With a deluge of delegates, media outlets and protesters set to flood the center of Manhattan this week for the Republican National Convention, many New York City officials are projecting the Big Apple will see a juicy economic return from the event. But some economists and local retailers are expecting a bust.
The four-day event, which is expected to attract some 50,000 attendees, is just sort of occasion that typically livens up a city’s economy. Big city events are often expected to give municipalities an economic boost, as more people that usual spend money in a city’s bars, restaurants, hotels and shops, and local retailers see a rise in revenue.
But with a massive security operation in place in New York City and the city on high alert for terrorism, the question is whether the money spent by convention attendees will more than make up for the money that might not be spent if tourists stay away, New Yorkers stay at home and commuters are stuck in large traffic jams.
“There’s a good deal of concern in our membership about a reduction in businesses that may arise, as many individuals seem to want to avoid the city during the convention period,” said Donald Halperin, a spokesperson for the New York Metropolitan Retailers Association, which represents large chain retailers in the city.
“This is state of mind for people,” he added. “They are not necessarily worried about an act of terrorism, but they are not going to take the chance of getting caught up with the increased security measures designed to guard against terrorism. New York is enough of a hassle without a political convention and we are hearing anecdotally that firms are letting are letting workers work from home, or form other locations, during the convention.”
City estimate upbeat
New York City’s Economic Development Corporation estimates the city will see a $265 million economic gain from the Republican National Convention, which comes during a week when many residents take vacations and economic activity slows.
In his weekly radio address last Friday, New York City Mayor Michael Bloomberg dismissed a recent report by City Comptroller William Thompson estimating that the city stands to lose $309 million from the convention due to a loss of business activity, lower tax revenues and additional security costs.
“There’s no question, just this week alone will give us more economic activity than we would have had, since we paid for the convention privately and the federal government paid for most of the security,” Bloomberg said.
Occupancy at all New York City hotels for the week of Aug. 30 stands at 87 percent, according to an independent study by PricewaterhouseCoopers cited by Cristyne Nicholas, president of NYC & Company, the city’s marketing arm, in the radio broadcast.
But if results from the Boston’s hosting of from the Democratic National Convention are anything to go by, the New York City’s financial gain may fall short of Mayor Bloomberg’s estimates.
Boston saw $14.8 million in economic benefit from the Democratic convention, which was held there late last month, according to a post-convention analysis by the Beacon Hill Institute at Suffolk University — a number that is far from the $154 million the city estimated the convention would contribute.
David Tuerck, director of the Beacon Hill Institute, reckons New York is likely to see a similar shortfall next week.
“We expect the [economic] benefit to be about $163 million,” he told CNBC. That figure is some $102 million short of New York’s official estimate and takes into account the new spending the convention will bring in, and then adjust that number downward for an expected loss in tourism and productivity, according to Tuerck.
Tuerck also said increased security measures in the city will slow commuters and lead to a loss of productivity for businesses. Still, security in New York is expected to be less disruptive than the in the Democratic host city of Boston in July, where major roads and train stations were closed, keeping commuters at home and tourists at bay.
Some businesses concerned
Many of the streets surrounding Madison Square Garden, the site of the convention, will be closed to traffic, and businesses in the area have been bracing for a loss of business in the week ahead.
Nick and Stef’s Steakhouse, for example, told CNBC last week that construction for the event has already hurt business. The restaurant, located next to Madison Square Garden, has seen a 50 percent decrease in lunchtime guests and 20-35 percent fewer dinner guests. And D'Aiuto's Pastry located on nearby 8th Avenue expects business to be cut in half during the week of the convention.
It’s not just retailers who are concerned.
Many businesses located in and around the Madison Square Garden area are advising their staff to stay at home for the week of the convention, or work elsewhere. CyberStaff, a recruitment firm, is recommending that its staff of 20 works from home during the week, while publisher McGraw-Hill has told its workers they can either telecommute, work at other locations or adjust their work schedule to avoid problems with their commute.
Some businesses are predicting the Republican convention will hurt their bottom lines. An August survey of 54 New York companies by CoreNet Global shows 56 percent expect a loss in worker productivity, and therefore profits, as a result of the convention.
Dan Biederman, who heads the 34th Street Partnership, the business association representing companies and businesses in the Madison Square Garden area, is more sanguine. He expects the convention to have little impact on the retailers located in the so-called “Safety Zone,” an area of a few blocks around Madison Square Garden where police will require anyone entering to carry business and/or personal identification.
“The sexy story is the whole Midtown area will be a ghost town, but I’ve never seen New York City act that way,” he said.
“I think restaurants and hotels in our area will do fine because they’ll see a lot of convention business, but if there’s a terror warning all bets are off,” Biederman said. “My worst case scenario estimate is for a decline of 25 percent in retail sales across food, drink, clothes and back to school supplies, but in the end I think it will be a wash.”