Analysis: We need to establish if the money spent in Dublin this weekend is 'new money' or cash which would have spent elsewhere in the economy
There is only one show in town this weekend and, yes, the Taylor Swift articles are coming in thick and fast. Her star power is so strong and her fans are so devoted that it's estimated Swifties spent $1,300 on average to attend one of her US Eras tour gigs.
There’s no doubting that Swift is an economic powerhouse. Earlier this year, she became a billionaire, the first musician to reach this level of wealth as a result of earnings primarily from her songwriting and performances. The US leg of Eras is the highest grossing tour of all time, with revenue reported to be in excess of $1 billion. To put this figure in perspective, it is equivalent to the economic output (measured by GDP) forecast for the country of Samoa this year.
From RTÉ News, the business of Taylor Swift explained
Swift’s earning power, together with her massive fanbase, has resulted in media coverage that goes beyond her cultural and news impact into the realm of economics. The analysis of her influence on the global economy is so pervasive that it’s been named twice, referred to both as Taylornomics and Swiftonomics.
While there may be no denying her cultural impact and profitability, most reports overestimate uplifts to the economy resulting from her tour. These economic effects are much harder to quantify. For example, Dublin Chamber of Commerce claims that tourists coming to the concerts in Dublin from overseas this weekend will make a real economic impact. Previously, they estimated that the Garth Brooks concerts in 2022 would provide a €35 million boost to the economy.
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From RTÉ Radio 1's Oliver Callan Show, writer Amy O'Connor take a deep dive into Taylor Swift's business success
But this figure is simply an estimate of the money visitors to the capital will spend, the 'factual’. To know the actual impact of the concerts on the economy, we would need to know how much money would have been spent in Dublin this weekend had the concerts not been on, what we call the ‘counterfactual’. To calculate the real effect on the economy, we need to look at the difference between these two numbers, the factual and the counterfactual. This is difficult because we can’t see the counterfactual, consequently what gets reported is just what’s observed, the factual.
To try and figure out the real impact, we need to think about if the concerts are bringing new money into the economy, if they are reallocating money or if they are ‘crowding out’ other spending. For example, if someone is coming from Cork to Dublin to attend a concert over the weekend, they will most likely spend money in restaurants or bars in the capital. This money is only a boost to the economy if they wouldn’t have spent the money had they not attended the concert. In all likelihood, they may have spent the money on a night out in Cork if they hadn't got a concert ticket. Rather than a boost to the Irish economy, the spending is simply a transfer from one business to another.
We also need to examine tourist spending. If someone is coming to Dublin from abroad to go to the concerts, you might think that this has to be ‘new money’ and a boost to the economy. However, there is likely a crowding out effect from the concerts, whereby many people who would have spent money in Dublin this weekend, now avoid the capital because of the concerts.
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From RTÉ Six One News, hundreds of thousands of sports and music fans prepare for a weekend in Dublin
For example, GAA fans attending the quarter finals in Croke Park or people going to the Pride parade may not stay in town for the night because it is too crowded, or hotel rooms are too expensive. Therefore, a significant portion of the tourist spending, rather than being new, is simply replacing spending that would have happened had the concerts not been on.
Despite the questionable impact of the concerts on the economy overall, there are two sectors that benefit from high demand events like the Eras tour. Hotels and airlines use what are called ‘surge’ or ‘dynamic’ pricing strategies, whereby they increase prices as supply decreases, or as demand goes up. The result is that two consumers can be staying in the same hotel on the same night and be paying wildly different rates, depending on when they booked.
Despite all the money that will be spent by Swifties over the weekend, the only gold rush will be for hoteliers - and the singer herself
Anyone who has ever travelled to a big sporting event, or anyone travelling to a concert this weekend, will be acutely aware of the fact that prices for flights and hotel rooms soar as soon as a big event is announced. The average cost of a hotel room in Dublin on Saturday night is reported to be €400 and that’s almost twice the average cost of a room across all nights last year. Surge pricing allows these industries to extract much higher prices for their product when big events are on, because supply is fixed (you can’t temporarily increase the number of hotel rooms for the weekend), and demand is high.
Despite all the money that will be spent by Swifties over the weekend, the only gold rush will be for hoteliers - and the singer herself. It might not go down well with her fans, but any economic impacts from her tour are at best temporary, and overstated by many engaged in Taylornomics. But if all this hype gets people more interested in economics, I’m going to try to shake it off....
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
