N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Main menu

Skip to content
  • Home
  • About NDM
  • News
  • Downtown Curmudgeon
  • Reports
    • Long Island City (pdf)
    • Manhattan
    • Meredith (pdf)
    • Morristown (pdf)
    • Peoria (pdf)
    • Sherwood, WI (pdf)
  • Downtown Revitalization
  • Contact

Category Archives: movie theaters

Post navigation

← Older posts

THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

Posted on April 7, 2020 by DANTH

FOR IMMEDIATE RELEASE

Online version available at: www.theadrr.com

Contact:
N. David Milder, Editor
The ADRR — The American Downtown Revitalization Review
718-805-9507  [email protected]

 THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW  (THE ADRR)
 
There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR.  It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.
 
This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.
 
How to Subscribe to The ADRR


Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).
 
How Issues of The ADRR Will Be Distributed.

New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.
 
The Content We Are Aiming For.
Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.
 
Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.
 
Who Will Write the Articles?  

Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. —  who have significant downtown related knowledge and experience.
 
Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them.  However,  there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!
 
Article Length and Author Responsibilities.  

There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.
 
Publication Schedule:

Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.
 
How It Will Be Organized.

The ADRR will be published by an informal group for its first year, with no person or group having ownership.

 Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.

 The Advisory/Editorial Board :

  • Jerome Barth, Fifth Avenue Association
  • Michael J Berne, MJB Consulting
  • Laurel Brown,  UpIncoming Ventures
  • Katherine Correll, Downtown Colorado, Inc. 
  • Dave Feehan, Civitas Consulting 
  • Bob Goldsmith, Downtown NJ, and  Greenbaum Rowe 
  • Stephen Goldsmith, Center for the Living City 
  • Nicholas Kalogeresis, The Lakota Group 
  • Kris Larson,  Hollywood Property Owners Alliance.
  • Paul R. Levy, Center City District, Philadelphia
  • Beth Anne Macdonald, Commercial District Services 
  • Andrew M. Manshel, author 
  • N. David Milder, DANTH, Inc 
  • John Shapiro, Pratt Institute 
  • Norman Walzer, Northern Illinois University 

 Articles in our first issue that will be published in June 2020

  • Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
  • Roberta Brandes Gratz, “Malls of Culture.”
  • Andrew M. Manshel, “Is ED Really a Problem?”
  • N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
  • Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
  • Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
  • The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
    • Katherine Correll, Downtown Colorado, Inc.
    • David Feehan, Civitas Consulting
    • Isaac Kremer, Metuchen Downtown Alliance
    • Errin Welty, Wisconsin Economic Development Corporation.
Posted in automated cars, backdoor retailing, BIDs, Business Recruitment, Captive Markets, Central Social Districts, Change Agents, clean sidewalks, clean streets, commercial nodes, Contingent workers, convenience, Creative Class, Crime, DANTH, Deliberate Consumer, Downtown Garages, Downtown Merchants, Downtown Niches, Downtown Redevelopment, downtown retailing, driverless cars, E commerce, Economci Development, EDOs, Entertainment, Entertainment niche, Entrepreneurship, fear of crime, Financial tools, Formal entertainment venues, Formats Facades Signs, Housing, Informal entertainment venues, Innovations, Jamaica Center, Jobs, Leakages/gaps, Living donor, Luxury retail, Market research, movie theaters, Moving People, multichannel retailing, New Normal, Office Development, Pamper Niche, Parking, Parksmand public spaces, Pedestrian traffic, Planning and Strategies, Public Spaces, retail chains, self-driving cars, Small Merchants, Small Town Entrepreneurial Environments, Small Towns, Social Media, Sprawl, Suburban Downtowns, technology, teenagers, The Arts, time pressure, Tourism, Trends, Up for Grabs shoppers |

About the Dynamics Within the New Normal for Our Downtowns — in about 1,525 words

Posted on August 5, 2018 by DANTH

By N. David Milder

Introduction

I have been working in the field of downtown and urban revitalization since 1974. Back then, the riots of 1968 had brought considerable attention to our urban distress. Many civic and business leaders became much more aware of the cascading erosion their downtowns were facing. The white flight of shoppers and residents living in the downtown and close-in neighborhoods, disinvestment by landlords and businesses, spreading physical decay, soaring fear  of crime, badly tarnished public images, and widespread frustration about not knowing how to reverse this situation were common problems in downtowns across the nation.  Today,  many of our downtowns have been thoroughly revitalized and become very popular places for people to live, play and work. Scads of other downtowns  are in the process of doing so. These days, the expectation that downtowns can and will be revitalized has replaced the fears of the 60s, 70s, 80s and early 90s that downtowns were doomed to be places of failure, despair and decay. Downtown leaders now can tap a large and growing  knowledge base that includes an array of tools and techniques they can use to solve the problems that had previously plagued our downtowns. Among them are: place-making, improving walkability, transit-oriented development, mixed-use residential development, niche marketing, BIDs, TIF, PILOTs, community policing, etc. This success — both actual and expected — and the knowledge base and leadership pool that support it, are some of the defining characteristics of the New Normal for Our Downtowns.

The Downtown Residents – CSD Connection

Successful downtowns, however, are not stagnant socio/economic/geographic organisms. Indeed, some of the factors that explain their success have also both changed the way they operate and generated a new set of problems that now need attention and solutions. For example, though it is generally agreed among downtown revitalization experts that the significant growth of housing in and near our downtowns has been a primary engine for their recent rejuvenations, questions recently have emerged about downtowns being turned into ghettos for the affluent. Still, the significant presence of these residential units are themselves an important and new phenomenon. Moreover, these new residents have created a significant new demand for services, amenities and merchandise that are not typically associated with the Central Business District (CBD) functions and venues that dominated our downtowns in decades past. These CBD functions and venues also have long dominated our understanding of how successful downtowns should operate and been the focus of most downtown revitalization strategies (e.g., retail growth, office development, job creation, transportation improvements). While many of these new downtown residents may also work in the district, their demand for and consumption of opportunities to socialize, relax and be entertained has driven the development and/or use of strong restaurant and bar niches, public spaces and parks, libraries and community centers, movie theaters, museums, PACs, churches, senior centers, etc. These venues are associated with a downtown’s Central Social District (CSD) functions.

Another defining characteristic of the New Normal is that successful downtowns have very strong CSD venues and, with increasing frequency, they are as important or even outshine those associated with its CBD functions. Some types of CSD venues have long been present in some downtowns, but the appearance of a bolus of downtown residents has generally sparked their significant growth while broadening the kinds of venues present. In turn, by strengthening these venues, the downtown residents have helped them be stronger magnets for people working in the district as well as daytime visitors from the district’s largest trade areas and for tourists from even more distant places.

The presence of these residents and the strength of these CSD venues also has changed the way a downtown operates. Most importantly, they widen the range of a downtown’s multi-functionality, increasing the reasons why people will use the downtown. By doing so, they also provide a steady and significant flow of pedestrians and customers that helps assure the district does not close down on weekends or weekdays after  6:00 pm. Strong CSD venues also make the downtown “stickier,” keeping visitors in the district for longer periods of time.

