the economy the weather also plays a major role in Pier activity, especially the number of warm weekend days and holidays. To better understand the Pier s revenue patterns, AECOM indexed Pier monthly revenues over the last five years to the annual average for each corresponding year. This annual index provides for better comparison of monthly revenues and adjusts for year over year increase in revenues. As shown in the chart below, Pier revenues show a strong seasonality almost identical across all years. viii

12 Executive Summary - Cirque du Soleil Economic Impact The above chart clearly shows: Summer is the best time for the Pier with revenues peaking in July. March, April, May and September represent average revenue months. October through February are low revenue months. There is a steep decline in revenues between August and September, marking the end of summer. Undoubtedly, the months during which the CDS event was held were the historically low performing months for the Pier. During these months, the index shows about average performance in September and December 2009 relative to other years. October 2009 is slightly higher than other years and November 2009 is marginally lower than other years. To estimate the net impact of CDS during the months of September through December in 2009, AECOM looked at the variation of revenues for these months from the monthly average for the year over the 2005 to 2008 period. Comparing the historic data to 2009 data showed a net positive variation of approximately 3 percent in This translates to approximately $420,000 and represents the net impact of CDS on Santa Monica Pier businesses. We already know that the Pier did well in 2009, the question is - Could Pier businesses have done better without CDS? We then compared this net impact to the survey findings, which show that CDS visitors spent approximately $800,000 at the Pier, a number considerably higher than the net impact based on historic trends. This means that CDS did displace approximately $380,000 in sales from the Pier, but more than compensated for the loss by generating a substantial amount of visitor expenditures by its patrons who visited the Pier, creating a net gain of $420,000 to Pier businesses. This net gain in sales at the Pier would not have been possible without CDS. ix

13 Executive Summary - Cirque du Soleil Economic Impact Impact on Individual Businesses Although CDS generated a significantly positive economic impact to the City of Santa Monica and the Santa Monica Pier, the economic analysis presents these impacts in an aggregate basis. There is considerable variation in the manner to which different businesses along the Pier have been impacted. Confidentiality issues pertaining to revenue data prevents this report from making specific comparisons, but AECOM looked at broader retail categories at the Pier and interviewed Pier businesses to better understand the nuanced impacts. Between 60 to 70 percent of purchases by CDS attendees were in the food and beverage category. The direct beneficiaries of this expenditure pattern were Pier restaurants. In addition, given the demographic profile of CDS attendees, higher-end restaurants would have fared better. This is empirically confirmed by most Pier businesses. Pier based entertainment, on the other hand, did not cater to the demographic profile of the CDS visitors. As a result these businesses were not able to capitalize greatly on the event. Based on AECOM s analysis of historic information, restaurants at the Pier performed 9 percent better during the CDS event than it would have otherwise, while entertainment businesses at the Pier experienced a 1 percent reduction in revenues during the CDS period than they would have otherwise. Pier Lessee Input The report also synthesizes the qualitative feedback from Pier lessees. In line with the quantitative analysis, Pier tenants described restaurants achieving increased volume from CDS while other businesses may have had some reduction in volume. However, even among restaurants the overall benefit of CDS varied. Tenants believed that it did bring a different demographic, but for some tenants, such as the entertainment businesses, it was not the appropriate market for their business. Businesses had several concerns with the CDS event, primarily the loss of parking as well as disillusionment with attempts to market Pier businesses to CDS ticket purchasers. Several Pier tenants reported that the 1550 Lot was important to attract special events and nightlife customers. Other businesses put in substantial effort working with CDS on marketing efforts that were ineffective in that they did not win CDS business or did not bring in a desirable level of additional customers. While not all businesses benefited directly from the CDS event, a few businesses thought CDS brought a substantial amount of positive attention to the Pier and that this was good for the Pier s long term reputation. Also, more than one tenant described how different events at the Pier impacted different businesses. This tenant described how filmings did not benefit their retail business or the restaurants along the Pier, but that they believed it was positive for a wide audience to become familiar with the Pier. x

