Marina Economic Impact

Boating Week 2000

Chuck Pistas and Dr. Dan Stynes of Michigan State University presented the discussion on the economic impact of boating/marinas and some new tools available to calculate this impact.

Some questions local marina owners and area businesses should be asking are:

What is the optimum mix of trailer, sail, cruiser and other craft types to create the greatest economic impact on the local economy?
How does that economic impact compare to other potential uses of the site (condominiums, etc.)?
Will the facility complement existing local businesses?
Which mix of facilities creates the largest for the situation and surroundings?

When considering alternative uses of the land, you need to remember that marinas generate funds annually, while some other uses may generate more initial impact, but less on an annual ongoing basis.

Marina economic studies using conventional economic impact tools (local turn over of funds by SIC code and additional turns before the money leaves the area) have been conducted for years. Most of the studies "re-create" the method and data is difficult to compare across studies. Also, several overestimate the "number of turns" before money leaves the local area (especially when gas purchases are involved), Fuel costs are a major portion of the expenses to keep a boat up and running. The bulk of the money spent for fuel leaves the area directly and does not "turn over". Only the retail margin on fuel contributes to the local economy.

Dr. Stynes has created an Economic Impact tool for calculating economic impact of tourism and is in process of adapting the tools specifically to boating economic impact.

Historically, once the area was defined (county, state, country) you had to go out and survey the boaters, ask them about their boat (length, type, trailered or berthed), survey them on their expenses by category (fuel, marinas, insurance, repairs, new accessories, food, lodging, etc). Then apply the survey data to the total estimated population and calculate the total for each expense category. Tables were used to determine the local economic impact for each category, those were summed and additional "turns" also estimated by a table.

The tables mentioned above are RIM (Regional Impact Model) and/or IMPLAN tables. They indicate the economic impact of a specific expense in a specific region of the U.S.

Economic impact comes from changes in sales, jobs, income, taxes. Economic impact for a community is basically quite simple. You want them to spend in your community instead of somewhere else.

Economic Impact results from a 3 tier pyramid.

Boat Spending (craft, equipment, new boats, trip spending)
Industry Spending (operations, wages, construction)
External Events and Policies (empowerment, government policies)4

A community starts with policies and a plan of action. This creates activity which creates industry spending (building of marinas, boat ramps, picnic tables, bait & tackle shops, etc) which then results in boats spending money into the local economy.

Effective community plans have to create an incremental increase in the level of current industry spending which then creates an incremental increase in the money spent by boaters in the community.

He referenced several earlier studies, including one by Hushek in 1999, Recreational Boating in Ohio and Economic Impact Study.

The tourism industry has "picked up" on the satellite account method of calculating economic impact. The government has created a set of tables indicating the contribution of spending in certain areas to local economic impact. The method falls short for the boating industry as categories are not small enough. Tourism has tried to break their contribution/portion out 500 to 600 of these national accounts . The system (national accounts) does have credibility as the numbers are furnished by the U.S. government, but it does not list side effects.

One frequent mistake: applying state wide multipliers to obtain local economic impact. Money leaks out of a local area much faster that it leave a state.

Typical conservative multipliers for sales are 1.2 to 1.3 for a local multiplier and 1.6 to 1.7 for a statewide multiplier.

Some typical round numbers and calculation methods are shown below.

Trip Spending
1000 boats
Average boating 20 days a year
Spending $50 a day
For a total of $1 million

Annual Expenses
(marina, repairs, upkeep, insurance)
1000 boats
$500 per year in annual expenses
For a total of $500,000

Total Spending per thousand boats = $1,500,000

You can determine the current number of direct jobs (marinas, etc) in the region and divide this number by the number of boats in the area to determine the number of jobs per boat.

Maybe 45 cents of each dollar of marina expenses go toward wages.

1 million dollars of trip spending times 30 jobs/million dollars sales = 30 new jobs

.45 times income divided by sales ratio = $450,00 of direct income.

Total effect = $1 million trip spending times 1.5 = $1.5 million total sales.

His new tool, MGM2/MITEIM Approach, is a spreadsheet model. It provides activity data by segment. It can use local, state or national spending data. Generic or custom multiplier models can be used.

Users need to think in terms of segments.

They are in process of acquiring spending data.

The spreadsheet captures spending by segment (type of boat).

His existing spreadsheet model was developed for the National Park System. He is in process of creating a similar one specifically for boating.

You just input the number of boaters, days of use, local tax rates, then select the region you wish to calculate the economic impact for (local, regional, statewide).

Boats are classified by where they are stored: Marina, Waterfront Primary Home, Waterfront Seasonal Home, Non-Waterfront Home. These categories drastically effect the type and amount of spending per craft. Trailered boat expenses are much different than those used at a local Waterfront Primary Home. Trailered boats will be significantly heavier in the areas of food, vehicle fuel and lodging.

Michigan Craft Spending per boat (1998?)

Size           $ per boat per year
PWC            $430
<16 ft         $160
16-24 ft       $574
21-28 ft     $1,092
29 + ft      $5,039
Overall        $614

The state of Michigan has a 3 year boat registration cycle. About 20 to 25 percent of the boats are not used in any given year (many have been removed from active use). You need to take this into account when estimating the number of active boats in your area from registration data.

RBBI Comment: In another session, it was pointed out many boats are purchased in areas other than the one in which they are used. People purchase a boat on a trip, may have a second home in the area or the owners may be snowbirds (purchase the boat up north for use in the south).

Several of his studies include boat size data as well as how they are stored.

Recently, they did an economic impact study concerning the current low water levels in the Great Lakes.

What is the direct economic loss to Michigan marinas?
What are the anticipated future losses?
Could the State of Michigan assist the industry?

As a result of the study, the state released $20 million in loans with a 7 year payback, $75,000 limit. This was the first known government response to economic impact of weather on boating access.

Transient boaters need to be viewed as both boaters and tourists in economic impact models.

Transient boaters can create substantial economic impact in a coastal communities. They are often looked down on by marinas (they do not berth boats locally and many purchase fuel in local gas stations).

In Michigan, state owned facilities are now more focused on transient boaters (private facilities find them not very attractive). This allows the state facilities to serve a population not sought after by the private sector, and still create substantial statewide economic impact.

The spreadsheet model is now being moved to the web. Facilities in the state of Michigan will be able to run it online.

They are moving from a survey to a monitoring situation. Marinas will enter data in a password protected mode. This data will replace the data previously gathered by surveys.

The online boating model will be added to his website shortly.

You need a couple hundred boats in each category in a traditional survey to get good data.

For Additional information see Dr. Stynes web site.

RBBI Comments:

Great Session !!
I visited with Dr. Stynes afterwards and he provided me with a copy of Clean Vessel Act/ Michigan Boating Study, 1994-95 Report II, 1994 Michigan Boating Survey. This report laid the groundwork for the current efforts.
I really enjoyed the session. His efforts in trying to standardize boating economic studies makes them much more cross comparable. Before, everybody had slightly different variables and definitions making it very difficult to compare data between studies or to use data from a similar site to fill in some data you might be missing to at least generate an early estimate. The soon to be online processing and data collection tool is icing on the cake. We think he and those working with him should be highly commended for their efforts.