Strong CSD venues also make working in a downtown more appealing. In a labor market where many job offers now find no takers, firms located in strong CSDs are likely to find it easier to recruit quality employees. Moreover, many of the quality of life needs of creatives/knowledge workers are met by strong CSD assets. In smaller towns, strong CSDs can help attract quality independent retailers and Lone Eagle business operators.

But CSD Development Can Be Very Bumpy

Nevertheless, CSD development and growth does not always have clear sailing. Many communities may opt for CSD development projects that are ill-suited for their demographics,  geographic locations, or industry trends, while they could have instead undertaken projects that were cheaper to build and operate and capable of attracting many more users. For example, advocates for new arts events venues such as PACs, theaters, and museums as well as for arenas and stadiums often badly over-estimate their potential economic impacts on the downtown, while underestimating construction and operating costs. In larger cities, major organizations in the opera, ballet, symphony orchestra and nonprofit theater fields are badly stressed having to cope with significant declines in paid attendance and financial contributions. In smaller communities, the impacts of new arts events venues on their downtowns are too often grossly exaggerated, and operating costs badly underestimated. Consistently, between 40% and 50% of arts nonprofits are financially in the red.

The most effective strategic path is to first focus on the strengthening and/or development of well-activated parks and public spaces, restaurants and watering holes, and movie theaters. They are usually the easiest to create and operate and have the fewest user frictions or are asset treasures that need to be improved and saved.

Though a lot of strategic planning is done for CBD functions and venues, strategic plans for CSDs are rare, but equally needed. While attention may be given to individual CSD projects, too many of such studies are marred  by advocacy induced puffery. Very unfortunately, little attention is being paid to the CSD as whole entity.

Technology Is Creating a New Set of Problems

The impacts of technology are also strongly defining the New Normal. This is most apparent in the way the Internet is forcing the whole retail industry to search for a new operating paradigm and electronic consumption has reduced the brick and mortar consumption of the arts. How and when people shop is consequently changing in significant ways. They first research online and then shop the store for the targeted item(s). Strolling and browsing shoppers subsequently are on the decline. Many Americans are time-stressed, so many shoppers want quick, convenient retail transactions. Yet, many others want more interesting, more meaningful and more socially appealing shopping experiences. Shoppers have also become much more careful and deliberate when making purchases. While this is most strongly apparent among middle-income consumers, affluent shoppers are also showing signs of greater caution.

Changed consumer behavior, combined with growing online sales, have reduced the demand for downtown store locations and the amount of space retailers want for their new stores.

While downtown retail shops will not disappear, they almost certainly will change in the way they operate, the amounts of space they each need, as well as the types of locations they will want.

Yet, as my discussions with potential clients demonstrate, many downtown organizations still see retail as a key element in their downtown’s future, while largely disregarding improvements to their CSDs.

The appearance of app-driven car services such as Uber and Lyft have already impacted on traffic congestion and the use of public transportation in several large downtowns. The imminent use of automated vehicles – e.g., by Waymo soon in Phoenix – will likely have important impacts on traffic congestion in a host of additional downtowns. What these impacts will be remains uncertain- as do the possible remedies to those that are harmful. The transition to automated vehicles will probably take 20 to 40 years, with different issues dominating downtowners’ concerns at each stage of its progression.

Success Can Create Problems

The very success of our downtowns also has created its own set of problems. For example:

  • High housing demand has created a very serious affordability problem for many downtowns and their nearby neighborhoods.
  • Downtown success usually means more pedestrian traffic. For example, from 2009 to 2015, pedestrian growth in Manhattan’s economically healthy central business district grew by about 18 to 24 percent. At what point does the density of downtown pedestrian traffic become uncomfortable and unappealing for pedestrians and detrimental to an area’s image and popularity? The uncomfortable density of users is already occasionally being felt in such famed public spaces in NYC as Times Square, Bryant Park and Central Park. Will those instances of pedestrian congestion increase? Some of the managers of these public spaces seem unconcerned about pedestrian congestion. Indeed, they seem to be committed to having the largest number of visitors possible.
  • As a recent study of Center City in Philadelphia has shown, greater downtown development density increases traffic congestion.

Postscript.

This is part of book proposal I am writing. I’d appreciate hearing if you would be interested in a book  that expanded upon the above content. Please let me know at [email protected] .

Posted in automated cars, BIDs, Central Social Districts, Deliberate Consumer, Downtown Merchants, Downtown Niches, Downtown Redevelopment, downtown retailing, driverless cars, E commerce, Economci Development, Entertainment, Entertainment niche, fear of crime, Informal entertainment venues, movie theaters, New Normal, Parksmand public spaces, Pedestrian traffic, Planning and Strategies, Public Spaces, self-driving cars, Small Merchants, Small Towns, Suburban Downtowns, technology, The Arts, Uncategorized |

Some Downtown Equity Issues

Posted on March 17, 2018 by DANTH

Part 2 of the A Closer Look at Some Strategic Challenges Generated by the New Normal for Our Downtowns Series of Articles

By N. David Milder

Introduction.

There are a number of issues that involve questions about who will visit, live, work and play in our downtowns and how all stakeholders – be they those who live, work and play there or those who own properties and businesses – can share in their successes. The term “equity” seems to fit all of these issues. Their emergence has been relatively recent, and their full dimensions are probably yet to be grasped. As a result, most are not on the radar screens of many downtown leaders, save in those cities where the problems have already become very acute and/or nationally visible, e.g., affordable housing in San Francisco and the entire Bay region.

The core equity issues are essentially about what our values and preferences are and how they will be applied to many of the component parts of these successful downtowns. Decades ago, at their nadir, downtowns had a different set of users and, often, different stakeholders. Strong concerns about equity were not really salient since there were so few goodies to distribute and so few people who wanted either a psychological or legal stake in these districts. These days, that has all changed. The equity issues are generated by downtown and community successes, sometimes huge ones, not their failures!

Way back when, it may have been from one of Jane Jacobs’s books, I learned two axioms about downtowns that have stayed with me ever since:

  • A downtown needs its community’s residents to take psychological ownership of it. It must become “my downtown” in their guts. When that happens, they will not only use it, but also politically defend it, and support efforts to improve it. Psychologically, they become stakeholders.
  • A downtown should be everyone’s place. It should have attractions suitable for large swathes of the community. It also should be the community’s central gathering place. Anyone acting in an orderly manner should be welcome.

During the decades when downtowns were in decline, it seemed as if few people within their communities wanted to take psychological possession of them. Today’s successful downtowns show a marked ability to attract many more people, many of whom are affluent and well-educated, to live, work and play in them. In some, where the median price of a residential unit exceeds $1m and where the price of a ticket to a show or ballgame can exceed $1,000 in secondary markets, many local residents may wonder what’s there in the downtown for them?

Who Can Afford to Live Downtown?