14 Executive Summary - Cirque du Soleil Economic Impact Conclusions As shown below, the net economic impact generated by CDS s KOOZA performance to the city of Santa Monica was $16.7 million. Of this total impact approximately $5.1 million was in wages supporting 151 annualized jobs. CDS is a significant contributor to the Santa Monica economy. CDS generated a total fiscal impact directly to the City of Santa Monica of $1.1 million. SUMMARY OF ECONOMIC AND FISCAL IMPACTS Economic Impacts Output (Millions) Earnings (Millions) Jobs Gross Impacts $ 17.2 $ Displaced Sales 1 $.5 $.2 5 Net Economic Impact $ 16.7 $ Fiscal Impacts Source Direct Benefits from Cirque Tax Benefits Total Fiscal Impacts Source: AECOM Receipts $920,000 $130,000 $1,050,000 An estimated 156,000 visitors were induced to Santa Monica for the main purpose of attending CDS. Of these visitors, 40,000 also visited the Pier during their trip. Isolating the impacts to the Pier, CDS generated a net impact of $420,000 to Pier businesses, even after adjusting for displaced sales. This net gain in sales at the Pier would not have been possible without CDS. CDS attracted a distinctly different market demographic to the Santa Monica Pier. They were older, with higher incomes, and lived much closer to Santa Monica. An overwhelming majority of visitors had an enjoyable experience at the Pier and would return. Despite the City s parking mitigations, parking was still viewed as a significant issue by businesses along the Pier. However, parking was not an issue among the Pier visitors surveyed. Over three quarters of Pier visitors who drove, indicated that parking was easier or about the same that when they usually park at the Pier. Approximately half of CDS attendees parked in the allotted Civic Center structure or 2030 Beach Lot and only 5 percent parked at the Pier. xi

15 Executive Summary - Cirque du Soleil Economic Impact Based on input from Pier businesses, most businesses did not believe they benefited from co-marketing efforts. The study demonstrates that CDS generated a positive net impact to the Pier, but even Pier businesses who felt like they benefited from the CDS presence did not believe the co-marketing efforts, themselves, generated significant benefits. While 25 percent of CDS attendees visited the Pier, and 60 percent spent money, their spending was largely at restaurants, with only 24 percent spending any money at entertainment venues. As mentioned above, CDS generated a positive net impact to Pier businesses, but the impact on specific types of businesses along the Pier differed. Entertainment businesses had a 1 percent reduction in revenues during the September through December 2009 period attributable to CDS, while restaurants had a 9 percent increase in revenues and even within categories, impacts differed. Some Pier lessees did not reap direct benefit from the event; the direct marketing assistance provided by CDS should be better focused to help these businesses preserve their existing customer base during the event. On the whole, special events like Cirque du Soleil have significant near term and long term benefits to Santa Monica s tourism economy. Besides the obvious economic and fiscal benefits to the City, co-location of such a globally publicized event with a tourist icon like the Santa Monica Pier can yield intangible benefits for the Pier and the City over the long term that have not been quantified in this analysis. While the manner in which Pier businesses and special events coexist can be improved upon continually, these events are important for the City, its economy, and the overall quality of life of its residents. xii

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17 I. Introduction

18 I. Introduction Overview >> The consulting team, led by Economics at AECOM*, was retained by the City of Santa Monica to analyze the net economic impact and fiscal benefits of the Cirque du Soleil s 2009 performance run of KOOZA on the city of Santa Monica. Cirque du Soleil operated a run of the theatrical performance KOOZA between October 16, 2009, and December 20, 2009 and occupied a portion of the beach parking lot immediately to the north of the Santa Monica Pier from September 14 through December 22nd. The event was welcomed by a number of local businesses as it was expected to provide an increased opportunity to capture from a broader visitor base. However, there was concern by some of the businesses located on the Pier that, despite mitigation measures put in place, there may be a negative impact from Cirque, primarily attributed to the loss of adjacent parking. To better understand the overall impacts of Cirque du Soleil s KOOZA in Santa Monica, the City of Santa Monica retained Economics at AECOM to conduct a comprehensive economic impact study of hosting Cirque du Soleil (CDS) taking into consideration all positive and negative impacts, based on actual visitor data collected during the event period. To understand the full picture, this study utilized primary research as well as additional secondary data sources. Lauren Schlau Consulting (LSC) conducted a field survey of 300 pier visitors and an online survey of 1,270 CDS attendees between November and December 2009, documenting Pier and CDS visitor behavior and spending characteristics. Inputs from the survey, as well as revenue and sales data from the City of Santa Monica and Pier businesses were used by Economics at AECOM to develop the net economic impacts and fiscal benefit estimates. This report presents the findings of this analysis, considering both the positive impact of CDS to the Pier and City of Santa Monica as a whole, as well as potential reductions in economic activity to the City of Santa Monica and Pier as a result of the CDS 2009 operations. *Formerly known as Economics Research Associates Page 4

