Image: 2008 Democratic National Convention
Max Whittaker  /  Getty Images
Delegates, journalists and other political junkies have been streaming into the Pepsi Center for convention activities and then streaming out to the shops, bars and businesses of downtown Denver.
By
msnbc.com contributor
updated 8/28/2008 11:31:04 AM ET 2008-08-28T15:31:04

Unlike the man of the hour in this town, Jamie Sutherland isn’t selling hope. He’s selling pants.

But Sutherland is trying to grab Barack Obama’s crowd with a dash of left-leaning humor. In the display window of Players, the shop he manages a few blocks from the Pepsi Center, Sutherland has hung a banner that truly beckons the Democratic faithful.

“Liberal Markdowns,” it reads.

The sign is working. The Dems are spending. And like many downtown Denver merchants, Sutherland is smiling as out-of-towners poke through his discounted racks of cotton shirts and cashmere coats. This week, about 75 percent of his patrons are convention attendees.

“Business has actually been kind of good,” Sutherland said with a hint of surprise.

He had not been sure. When Sutherland recently asked several Boston retailers how they had fared during the 2004 Democratic National Convention, he heard ho-hum tales of routine sales. At least two economists have scoffed at Denver’s promise of a $160 million payday for local businesses, saying that political conventions don’t pack nearly the economic punch that civic boosters often claim.

But hotels in the Mile High City have been jammed this week, downtown restaurants have often been slammed, many small business owners seem pleased, and the city’s convention chief sounds thrilled, if not relieved.

“It’s beyond everyone’s wildest expectations,” said Rich Grant, communications director for the Denver Metro Convention & Visitors Bureau. “As much as a week ago, we were concerned about there not being that many people downtown and it looking like a ghost town. Downtown has never looked more crowded.”

The worries were all about the locals. Would the arrival of 50,000 conventioneers — including delegates, politicians and journalists — squeeze out or scare away Denver’s usual crowd of shoppers, diners and drinkers? Would the visitors keep the regulars out of their favorite downtown haunts, replacing but not adding to their spending habits?

That’s the dynamic some economists point to when dismissing the financial impact of a convention. They dub the effect “crowding out.” That’s what happened three years ago when the NBA held its midseason all-star game in Denver: Thousands of locals steered clear of downtown, leaving the streets empty.

New York and Boston, which hosted the party conventions in 2004, posted mixed economic results.

New York reported $212 million in direct revenue from the Republican National Convention, but attendance at Broadway shows fell 20 percent that week as both visitors and locals sought to avoid the hassles of convention security.

Boston reported $150 million in direct impact from the DNC, but later analysis by the Beacon Hill Institute, a think tank at Suffolk University, pegged the actual economic boost at $14.8 million after declines in spending by consumers and tourists were factored. Out of 100 Boston businesses surveyed by the think tank, only 11 said they enjoyed an increase in revenue during the 2004 convention.

Yet it’s those fat and unfiltered “direct impact” numbers that are most often recycled and repeated by future hosts of political conventions. When asked to forecast the economic bump St. Paul, Minn., will enjoy from next week's Republican convention, Adam Johnson, marketing director for the city's Convention & Visitors Authority, simply listed New York’s reported $212 million haul and the $150 million that Boston officials said their city reaped. In other words, St.  Paul will be in that same financial ballpark, according to Johnson.

Grant acknowledged that Denver's projected $160 million windfall also was based on the Boston numbers. But after watching the bustle on Denver’s sidewalks this week, Grant isn’t backing off.

He pointed out that Boston has limited vehicle access to its urban core, and Boston’s mayor asked residents to avoid the downtown area during the 2004 DNC. Denver’s downtown, in contrast, can be reached via dozens of streets from all directions, and its mayor has used TV airwaves to urge locals to flock to the city’s hub.

“We were probably wildly conservative with our numbers,” Grant said. “The $160 million did factor in lost business, which we don’t have. There’s no one who’s going to say this is a bad deal for the city. Look around: Every café is filled, the streets at midnight are filled.”

So how high will the convention boost be?

True, almost all downtown Denver hotels are sold out this week — and priced to the ceiling. The Democratic Party alone reserved 17,000 of the Denver area’s 42,000 hotel rooms. According to Expedia.com, a room at the Brown Palace is fetching $450 a night (a $225 increase over normal rates) while a room at the Magnolia Hotel is running $667 a night (a $480 bump from the normal rate).

This is where economists like Alan Sanderson, a professor at the University of Chicago, and Victor Matheson, a professor at the College of the Holy Cross in Worcester, Mass., inject their doubts. Sanderson believes the DNC’s direct economic impact on Denver will be closer to $16 million. Matheson, who this year co-authored a study on the financial bang from political conventions, agreed that Denver officials inflated their projection by a factor of 10.

“Sure, it’s a huge economic event, but it’s a fraction of what boosters are saying,” said Matheson, who has analyzed the monetary aftermath of every convention since 1972.

His study crunched local employment numbers during conventions and dissected effects on the host cities’ overall income — the civic version of gross domestic product — as well as personal income per capita. Matheson found no significant change in any of those indicators. On top of that, there are the costs a host city incurs, although $50 million in federal money is being spent on security at the 2008 DNC.

“There are, without question, thousands of people in town for this event. There may be conventioneers at the bars and retail stores and hotels,” Matheson said. “But I bet the locals are not going into their regular Cheers downtown where they say ‘Norm’ when you walk in the door. The regulars are being crowded out.”

But to Denver merchants like Trina Lynch, customers are customers. She and her husband Lamont own Boney’s Smokehouse in downtown Denver, not far from Players clothing. Before the DNC, the Lynchs ordered extra meat and decided to stay open 12 hours a day, stretching their typical lunchtime fare. This week, revenue at Boney’s Smokehouse has increased by 100 percent, Trina Lynch said.

Mountain guide Stefan Van der Steen hopes to double his usual number of clients at Denver Adventures, located in the foothills of Golden, just west of Denver. So far, he’s not sure if the delegates will be able to break away for any high-country hikes, but a number of journalists have booked jaunts this weekend.

“The professor at Holy Cross says you have to subtract all the lost business, well, we don’t agree with that,” Grant said. “If ‘The Dark Knight’ is sold out and turns away 100 people, do you subtract those 100 people from the gate? Of course not. You can’t do better than sold out.”

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