Downtown experts agree that more residents in the downtown and in neighborhoods within reasonable walking distances of it have been the strongest engine for downtown revitalization. Yet, more housing in those places is proving to be a double-edged sword and concerns about middle income and “workforce housing” are popping up across the nation. The situation in San Francisco has attracted a lot of national attention and demonstrates many aspects of this problem. Nearby Silicon Valley has had a famed economic success and many of its relatively well-paid workers seek housing in San Francisco. For example, Google-owned buses haul hordes of them to and fro daily. The result has been a very expensive housing market in the entire Bay area. It’s become very difficult for these relatively affluent workers to find affordable housing and those pressures are also impacting other types of workers. One response is to accept smaller and/or unusual types of dwellings. Here’s a recent headline in the New York Times: “Dorm Living for Professionals Comes to San Francisco” (1). The article goes on to detail that: “In search of reasonable rent, the middle-class backbone of San Francisco — maître d’s, teachers, bookstore managers, lounge musicians, copywriters and merchandise planners — are engaging in an unusual experiment in communal living: They are moving into dorms.”

Dorms and other “co-living” arrangements are just one solution path San Franciscans have followed to cope with their region’s skyrocketing housing costs. For example, Business Insider even headlined that: “A 23-year-old Google employee lives in a truck in the company’s parking lot and saves 90% of his income” (2).

A Cargo Container Converted into a Small House in San Franciso. 

The Tiny House movement has even penetrated the San Francisco area as evidenced by the photo above taken from an article in Business Insider (3). In this instance, a cargo shipping container was converted into the wee home. Some more affluent San Franciscans have spent $1m+ to purchase and renovate “earthquake shacks,” or are living on boats in the bay. Still others are squeezing together with a large number of roommates into an apartment or house (4).

High housing costs are not confined to San Francisco.  As can be seen in the above table, in all 10 of these highly successful major cities, the ratio of median home prices to median household incomes exceed the 5.1 level deemed to indicate serious unaffordability.

An important question: are the housing costs in smaller communities than our major cities also skyrocketing and having adverse impacts?  Probably yes, if they are located in a region, such as the San Francisco Bay Area, where the whole area is thriving economically. For example, the communities where the Jobs, Zuckerbergs, Pages, and Ellisons live are small and hyper expensive. In less economically robust regions, one might expect a more complicated picture. My hypothesis is that higher housing prices are an inevitable result of a downtown and its community becoming successful, desirable places to live, work and play. So, where that has happened, the prices will very likely be higher. For instance, in districts that have recently experienced a significant revitalization that was propelled by mix-use, residential anchored projects. This has happened in a number of suburban communities around our major cities, especially those served by commuter rail. Otherwise, in smaller towns and cities, housing prices probably have not skyrocketed. For some smaller towns, their lower housing costs when combined with strong quality-of-life assets,  and decent broadband and transportation access, might give them a meaningful competitive edge in attracting new residents and businesses.

“Micro-living,” i.e. living in units of 300 to 400 SF or less is a growing phenomenon in cities across the globe where their economic success has pushed housing prices well beyond what middle-income and even upper-middle-income persons/households can afford. In the U.S. they can be found in many of our largest cities — e.g., Boston, Chicago, and NYC – but especially in cities such as Atlanta, Cincinnati, Denver, Pittsburgh, Seattle, St. Louis and Washington D.C., where the share of single person households exceeds 40%.  The mini apartments also are not unusual in Tokyo and many European cities (5).

To provide some perspective on these 300 SF to 400 SF units, consider that in the recent past many of their occupants would have rented studio apartments. Their average size in NYC, San Francisco, and Oakland are 550, SF 514 SF and 531 SF respectively. The micro-living units are 20%+ to 40%+ smaller than the studios. Also, consider that in the 20 most populous metro areas there is a distinct trend toward smaller units – though all still average above 854 SF (see the above table). The decreases in size have been smallest is in the metro area that have very high costs and low costs and highest in the high cost and moderate cost markets.

The small units, such as those in dorm or co-living buildings, often have desirable social/communal advantages that attract their inhabitants. Whether a true equity issue exists for these residents under these conditions depends on whether the inhabitants really want to live in such units or are occupying them because they are the best of the bad options available to them.

This discussion would also be more informed if there was some research establishing that humans need abodes that have XYZ square feet of living space. My memory says that HUD somewhere at some time established that dwellings were overcrowded if a unit’s occupants have less than 188 SF each. I have not found any research that supports a number like that. Moreover, it is highly probable that the personal space needs vary culturally. For example, NYC subways certainly get crowded, but I doubt that their riders would accpt either the level of crowdedness found in the Tokyo subways or their use of car packers to assure that the subway cars are maximally stuffed with riders. Moreover, there are many people in neighborhoods in the Borough of Queens in NYC, such Kew Gardens, Forest Hills, Bayside, who use the l far more expensive Long Island Rail Road rather than experiencing the crowded subways.

Many San Franciscans and residents of other high price communities have responded to the housing equity issue with their feet. A recent report notes that: “San Francisco lost more residents than any other city in the US in the last quarter of 2017…. San Francisco lost net 15,489 residents; about 24% more than the next-highest loser on the list, New York City” (6). This behavior pattern probably results in area firms losing a lot of talented employees. Of course, very high housing prices probably will also dissuade a significant number of talented people from taking jobs located in a community.

Tourists and Tight Housing Markets. City leaders, their economic development officials and local business operators often brag about how many tourists and second homeowners they have and all the revenues and jobs that means for their local economies. However, the residents of many of these communities may tell a different story. They may note that the retail developed for tourist shoppers really does not provide the types of merchandise and services they need or want and often creates seasonal traffic nightmares on local streets. In many communities, large and small, tourists also have impacted negatively on the housing market from the perspective of the needs of local residents.

Moses Gates, in a study by Regional Plan Association (RPA), noted that: “54,764 apartments in New York City … are vacant, according to the 2014 Housing and Vacancy Survey – but not really. These are apartments used for ‘seasonal, occasional, or recreational use’ – i.e., pieds-à-terre or second homes” (7). He went on to state that:

“We also need to better leverage our housing inventory, especially in places where land is scarce and building new homes is difficult. One way to do that is through policies like a tax surcharge on second homes in the New York City (or a pied-à-terre tax) designed to get mostly unused apartments back on the housing market.”

It should also be noted that strong suspicions have been raised about many of these pieds-à-terre in some of our biggest and most tourist-popular cities  (e.g., NYC, Miami, etc.) being money-laundering operations for their wealthy and unknown foreign owners.

Many of these units are vacant for most of the year. They thus do not contribute the pedestrian traffic to the sidewalks below nor the expenditures in the city’s shops, restaurants and entertainment venues that one might reasonably expect – nor the sales taxes on those expenditures.

Are these second homeowners to be treated differently from a downtown’s normal stakeholders? Laws probably protect them in many ways, but I am certain that many local residents would say there is something unjust stirring here that must be fixed.