19 I. Introduction Overview >> Background of CDS in Santa Monica In recent years the City of Santa Monica has booked a number of large scale special events to support the City s economic development and cultural arts goals. To accommodate such special events, the City Council adopted a policy authorizing licensing a portion of the 1550 PCH Beach parking lot (1550 Lot) for extended periods to provide revenue to the Beach Fund. It determined that during off-peak periods, booking events in the large beach lot was an effective means to satisfy the community demand for local cultural events as well as to generate needed beach maintenance funds through visitor spending. The 1550 PCH lot is located just north of the famed Santa Monica Pier, adjacent to the beach and to Pacific Coast Highway, and within walking distance of Santa Monica s Palisades Park and downtown Santa Monica. It serves as a parking lot for the Santa Monica Pier, beach, and other visitors. A number of annual events have been held in the 1550 Lot across the last two decades. Events have included the first North American run of Canada s now legendary Cirque du Soleil in 1987, subsequent CDS performances every two years until 1996, and CDS performances in 1996, 1997, and Cavalia, an equestrian show similar il to CDS, was held at the lot in 2004; and in 2006, the Ashes and Snow photography experience was held in the 1550 Lot. Page 5

20 I. Introduction Overview >> CDS s 2009 Performance Run of KOOZA CDS returned in 2009 with its show KOOZA, which ran from October 16 December 20, the subject of this report. KOOZA, similar to the other events at the 1550 Lot, required temporary structures to be erected on the lot thereby eliminating portions of available parking. City of Santa Monica s License Agreement required CDS to pay rent for the space and also required CDS to pay all City costs and services associated with the event including police services for crowd/traffic control, fire safety officers, event licensing/liaison and location supervision, parking staff, utility charges, sanitation services, and custodial/maintenance services. City of Santa Monica s License Agreement with CDS included several parking mitigation strategies and other marketing assistance intended to help the Pier and other Santa Monica businesses, generally: To mitigate t the parking impacts on pier businesses, pier and beach visitors it who drove to the 1550 Lot were directed d to alternate parking in the nearby Civic Center lot or the 2030 Ocean Beach lot, both of which provided free shuttle service. CDS attendees could access parking information through a link on the CDS website to the City of Santa Monica website, where parking and directions were given specific to performance time and day. Strong cross-promotion with the Pier Restoration Corporation (PRC) and Pier tenants to provide value-added offers (i.e. restaurant promotions and rebates) on the CDS website during the entire sales period, beginning March 2009, along with bulletins sent to the 490,000 Cirque Club members in California and 1.6 million worldwide. Page 6

21 I. Introduction Overview >> CDS Support and Concerns Public input to the City included support from the City s restaurants and hospitality sectors regarding opportunities for increased economic benefits to their businesses from CDS, especially in light of the current economic downturn. While parking mitigation measures were put in place, Pacific Park, a major Pier lessee, and the Pier Aquarium expressed concern about a possible negative financial impact on its business due to the temporary loss of parking immediately adjacent to the Pier. Given these concerns, the City retained the consultant team to complete an objective assessment of the impacts of the CDS s 2009 occupation of the 1550 Lot. Page 7

22 I. Introduction Overview >> Study Description The consulting team undertook a comprehensive study to quantify both the positive impact of CDS to the Pier and City of Santa Monica as a whole, as well as any reductions in economic activity to the city of Santa Monica and Pier as a result of the CDS 2009 operations. The report evaluates: Overall net economic impacts of the CDS event, including revenues to the City, income to the Pier lessees, and overall economic impacts to the Santa Monica economy The demographic and visitor profile of Cirque du Soleil and Pier visitors Whether CDS attracted a broader cross-section of patrons to Santa Monica than would visit otherwise, and To what extent did CDS s occupation of the 1550 Lot impact Pier visitors parking experience. Project Team The consultant team was led by Economics at AECOM, formerly known as Economics Research Associates. Economics at AECOM has over 50 years experience in the visitor and attraction industry and is considered the industry leader in the specialized field of economic planning for recreation and entertainment projects. Based in Los Angeles, Economics at AECOM has completed numerous economic impact studies for attractions, events, theme parks, convention centers and large-scale l destinations. Economics at AECOM performed the economic and fiscal impact analysis for this study. Lauren Schlau Consulting (LSC), based in downtown Los Angeles, specializes in consulting and market research related to economic development, and has extensive experience working with cities, visitor bureaus, attractions and special events throughout Southern California. LSC was responsible for overseeing the market research process and performed the patron analysis of this study. Page 8

