Economics of venue selection for special sporting events: with special reference to the 1996 Melbourne Grand Prix

Venue selection for major sporting attractions can be a highly politicised decision making process. Due to the sometimes controversial nature of venue selection, politicians can be circumspect on related issues including potential economic impacts. This was the case with the Australian Formula 1 Grand Prix held at Albert Park, Melbourne in March 1996. Comments provided by the authorities on matters associated with the venue selection referred to both the opportunity to showcase Melbourne on international and national television due to the proximity of Albert Park to the Melbourne skyline as well as referring to the fact that the Australian Grand Prix had been conducted at Albert Park in the 1950s and therefore the race could be said to be returning home! However, limited details have been made public regarding the financial aspects of the event. A real challenge was to estimate expenditure by the visitor and the indirect economic benefits on regional economies in the absence of formal data. In the aftermath of the event, however, the media amply reported estimated figures for gross economic gains attributable to the Grand Prix. This paper argues that it is possible to use these estimates of gross economic gains, as reported by the media, to derive the direct contribution of this event. This paper investigates the comparative benefits of an alternative venue, such as Sandown Park in the Eastern region and concludes that the higher multiplier effects evident in the Melbourne Metropolitan Region ensured that any decision made on economic grounds would favour Albert Park over outlying regions. Spefically, the paper uses the technique of input-ouput analysis to gauge the relative effects attributable to an event such as the Grand Prix. Media reports of gross economic gains were collected and used as a basis for the analysis. These were then used to derive estimates of direct expenditure by the visitor as well as the contribution to household income and employment opportunities generated by the event. This paper is an applied example of the usefulness of input-output analysis in relation to major sporting attractions. This analysis can therefore reveal a great deal about the subjective decision to hold the Grand Prix at a selected venue over other alternatives. This paper also argues that it is possible to uncover a great deal about venue decisions by interpreting secondary sources. Due to the fact that the multiplier effect is stronger in the Melbourne Metropolitan Region, the authorities might have reason to stage the event wherever economic gains would be maximised. In the future, events which are not location-dependent , will tend to be staged in well developed economic regions where multiplier effects are higher. Consequently, such decisions are likely to attract negative comment and controversial protests. To counteract such negativity, the authorities' circumspection is at best questionable. Providing that venue decisions can be justified on economic grounds, attacks on the decision from minority groups could be minimised. This paper makes a contribution to the growing body of literature on the application of input-output analysis. In addition, it contributes to our understanding of venue selection decisions