Airbnb has seemed to be looking for trouble in a host of cities, quickly getting into conflict with city governments because of its alleged flaunting of local laws and putative negative impacts on the availability of affordable housing. As a recent study published in the APA Journal noted, Airbnb had been criticized for enabling:

“…tourism accommodations to penetrate residential neighborhoods, which creates conflicts between visitors and residents, ­ displacing permanent accommodations in high-demand cities and exacerbating affordability pressures for low-income groups (8).

Governments, at all levels, have for decades often mounted programs to cope with the affordable housing issue, though they almost always targeted low-income and impoverished households. Also, the units produced by those programs usually were placed in poor neighborhoods or in those very out of the way, e.g. Far Rockaway here in NYC. The downtown housing equity issue differs in that the targeted population is middle or even upper-middle-income households and that the units produced for them should be at least within a very reasonable travel time of the downtown. It would also probably be a good idea to have representatives of these residents and their employers extensively involved in the development of the needed housing units.

Downtown Success Encourages Landlords to Ask Independent Retailers for Unaffordable Rents

This problem is made more complicated by the fact that to properly understand it one must break it down analytically into three constituent parts: fairness to the merchants, impacts on vacancies, and the impacts of the loss of popular, able merchants. In many discussions of the affordable retail rent problem, things get murky as attention quickly shifts from one of these sub-issues to another. My objective here is not to provide definitive solutions, but to help illuminate the problem and to suggest some solution paths that may be worth exploring.

The Problem Is Not New.  Unaffordable retail rents are an issue that long predates the Great Recession. For example, back in the late 1970s, when I surveyed street-level merchants in Charlotte’s CBD about how they were impacted by an off-street, internal shopping network that was created by overstreet bridges connecting a number of new buildings, they replied that it took traffic from the sidewalks and led to hard to afford rent increases. In the two districts I managed, I never met a small merchant who did not have something negative to say about their rent increases.

Generally, when downtowns or neighborhoods become observably successful, they not only attract retail chains, but also tend to attract many other types of businesses, such as personal, professional and financial service operations. A very high percentage of these operations can afford higher retail rents than the average independent retailer. Some, such as the banks, are willing and able to spend a lot more on rents than even the well-heeled retail chains. As one observer noted: “Banks frequently overpay by 15% to 20% or more on average for real estate compared to other retailers for comparable space. Over 10 or 20 years we’re talking a lot of money!” (9).

I put together the above table for an article I wrote back in 2010. It shows how much space a merchant could afford to lease if 15% of his or her annual sales were devoted to paying rent (10). The 15% figure makes the analysis somewhat conservative, as a more accurate number would the 8% to 12% range for downtown merchants and about 10% for restaurants. Small merchants just cannot afford a whole lot of space in any successful district unless they have very significant annual sales.

Small retailers have not been the only group impacted on. Jeremiah Moss, in his book Vanishing New York, describes how bohemian artistic live-work areas, such as the East Village, were erased by major retail chains coming in.

Why Do Landlords Ask for Unreasonable Rents? Landlords are not necessarily being venal or thoughtless if they sign these higher paying tenants when they appear on their doorsteps. They are simply responding rationally to proven market demand. Of course, even then, they must decide, perhaps just implicitly, that these non-retail uses will ultimately generate more value than if a current small retail tenant was retained. However, one might ask if they considered how that tenant might affect nearby businesses and buildings or if they just considered their own bottom lines. Obviously, another important question is if considering the impacts of a potential tenant on the district should be obligatory in some way, shape or form? This problem would ease if a landlord or an accomplished EDO owned a lot of downtown properties with retail tenants and managed them like a mall, but that is an unlikely outcome.

Here are some other patterns that I have found in the ways landlords establish their rent increases

  • Some increases are based on a reasonably accurate assessment of local rising property values and dominant asking rents. Both of these may already reflect the district’s growing success. These landlords tend to avoid asking for the highest rents. Among them, are a number of experienced professionals who see the landlord function as having strong stewardship aspects and consider what is good not only for their properties but also for those that are near them. I fear that they are a dying breed. How instead can we develop more of them?
  • Some small landlords I’ve spoken to simply could not explain the reasons for their very high rent increases, save to say they were products of their best judgments. Among those that I have met, many were new to the U.S. and new to local property and retail markets. A number of them would stubbornly maintain unreasonable asking rents for a year or more. These landlords do not typically care who their tenant is as long as they pay the asked for rent. Here the high rents and vacancies are being sustained by landlord ignorance and management ineptitude. Newness to the area is another factor.
  • Other increases are based on hopes, often wishful, that a national chain or other higher paying tenants can be attracted that will pay much higher rents and have a better credit rating than those of the current independent retail tenant. An analysis of the local retail market is either perfunctorily done or simply missing.  An example of this is Wong Kee, located in Manhattan’s Chinatown. It recently “succumbed to a new landlord and rising rents.”  It was in Chinatown for nearly 30 years. Its lease was not renewed. by the landlord.  The landlord wants to build a pharmacy in its place, though there are already several pharmacies nearby (11). This type of landlord needs to learn what is really feasible from a business recruitment perspective.
  • A few other landlords – usually those unfamiliar with the downtown, retailing or even property ownership – will ask for very large increases because they paid way too much for their newly purchased building. Their huge rent increases are what they need to financially stay whole. This may be because their bank loan agreement probably stipulated a formula for determining what the rents should be. There was little room for them to consider local market factors, even if they wanted to — and too many didn’t care anyway. According to Jerimiah Moss, banks will devalue a property if it has a small business tenant but increase it for a retail chain tenant. “There’s benefit to waiting for chain stores. If you are a hedge fund manager running a portfolio you leave it empty and take a write-off” (12). In other words, such landlords have tax incentives that encourage them to demand very high rents and tolerate long-term vacancies. They also seem absolutely oblivious about how a vibrant district will increase their local property values and bottom lines.

The Fairness Issue. Local residents and civic leaders may feel that some of the merchants facing unaffordable rent increases are being unfairly treated. This issue is implicitly present in most usages of the phrase “unaffordable rents” where unaffordable is really seen as a synonym for unfair.  Should such an equivalence be accepted? Moreover, why should any government entity or nonprofit help those facing unaffordable rents? Market forces are freely at work and, to quote Barzini in the Godfather, “After all, we are not a bunch of communists.”  I would argue that it is not the unfairness of the unaffordable rents that justifies remedial action, but their most important impacts: long-term and multiple vacancies and the loss of many popular, high-quality merchants.

Vacancies. First, let’s establish that a certain level of vacancies is necessary for a downtown to work correctly and prevent ossification. Downtowns need some churn to recruit new, attractive merchants and to get rid of the dregs. I think it’s generally accepted that a vacancy rate below 5% suppresses the desired level of churn while one above around 10% can have bad effects on the district. Many consultants, downtown leaders and, perhaps more frequently, elected officials, believe that vacancies can be an unattractive creeping plague. However, the real problem about vacancies may not be the emptiness of the storefront, but the absence of an accomplish operator to occupy it. Let me anticipate those who will claim that a cluster of empty storefronts is visually an eyesore for the district, diminishes its walkability and a puts a blemish on its reputation, by asking: Is the district really any better when the vacancies are filled by unpopular, inept operations? Bad operators can repel customers and downtown visitors even more than empty storefronts.