23 I. Introduction Overview >> Study Description Report This report highlights the key findings of the survey and economic impact analysis. Additional detailed information can be found in the Appendices. Section I presents an overview of the study and background on the CDS s Terms and Conditions. Section II, Key Survey Results, describes the findings from the survey that relate to building a general profile of CDS visitors and Pier visitors, parking and the specific survey points, purpose of visit, and spending that are inputs into the economic impact analysis. The full survey report is included in Appendix I and includes the detailed tables that describe visitor activities, characteristics, and CDS visitor s experience at KOOZA in full. Section III, Economic Impact Analysis, describes the net impacts to the city of Santa Monica s economy. It presents an overview of economic impacts and presents the economic impact results. This section first evaluates the gross economic impacts due to CDS s 2009 operations and then looks at any potential reduction in economic activity as a result of these operations. This section also highlights direct inputs from Pier Lessee s regarding the impact of CDS. An outline of the economic impact methodology can be found in Appendix II. Detailed tables documenting the derivation of the total economic impacts can be found in Appendix III. Section IV, Fiscal Impact Analysis, describes the revenues to the City of Santa Monica. This evaluates the direct benefits from leasing the 1550 Parking Lot and other revenues from taxes generated by CDS attendee s spending. Section V briefly summarizes the economic and fiscal impact results. Page 9

24 I. Introduction Background >> Cirque du Soleil (CDS) License Agreement Terms and Conditions The City of Santa Monica s License Agreement allowed Cirque du Soleil (CDS) to operate on the 1550 Lot from October 16 through December 20, 2009, occupying approximately 721 of the total 1,017 spaces in the 1550 Lot. The License agreement included several terms and conditions to maximize the benefits of the CDS s presence in Santa Monica for the City, businesses, and residents. Economic Terms City of Santa Monica s License Agreement required: CDS to pay $955,000 in rent for the space; Contribute 25 percent of gross parking revenues for use of the Civic Center lot until the lot improvement costs were recouped and 100 percent, thereafter; Make a substantial contribution for the Pier Centennial; Also required CDS to pay all City costs and services associated with the event including police services for crowd/traffic control, fire safety officers, event licensing/liaison and location supervision, parking staff, utility charges, sanitation services, and custodial/maintenance services. Parking Mitigations CDS was responsible for improving a portion of the Civic Center lot (former Rand lot) for public parking that was made available to Pier and beach visitors. To mitigate the parking impacts on Pier businesses, Pier and beach visitors who drove to the 1550 Lot were directed to alternate t parking in the nearby Civic i Center lot or the 2030 Ocean Beach lot, both of which h provided d free shuttle service. CDS attendees could access parking information online through a link on the CDS website directing them to the City of Santa Monica website, where discounted parking and directions were given specific to performance time and day. CDS patrons were directed to park in either the Civic Center Parking Structure or the 2030 Beach lot; free shuttle service to and from the CDS tent was available from each location. to CDS patrons in the event of high projected demand due to overlapping Pier and CDS events. Provide traffic control officers before and after the shows at specified locations. Provide attended bicycle valet parking in the 1550 lot. Page 10

25 I. Introduction Background >> Cirque du Soleil (CDS) License Agreement Terms and Conditions Marketing Conditions The License Agreement outlined a list of marketing efforts to encourage strong cross promotion with the Santa Monica Convention and Visitors Bureau (CVB), Pier Restoration Corporation (PRC) and Pier tenants, to include: Offering Pier merchants the first opportunity to develop special offers to CDS ticket holders; Offering a Pacific Park opt-in package on the Santa Monica page of the CDS website for park entrance at a discounted price provided by Pacific Park; Reciprocal links on the CDS website to the Pier and CVB; Value-added destination packages to be sold through the CVB; Public relations collaboration around the Pier Centennial, including promotion in CDS advertising material and e- messages to the 1.6 million worldwide Cirque Club members about Centennial Pier events; Development of a process to allow for coordinated scheduling and planning with the PRC and Pier lessees in cases of overlapping large events; Placement of a temporary ticket booth on the Pier deck, if permitted by available technology; Targeting of $300,000 of marketing funds for local media buys; Development of a catering RFP for Pier tenants to serve the VIP functions; offering opportunities to Pier tenants to provide concession products and services. Neighborhood Impacts and Community Outreach Establishing a representative contact in Santa Monica on a regular basis beginning at the time of ticket sales and provide an onsite representative from the date of set-up to handle information requests and complaints. Monitoring of noise during the event periods. Preparation and distribution of a Community Newsletter. Forging educational partnerships. Page 11

