Every March, when the weather in Texas is mild (except for those thunderstorms) and the Mexican free-tailed bats return to Austin, South by Southwest (SXSW) dominates Texas’ capital city for 10 days.
But with an announcement on Friday, the annual tech, film and music gathering that was slated to run from March 13 to the 22 was canceled for the first time in its 32-year history, with the COVID-19 virus, more commonly known as the coronavirus, killing what even 9/11 was unable to do in early 2002.
The big event is said to have pumped $355.9 million into the local economy last year and the cancellation may trigger bankruptcies among dozens of vendors who support the conference—especially as most have already fronted costs.
Twitter, based in San Francisco, was the first corporate casualty. There are 63 known cases of coronavirus in the Bay Area. Soon after Facebook and Intel (both headquartered an hour down the road in the Silicon Valley), TikTok (Los Angeles—there are 19 infections in the greater L.A. area) and Mashable and Vevo (New York City—with 143 cases in the region) pulled the plug.
There are still no known cases of coronavirus in Austin, Texas.
Even so, some 43,000 Austinites signed an online petition urging the city’s mayor to cancel SXSW. Likely most of them have bitterly complained over the years about the traffic the tech festival brings to the city—and likely half of them already made plans to be elsewhere over Spring Break. Very few were honestly worried about the outbreak, which will make its way to Austin one way or another regardless of SXSW’s cancellation.
Mark Escott, the interim medical director and health authority for Austin Public Health sought to sooth concerns in a Wednesday news conference by assuring the public that, “…we’re actively evaluating mass gatherings on a daily basis,” adding that, “Right now there’s no evidence that closing South by Southwest or other activities is going to make this community safer.”
He was right.
Even featured SXWS sessions like “A Blueprint for Cannabis Legalization Nationwide” and “Magical Mushrooms: How Mushrooms Could Help Save Us All” promising fun and Austin’s trademark weirdness couldn’t keep scheduled speakers from heading for the exits in the two days leading up to Friday’s cancellation.
How big a toll on the greater Austin are economy will SXSW’s cancelation end up being?
According to the U.S. Bureau of Economic Analysis, the Austin-Round Rock-Georgetown, Metropolitan Statistical Area had an estimated GDP of $146,784,519,000 in 2018. Thus, the loss of the conference would set the local economy back about 0.2% for the year.
But the econometric models-for-hire that estimate the local benefits of things like professional sports stadiums, urban rail, and crowded conferences are hard to prove out in real life.
In 2018, South by Southwest hired Greyhill Advisors to quantify how wonderful it was. Greyhill obliged and generated a number: $350.6 Million. The total was based on “direct participation” by an estimated 425,000 people. This sounds impressive—until you also find that SXSW resulted in 12,900 individual hotel reservations totaling more than 53,000 room nights for SXSW registrants with an average stay of five nights. Even at double occupancy, those 12,900 hotel reservations would only add up to 25,800 people, so, where did the other 399,200 people come from?
Austin is home to 1 million people with another 1.2 million people living in the surrounding area. So, most of the almost 400,000 people who didn’t book a hotel room for SXSW were likely locals coming in for the festivities.
And, here’s where things get less impressive. Serious economists have known for years that highly hyped urban amenities such as sports stadiums don’t really add to the local economy, because, “Most spending inside a stadium is a substitute for other local recreational spending, such as movies and restaurants.” SXSW is, at its core, entertainment. Were it not in Austin for 10 days, locals would still spend the same amount of disposable income on entertainment—it just wouldn’t be downtown at SXSW. The only truly quantifiable potentially lost spending would be the $16 million in hotel revenue.
So, SXSW or not, the Austin economy will do just fine—and likely have a little less traffic over Spring Break. As a bonus, Austin may suffer its first confirmed case of coronavirus a few days later than it otherwise would have had it hosted 26,000 people from around the world.