It is also important to realize that any valid explanation of today’s retail vacancies must take a multi-causal approach that includes far more cautious consumer behavior, the rise of Millennials who prefer experiences over things, significantly reduced demand by retail chains in terms of both the number and size of their new locations, and affordable rents. The reduced retail demand is especially relevant because many of the landlords that were pushing out independents were doing so in hopes of recruiting the very chains that were hardest hit by reduced consumer favor and demand, such as the apparel specialty retailers.

It is also important to consider that reducing landlord asking rents is not the only way of reducing vacancies. As Andy Manshel reminded me, good results can be achieved by “animating vacant storefronts with temporary art or high-quality other pop up uses.” He also suggested that vacancies could be taxed, motivating landlords to sign leases.

Generally, it can be reasonably argued that concern about vacancies is a misunderstanding of the essential core problem.

The Loss of Popular, High-Quality Merchants. That core problem is not the emptiness of the vacancies, but that ill-informed landlord rent increases can result in the closings of independent merchants who are well-loved in the community. They are real losses for their customers, nearby business owners, and their district. Additionally, it usually is very hard to replace them.

However, it must be understood, that by definition, about half of a downtown’s merchants will be below average in their performance, including their ability to satisfy local customers. Are the potential closings of poorly performing, unpopular merchants the type of losses that are worthy of preventive actions by an EDO or municipal interventions? Some, who are ideologically committed to small businesses, may say yes, believing every small firm by definition is worth retaining or saving. Yet, many savvy downtown managers and civic leaders see a prime result of their revitalization efforts being the replacement of their poor-quality merchants, not necessarily with bigger operators or chains, but with higher quality operations.

Who Should Receive Help? One might cogently argue that the harm done to the public and/or district that would result from the closing of a popular and able merchant might justify an EDO or municipal intervention, but how much sway should the “fairness” of the rent increase have? For example, should an unpopular or incompetent merchant who gets an unaffordable rent increase be helped? That would imply that the fairness issue carries the day. Or will assistance only go to merchants who are able and/or popular? Is the fairness issue unrelated to the issue of the merchant’s value to the community or district? I would suggest that the fairness issue only becomes relevant when the merchant’s community value criterion is satisfied.

My observations suggest that the merchant’s value to the community is very likely to be considered when one specific business favored by an important segment of the community announces that it will soon need to move or close – whatever the cause, e.g., poor sales, increased competition, workforce problems, high operating costs (including costs of space) etc.  In contrast, because of the sheer number of businesses involved, municipal attempts to remediate unaffordable rents cannot logistically evaluate each of the benefiting firms and it would probably be a political nightmare to do so anyway. As a result, the fairness issue seems to prevail when municipal actions are taken. For example, here in NYC, the City Council has passed a bill that reduces the Commercial Rent Tax that businesses have to pay if they are located in Manhattan below 96th Street, pay $250,000+ annually in rent, and that have annual revenues under $5m (13).

In several large cities across the nation — NYC being one of them — proposals also have appeared for rent control laws that cover properties with retail uses.

What Kind of Programs Do We Need to Cope with the Unaffordable Rents Problem?  Municipal actions tend to treat quality merchants and underachievers in the same way, probably out of necessity. Moreover, both the retail rent control and merchant tax abatements seem to be rather shotgun approaches aimed at helping broad classes of small merchants.  The key actors, whose behaviors need to be altered, are the landlords, not the merchants. The retail rent control approach carries with it great potential dangers and certain resistance from the entire real estate community. Yes, the tax abatement helps some worthy merchants, but it also helps make the unaffordable rent increases more bearable. In that way, it implies the increases are justified.

Downtown EDOs may be in a far better position to mount more effective programs to influence landlord behavior. Many of the landlords are probably on their boards and many others have engaged in their programs. Anyone who wants to educate or convince landlords has to have won their esteem, trust, and confidence. The goal of such an educational effort cannot unrealistically be to convince large numbers of landlords. Instead, it should be, to convince a savvy few among them who can lead by example and thereby also exert some market pressures for others to follow.

Probably the best solution to the affordable retail rents problem is to help able merchants buy the spaces they need to do business. They might do this alone or as a group. Buying a single storefront space is unlikely unless it is from some kind of retail coop or condo. In many suburban towns and cities with populations under around 100,000, I’ve encountered retailers who own the entire buildings in which their stores are located. In big, high rent districts with stores located in big expensive buildings that is not likely

It might be possible for buildings that have multiple storefronts to lease, that a partnership of some kind might buy either the entire building if it is cheap enough or just the retail spaces in the larger more expensive buildings. These groups of retailer property buyers most likely will not emerge organically from the merchants themselves. Probably, they will need the catalytic interventions of teams lead by the downtown EDO that has strong active support from the municipal government and a civic-minded developer.

Local governments can do a lot to assist the development of the retailer-owned co-op or condo buildings:

  • Provide low-cost land or a low-cost building.
  • PILOTS just as developers are ordinarily given.
  • Other abatements such as on NYC Commercial Rent Taxes.

The EDO might also help the buyers connect to financial organizations that will provide them with loans that have reasonable terms.

If helping able retailers purchase their spaces is not viable, here are some other actions that might be tried to assist these merchants. Their effectiveness is far from assured. To influence landlords, local governments might consider:

  • Using zoning and tax incentives to reduce spaces so that they are smaller than what chain stores would want, perhaps around 1,500 SF to 2,000 SF. Landlord blowback can be expected. Also, quality independent merchants might find such spaces too small and a few chains now might still find them suitable.
  • Use zoning to limit where chain stores can go. This has been done for personal service operations and big boxes. Various legal and political problems can be expected. Landlord blowback can be expected.
  • Use their own legislative powers to change its tax code to erase any incentives for landlords to demand higher rents and tolerate long vacancies. Also, vacancies might be taxed as if they were occupied.
  • Use their external political influence to change the state’s tax code to erase any incentives for landlords to demand higher rents and tolerate long vacancies

If the retailer space purchasing option is not viable, to influence landlords, downtown EDOs might consider:

  • Creating either a formula that landlords can use to calculate an appropriate affordable rent for their retail spaces or to identify the steps in an analytical process that can help landlords make a well-reasoned decision about rent increases.
  • Educating landlords about the importance of taking into consideration district benefits and harms in their recruitment decisions.
  • Make a special effort that targets landlords new to the district, retailing or property ownership.
  • Jawbone banks about the value of small merchants to properties and downtown.
  • Issue a brief annual report that identifies the most “recruitable” types of businesses to the district and the types of spaces they will want.
  • Publicly praise and disseminate information about what landlords who are effectively dealing with the rent increase issue are doing.

To help high value, threatened merchants, downtown EDOs should assist them to:

  • Find new locations. Deft use of the Internet can help many independent retailers thrive in locations previously deemed less than optimum.
  • Find financing for the move.
  • Publicize their new location to let current and potential customers know where they now are.

Who Can Play Downtown?