26 I. Introduction Background >> Cirque du Soleil (CDS) License Agreement Terms and Conditions Meeting the Conditions of the License Agreement To assist the Pier with marketing efforts, CDS provided a $100,000 grant to the Pier s Centennial Celebration, provided $100,000 of in-kind support to the Pier Centennial, and provided $100,000 to Pacific Park to assist in marketing. All requested parking mitigations were implemented. The former RAND Lot was improved and Pier and beach visitors were directed to this lot. Prepaid discounted parking and free shuttles were offered to CDS patrons in the Civic Center Structure and 2030 Beach lot. CDS worked with the CVB and offered discounted tickets to Santa Monica businesses which were offered through the CVB website. A number of Third Street Promenade and Ocean Avenue businesses took advantage of these tickets and offered dinner, parking, and CDS ticket packages. CDS developed a catering RFP to serve the VIP functions. A Pier lessee did not win the bid. However, CDS contracted with one Pier lessee to provide snacks within the tent. CDS complied with the provisions that were outlined in the License Agreement, but, as will be described in the Pier Lessee Input Section, the cross promotion outcomes were mixed. Page 12

27 II. Key Survey Results

28 II. Key Survey Results Overview of Survey >> A key element of this study is the primary research, performed by Lauren Schlau Consulting (LSC). LSC conducted a survey analysis to obtain direct visitor spending data and to better understand the overall Cirque du Soleil (CDS) and Pier attendee profile, and visitation dynamics. Questions addressed by the survey include: What was the demographic profile of CDS attendees and Santa Monica Pier visitors? Who was the target audience of each venue and to what extent were their demographics and visitation complementary? What were the economic impacts to Santa Monica by Santa Monica Pier visitor and CDS attendee spending during that specific visit? Did this event attract a broader cross-section section of patrons to Santa Monica than would visit otherwise, offering marketing opportunities for the City and for its venues? To what extent did the CDS location at the 1550 Lot impact Pier/Pacific Park parking and attendance? The following section first provides a brief outline of the survey process and then highlights those data points most pertinent to understanding the overall impact of CDS on the Pier and Santa Monica. First, we review the overall profile of CDS visitors and Pier visitors, then we highlight those data points that will be inputs into the quantitative economic impact analysis, induced visitors and visitor spending. A full report on the findings of the market research can be found in Appendix I. Interviews and Survey After reviewing background data on Santa Monica special events, CDS and Pacific Park performance and related data, survey interviews were conducted. The survey data encompasses: On-site interviews with 302 CDS and Pacific Park patrons at the Santa Monica Pier (Pier) between November and December of percent were interviewed at the entrance to Pacific Park and 44 percent were interviewed at the Carousel area. An on-line survey of 1,265 CDS ticket-purchasers (from an list of purchasers provided by CDS) in mid- December. Page 14

29 II. Key Survey Results Overview of Survey >> Survey data was cross-tabulated based on several segments, including : visitors main purpose, area of residence, age, income, performance time, overnight visitor or day visitor, and previous visitation to Santa Monica. While each segment s data was reviewed, we focus primarily on visitors whose main purpose for coming to Santa Monica was either CDS or the Pier in this report. The sample variance of the total 1,567 on-site and on-line interviews is 2.5 percent (at 50 percent response), at the 95 percent confidence level 1. The 302 respondents interviewed on-site at the Santa Monica Pier have a sample variance of 5.6 percent (at 50 percent response), at the 95 percent confidence level. The 1,265 CDS attendee respondents interviewed on-line have a sample variance of percent (at 50 percent response), at the 95 percent confidence level. Interview data was collected by groups, the response data were weighted to represent responses for individuals rather than for groups then analyzed to develop the behavior and demographic profile. Sample Survey Table (q1a) Where do you reside? Main Purpose Residence Age Income (*$1,000) Total 100- Pier CDS SM LA Co CA US Int'l < Base: Respondents A city or area within Los Angeles County 59.9% 46.4% 64.3% 0.0% 100.0% 0.0% 0.0% 0.0% 55.5% 61.2% 60.8% 61.7% 57.0% 59.2% Santa Monica 16.6% 6.3% 19.9% 100.0% 0.0% 0.0% 0.0% 0.0% 11.2% 18.6% 17.0% 12.1% 16.2% 24.9% In California outside L.A. County 14.2% 19.7% 12.9% 0.0% 0.0% 100.0% 0.0% 0.0% 16.9% 13.5% 13.5% 14.0% 18.2% 11.6% In another U.S State outside California 5.7% 16.0% 2.4% 0.0% 0.0% 0.0% 100.0% 0.0% 8.7% 4.9% 4.6% 8.5% 4.4% 3.2% In a country outside the U.S. 3.6% 11.6% 0.4% 0.0% 0.0% 0.0% 0.0% 100.0% 7.7% 1.8% 4.1% 3.6% 4.1% 1.1% Tested to 0.95 significance level. COLOR Indicates significantly higher/lower value from the comparison. Comparing to 'Total' Weighted by group size 1 At the 95% confidence level and 2.5% sample error for the 50% response level, means that on an average of 19 times out of 20 (or 95 times out of 100), the sample proportion obtained will be within 2.5% of the true value, that is responses falling within the range from 47.5% to 52.5%, will be statistically comparable.