As Central Social District (CSD) functions and venues have become of growing importance to the vibrancy and success of our downtowns, this basic question has become correspondingly important.

A few years ago, I put together the above table to demonstrate the user frictions that five specific CSD venues and two types of CSD venues have here in NYC. The specific venues were Bryant Park, Lincoln Center (LCPA), Madison Square Garden (MSG), The Museum of Modern Art, and The Metropolitan Museum of Art. The types of venues were movie theaters and Broadway theaters. The user frictions I looked at were:

  • When the venues were open.
  • Their admission fees.
  • Whether the user’s schedule could drive a visit or does the user have to conform to what is available on the venue’s schedule of performances.
  • Can the venue be used for visits that last 45 minutes or less? Lots of downtown visitors have holes in their schedules of that length and districts that have venues that can entertainingly plug those holes will be much stronger than those that cannot.

From the perspective of when the venues are open for people to use them, hands down Bryant Park has the most hours open, followed by the movie theaters. LCPA and MSG are basically closed during most days, while the two museums are closed 5 nights a week. If you work or go to school, these results mean that some venues are much harder to use than others.

Another key friction is how much it costs to be admitted to these venues and here is where many downtown users are simply priced out. Again, Bryant Park followed by movie theaters are the most affordable – and in many instances by gargantuan amounts of dollars:

  • Bryant Park is free to enter and the fees for using some of its attractions, such as riding the carousel or ice skating, are reasonable. It and other parks in the city cost the least to use.
  • At the time I did the research, my check of cinemas in Manhattan showed the average price for a ticket was about $13. Nationally, at the time it was about $8. I would argue that movie house ticket prices should be the benchmark of affordability because so many people still go to the movies.
  • MoMA and the Metropolitan Museum of Art rank next in lowest general admission prices. The Met “asks” for a $25 donation; MoMA requires it. The Met request is based on the deal the city made when giving land for the museum that gives NYC residents free admission. Residents can pay what they want or nothing at all. A $25 fee/donation to these museums would be 1.9 times more than the average cost of a movie ticket in Manhattan.
  • The prices at Lincoln Center are pricey. An average ticket to the opera costs $156. That’s 12 times more than going to a movie and taking a four-member family could cost a real bundle. If you want to accept alpine, nose-bleed seats you can get a ticket to a NY Philharmonic concert for about $29. But prices go up to about $112/concert if you are a subscriber to a series. That’s 8.6 times more than a movie ticket. Tickets to the opera and philharmonic concerts can be even higher than those cited if they are purchased on the secondary market and there is strong demand for them. But, given that their audiences have weakened in recent years, the markups are not as large as for Broadway shows or Madison Square Garden events. Perhaps in recognition of its high admission prices as well as its mission to serve a broad public, the Philharmonic does give a lot of free concerts on the LCPA’s campus as well as in the boroughs outside Manhattan. It also has a significant educational program in NYC’s schools.
  • In 2013, the average price for a ticket to a Broadway show was $98.64. Back in 1955, for her birthday, I took my girlfriend to see Mr. Wonderful on Broadway. We had dinner before at a steakhouse, Gallagher’s and to get to and from I hired a limo. It was a very memorable evening. The whole thing cost under $70, with the fifth-row center seats costing about $8.50 each. Adjusting for inflation, the price of those tickets would be $73.91 in 2013 dollars, substantially less than the actual $98.64. The difference is probably substantially accounted for by higher costs, such as for labor, talent, marketing, and equipment, etc. The biggest problems with today’s Broadway theater ticket prices is that so many of the tickets are bought by dealers who then resell them at substantial markups and that some hot plays are asking for $500 a ticket. Paying $1,000+ per ticket for hot shows.in the secondary market is far from uncommon.
  • The average ticket to a Knicks game at Madison Square Garden, in 2013, cost $125, while a ticket to a Rangers was $78. A ticket to a Billy Joel concert at the Garden could range from from $64 to $124. However, here too, a significant percentage of the tickets are captured by dealers in the secondary market and prices for a very popular game or concert can go above $1,000. Joe Six-Pack fans are unlikely to have the financial resources to attend with any regularity the basketball and hockey games of their favorite teams. Their attendance is more likely confined to special occasions for which they either plan early and save or are gifted. For these fans, downtown sports bars may be one way to deliver the more affordable TV access to these games in an arena-like, fan-filled setting.

Parks, other public spaces, and movie theaters are entertainment venues that help make a downtown everyone’s neighborhood. They are the most easily accessible and the least expensive to visit. Consequently, they provide reasons for most of a community’s population to take psychological possession of their downtown. Where they are absent or weak, the downtown will be lacking very important support mechanisms. On the other hand, attendance at the events of many high culture performing arts venues, popular concerts, and professional sports events can only be afforded by those with above-average amounts of discretionary dollars to spend. These folks, too, are assets for their downtowns, assets that downtown leaders only dreamed of attracting in years past.

The Impact of Tourism. The table above was generated from data published online by the Broadway League. It shows just how much the attendance at Broadway shows is dominated by out-of-towners. Just 22% of the ticket holders are NYC residents. Another 18% come from the surrounding suburbs. Most, 61%, are tourists, with about 46% coming from other parts of the USA and about 15% from other countries.

Strong tourism can have important impacts on a local economy. For example, here in NYC, we have about 60 million tourist visitors annually and their direct spending in 2016 amounted to about $64.8 billion (14). About 6.45 billion went to firms in the recreation and entertainment industries. Without tourist expenditures for Broadway tickets, the relatively high ticket prices probably would not have been reached or maintained. One may wonder if a lower flow of tourists would have resulted in lower Broadway theater ticket prices that would have attracted more buyers from NYC residents and from folks in the surrounding suburbs.

As is happening in many entertainment niches (defined to include cultural/arts venues) across the nation, tourism now accounts for very high percentages of the attendance at many of NYC’s major entertainment venues. This is particularly true for our most prestigious museums, where tourists account for 75% or more of their attendance (see table above). These institutions aspire to be and are world-class venues. That means that though they are located in NYC, for New Yorkers, they are no longer just theirs. Some psychological adjustments may be needed. As I write this I remember many years ago, when my neighbors and shopkeepers in Paris warned me in the late spring, that soon “your Americans and the Germans would come” and Paris would not be the same until the fall. They were absolutely right. The buildings, the Seine, the Metro, the museums were all the same, but Paris in the summer was very different. My French friends explained that they felt during the summertime as if their beloved city is taken over by foreigners. It’s really not theirs during those months. Things may have changed in Paris since my student days there, but that sense of tourists taking over is one I’ve encountered in several other communities here in the USA

Tourism can be boon for many downtowns, but it also often is a two-edged sword, that brings a number of problems with it. Some of these problems are obvious, such as how tourism can impact housing and retail, while others may be quite subtle, such as residents psychologically feeling dispossessed in their own communities.   Part of the New Normal, as more and more downtowns become adept at attracting tourists, will also be the emergence of these problems.

 

ENDNOTES

 

1. Nellie Bowles. “Dorm Living for Professionals Comes to San Francisco.” New York Times. March 4, 2018. Retrieved from:  https://www.nytimes.com/2018/03/04/technology/dorm-living-grown-ups-san-francisco.html?

2. “Employee lives in truck in parking lot.” “Business Insider. October 2015. http://www.businessinsider.com/google-employee-lives-in-truck-in-parking-lot-2015-10

3. See: http://www.businessinsider.com/american-suburbs-dying-photos-2017-10#in-lieu-of-traditional-housing-some-millennials-are-turning-shipping-containers-sailboats-and-vans-into-homes-59

4. Melia Robinson. “All the crazy things happening in San Francisco because of its out-of-control housing prices.” March 6, 2018. http://www.businessinsider.com/why-people-are-leaving-san-francisco-2018-3

5. Wendy Koch, “Mini-apartments are the next big thing in U.S. cities,” USA TODAY, August 1, 2013. http://www.usatoday.com/story/news/nation/2013/07/30/tiny-apartments-apodments-catch-on-us-cities/2580179/

6. Prachi Bhardwaj. “San Francisco is losing more residents than any other city in the US, creating a shortage of U-Hauls that puts a rental at $2,000 just to move to Las Vegas” BI. March 5, 2015. http://www.businessinsider.com/san-francisco-bay-area-residents-moving-away-increase-u-haul-rental-prices-2018-3.

7. Moses Gates. “How a pied-à-terre tax could help solve New York City’s housing crisis.” City & State New York. Aug. 30, 2017. https://www.cityandstateny.com/articles/opinion/pied-a-terre-tax-could-help-solve-new-york-city-housing-crisis.html

8. Nicole Gurran and Peter Phibbs. “When Tourists Move In: How Should Urban Planners Respond to Airbnb?” Journal of the American Planning Association. January 2017. 2017https://www.tandfonline.com/doi/full/10.1080/01944363.2016.1249011)

9. Richard Pilla. “Why banks overpay for real estate” BAI Oct 6, 2015 https://www.bai.org/banking-strategies/article-detail/why-banks-overpay-for-real-estate

10. N. David Milder. “As we leave the recession, affordable downtown retail rents are a revitalization imperative.” Downtown Idea Exchange. May 2010.  https://www.downtowndevelopment.com/perspectives/dixperspectives050110.pdf

11. “Wong Kee Vanished.” http://vanishingnewyork.blogspot.com/2018/03/wong-kee.html Retrieved on March 14, 2018.

12. Quoted in Edward Helmore. “New York’s vanishing shops and storefronts: ‘It’s not Amazon, it’s rent.’” The Guardian. Dec 24, 2017. https://www.theguardian.com/business/2017/dec/24/new-york-retail-shops-amazon-rent?CMP=share_btn_link

13. Sarah Maslin Nir. “Tax Break Could Help Small Shops Survive Manhattan’s Rising Rents.” New York Times. Nov. 28, 2017. https://www.nytimes.com/2017/11/28/nyregion/rent-tax-manhattan-local-shops.html

14. Tourism Economics. “The Economic Impact of Tourism in New York.” https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/NYS_Tourism_Impact_2016.pdf

Posted in Central Social Districts, Creative Class, Downtown Redevelopment, Economci Development, EDOs, Entertainment niche, Formal entertainment venues, Housing, Informal entertainment venues, Luxury retail, movie theaters, New Normal, Parksmand public spaces, Planning and Strategies, The Arts, Tourism, Trends | Tagged Housing |

Let’s Get Real About: The Potential Audiences for Events at Arts Venues in Smaller Downtowns

Posted on August 15, 2017 by DANTH

The Arts As an Important Downtown Revitalization Tool — Redux. Part 3

By N. David Milder

Introduction

This is the third and final article in a series aimed at helping downtown leaders and stakeholders (downtowners) in our smaller communities to more accurately assess just how strong an economic engine the arts can be for their districts. The focus, this time, is on the potential audiences for the events their arts venues might put on. Audience preferences and behaviors are changing and create significant challenges for those programming arts venues. In part, this is due to the electronic consumption of arts products – e.g., books, films, concerts, recorded music, plays, operas, etc. Of course, some performing arts have long had electronic distribution via radio, recordings and some TV, e.g., all forms of popular music, country music, classical music, jazz and opera. (Texaco sponsored radio broadcasts of the Metropolitan Opera for 63 years!) However, Internet streaming and the use of personal electronic devices may have brought about paradigm-level changes in arts consumption, and its full impacts are still unclear.

Perhaps even more important determinants of changing arts consumption preferences are shifting demographics and consumer behaviors such as

  • The maturing of the huge Millennials age cohort and its arts preferences and spending patterns.
  • Our growing “minority” populations, especially Hispanics, and their arts/entertainment preferences.
  • Our long-term wage stagnation and the emergence of much more cautious consumer behaviors.

Together, they have created significant constraints on an arts organization’s ability to penetrate local consumer markets. They’ve strengthened arts venue admissions prices and convenience as determinants of personal decisions about whether or not to attend an arts event. Consequently, more and more arts organizations must choose between:

  • Charging higher and higher admission fees for high-quality events that only can be afforded by affluent households.
  • Assuming greater financial jeopardy by either lowering their prices or offering free access to a much broader audience demographically, or
  • Providing performance and exhibition events that are perhaps less attractive, but can be provided at an affordable cost for the arts organization to produce and at affordable prices for their audiences.

We may well be in the midst of a trend where in person attendance at arts events is becoming overwhelmingly for the wealthy, while the middle and lower income strata consume arts products primarily through electronic media.

Most towns with populations under 25,000 do not have large numbers of wealthy households that can most easily afford arts event admissions fees. Their arts venues must compete with arts/entertainment consumption opportunities available physically nearby as well as through electronic media. To compete effectively, they must provide sufficiently attractive events that are not financially threatening for them to produce, yet affordable for consumers. That can be quite a challenge.

A Closer Look At Arts Consumption Through Electronic Media

Just as the Internet has disrupted our nation’s retail industry, electronic access channels are changing how Americans consume arts/entertainment events and content. For example, in 2012, a large National Endowment for the Arts (NEA) survey on public participation in the arts found that 71% of its respondents had consumed arts through electronic media in the past year:

  • 61%    Used TV, radio, or the Internet to access art or arts programming
  • 38%    Used a handheld or mobile device to access art
  • 27%    Used a DVD or CD player, a record-player, or a tape-player to watch or listen to music or to programs about theater, dance, visual arts, or literature. (1)

Today, most movie watching in the US is not done in movie theaters, but on TVs and personal electronic devices – and by a very wide five-to-one margin (2). The NEA survey also found that 4% of the respondents watched operas electronically (2.1% reported attending in person), while 7% claimed that they watched some form of dance recital, musical or stage play electronically. Since 2012, those numbers probably have increased. A number of theater and opera companies have made much stronger efforts to engage in simulcasts and other forms of electronic distribution to regain audience share and strengthen their finances. The Metropolitan Opera Company in NYC, for example, will simulcast 10 operas in 2,000 theaters located in 70 countries during its 2017-2018 season (3).