30 II. Key Survey Results Profile of Pier and CDS Attendees >> As mentioned above, the survey report includes data by various groupings, but for the purpose of the economic impact analysis we focus primarily on those visitors whose main purpose for coming to Santa Monica was either CDS or the Pier. 71 percent of total respondents indicated their main purpose for being in Santa Monica was to see CDS, 14 percent were mainly visiting the Pier, and 15 percent were drawn to Santa Monica for other reasons. The higher number of CDS respondents is to be expected given the high number of on-line CDS respondents surveyed and is not indicative of preference. This section present a summary of the characteristics of Santa Monica and CDS main purpose visitors Audience Attracted by Residence and Demographics The table on the next page displays the residence and demographic data based on the survey. While there was some overlap, the Santa Monica Pier attracted a greater share of non-local visitors, whereas a high share of CDS attendees were Santa Monica and Los Angeles County residents. 84 percent of CDS visitors resided in Los Angeles County, and almost 20 percent of this number were from the City of Santa Monica. Approximately 50 percent of Pier visitors were from Los Angeles County with only 6 percent from Santa Monica. The other half included, 20 percent from areas outside of Los Angeles, but within California, 16 percent from other states within the US, and 12 percent international. Given the higher share of Los Angeles area residents, a much higher percentage of CDS attendees, 83 percent, had visited Santa Monica in the past year versus 55 percent of mainly Pier visitors. Page 16

31 II. Key Survey Results Profile of Pier and CDS Attendees >> In line with those figures, more CDS visitors, 56 percent, had visited the Pier in the last 12 months relative to Pier visitors, 48 percent, suggesting that up to 44 percent of CDS attendees could be potential new Pier visitors. CDS s audience was of much higher income, older and less ethnically diverse than the Pier visitor. The higher income of the CDS visitor is not surprising given the CDS s $100 ticket price. Overall, CDS likely had far less impact in attracting out-of-county visitors to Santa Monica than did the Pier. However, with the 17 percent of CDS attendees who had not visited Santa Monica in the past twelve months, it can be assumed that a small market of additional older, more upscale patrons were attracted to Santa Monica due to CDS. Residence & Purpose De emopgraphics Main Purpose Total Pier/PP Cirque Total L.A. County 76.50% 52.70% 84.20% California outside L.A. County 14.20% 19.70% 12.90% Another U.S State outside California 5.70% 16.00% 2.40% Country outside the U.S. 3.60% 11.60% 0.40% Visited Santa Monica (past 12 months; non-sm resident) 75.60% 55.40% 82.70% Avg. Number of past visits to Santa Monica Visited Santa Monica Pier in past 12 months (all respond) 55% 48% 56% Avg. Number of past visits to Santa Monica Pier Main Purpose Today: See Cirque du Soleil 71.30% 0.00% % Visit the Santa Monica Pier 14.20% 88.20% 0.00% Visit Pacific Park 1.90% 11.80% 0.00% Single adult 29.70% 39.50% 25.80% Household: Married/partnered couple with children 28.80% 29.80% 29.40% Household: Married/partnered couple without children 26.00% 18.00% 28.30% Median age of respondent Caucasian 63.10% 59.60% 64.70% Hispanic/Latino 12.70% 19.30% 11.10% Asian/Asian American 8.20% 7.90% 8.00% African/African American 3.00% 4.40% 2.60% Median household annual income $100,985 $66,667 $109,891 Respondent %: Female 53.30% 50.40% 55.10% Respondent %: Male 46.70% 49.60% 44.90% Source: LSC Page 17