Frequently, this electronic distribution has meant that famous plays and operas with celebrated performers became available to audiences in theaters – including many movie houses — in smaller communities in which they otherwise would never have appeared. This enabled these theaters to have a better “arts product” to offer in their local market areas. On the other hand, the big arts organizations’ expansion of their electronic performances may mean more competition for smaller performing arts companies, e.g., regional theaters and opera companies. Or they might be market builders for these smaller performing arts companies as, in years past, Texaco’s opera broadcasts were for smaller opera companies across the nation. Speaking with such uncertainty here is intentional since it demonstrates a key characteristic of the situation most arts organizations now are in when dealing with e-arts.

Museums across the world are rushing to put their holdings on their websites. See, for example, https://www.rijksmuseum.nl/en/rijksstudio where you can browse through 606,474 of its works of art.

Moreover, by 2013, 79% of the sales of music and videos and 44% of books and magazines in the US had moved to the Internet (4).

While it is still too early to tell with any real certainty how e-arts are impacting attendance at events held at most brick and mortar arts venues., movie theaters are an exception. Most observers agree that electronic consumption has reduced attendance at our movie theaters. Certainly, by offering households a cheaper and very convenient way to consume arts/entertainment products, they directly meet consumers’ strongest concerns about attending arts events and probably reduce to some unknown extent the need to go to another geographic location to consume them. Annual movie attendance today is nowhere near the per capita levels it reached in the 1930s and 1940s when weekly attendance was far from abnormal. More recently, aggregate movie attendance has dropped by about 14% between 2003 and 2016, though the US population had grown by about 11% (5). Also, since only about 12% of the movie industry’s annual sales come from US movie theaters, they are seen now by industry leaders primarily as a marketing tool to support electronic revenue streams, not as a major profit center (6). Some movie moguls would like to stop distributing all films to them and rely solely on pure digital distribution channels.

On the other hand, the practices of one theatre in a smaller community suggest that the distribution of arts/entertainment events over the Internet sometimes can be quite advantageous for such venues. This theatre not only offers simulcasts of arts events, but also football playoff games and baseball world series games. The sports events are offered free and the theater recoups costs from its concession stand. This theater is not so much in the arts business as it is in the entertainment business, of which the arts certainly are an important part.

Savvy arts organization leaders may, in the future, find more ways to positively leverage the electronic media.

Patterns in Arts Venue Attendance

There are many kinds of arts events. As common sense indicates and opinion surveys confirm, the content of an arts event is one of the most important determinants of an individual’s decision to attend it or not – more about this later. Knowing the popularity of the various types of arts events is critically important for any arts organization, especially new ones. Such knowledge should help arts venues and organizations shape the events they put on and how they are marketed.

About the Data. The discussion below is based on a secondary analysis of various kinds of data collected by a number of other organizations. There are two ways of looking at admissions. The first is how many times people report attending various types of events in assorted opinion surveys. The second is based on the admissions reported by arts venues or organizations, usually when they are surveyed by related professional organizations such as the League of American Orchestras or Opera America. Each has its methodological problems that cannot be detailed here without making a major diversion. Let’s just say that they should be treated with some caution, but when their findings show consistency and agreement they deserve serious attention. However, that means that the same subjects have to be looked at from two perspectives, even though it may appear repetitive

Attendance Data from Surveyed Individuals. The NEA has conducted three important large surveys on the public’s participation in the arts in 2002, 2008 and 2012. Some of their findings about attendance for a variety of performing arts events are presented in the table below.

 

One thing to notice is that fewer than 12% of the respondents in all three NEA surveys attended these kinds of “high culture” performing arts events. They have not captured large market shares. Moreover, other data sources indicate that attendance for these types of performances pales in comparison with that of motion pictures. For example, in 2013, about 68% of the US/Canada population went to the movies at least once in the previous year (7). The relatively small audiences for these performing arts forms suggest that arts venues that try to capture them will do well if they either have a large cluster of these potential audience members living nearby or are able to penetrate a relatively large market area in which sufficient numbers of them are present. These market areas are probably much bigger than the trade areas of the retailers in the towns in which the arts venues are located. Such market penetration will require a very effective marketing program and strong arts products.

The second thing to notice is the pattern of attendance decline that afflicted all types of events save those involving Latin, Spanish and Salsa music. The Great Recession had an obvious hand in this. Any rebounds by 2012 were uneven. The attendance declines were significant: -23%, -25%, -11% -31% and -34%. Operas and ballets, according to these surveys, were hardest hit.

The above table is based on other survey data presented in the National Arts Index, 2016 Report produced by Americans for the Arts. It is based on a collection of surveys that were done by one research firm of people attending arts events. The Index report provides attendance data for each of the types of venues/events listed for the years 2002-2013, with 2003 being set as the base comparison year. In that report, attendance statistics for 2003 are treated as having an index value of 1.0. The table above looks at just three of those years: 2003, the base year; 2010, the year after the Great Recession formally ended, and 2013, the last year for which the Index had complete information. By 2013, economic recovery was well underway, if bumpy and uneven.

Data about population growth has also been inserted in the table, with that of 2003 again having an index value of 1.0. It is there to serve as a kind of benchmark of potential arts attendance growth. If the population grows, one might reasonably expect arts attendance will, too. However, such growth would not be strictly linear. There is probably a lag time before “newcomers” become old enough or sufficiently acculturated to attend arts events. To provide some insight on that contingency, data on population growth for the 1993-2002 time period is also included. Between 1993 and 2013, there was substantial population growth — about 11% between 1993 and 2002 and about 9% between 2003 and 2013. This population growth should have had some significant positive impact on the potential size of arts event audiences, even allowing for a time lag.

The Index’s data confirms the patterns found by the NEA surveys. Compared to 2003, the decreased attendance rates for high culture performing arts events in 2013 were:

  • Dance and ballet performances, down from 1.0 to 0.87
  • Live theater shows, down from 1.0 to 0.87
  • Symphony concerts and operas, down from 1.0 to 0.79.

All had significantly fallen by 2010, probably due in large part to the Great Recession.

The table also shows that those performing arts that might be considered to be more as popular entertainments than vessels of high culture were somewhat more resistant to the recession and showed significant audience growth between 2010 and 2013. Their index scores moved over those four years from:

  • 0.95 to 1.25 for country music concerts
  • 0.93 to 1.34 for r&b/rap/hip-hop concerts
  • 1.02 to 1.17 for rock concerts.

Online visits to a number of theaters and performing arts centers in smaller and medium-sized cities across the nation showed that their schedules were dominated by popular entertainments rather than high culture performing arts events. This is probably the programming path that new performing arts venues in our smaller communities should pursue if they want to have audience appeal and financial stability.

Given our nation’s population growth and the ability of popular entertainment types of performing arts to grow significantly in the post recession years, the public’s reported lower attendance at dance and ballet performances, live theater shows, symphony concerts and operas probably are due to factors other than those associated with the Great Recession. One hypothesis is that they simply became less popular.Another is that their ticket prices are too high.

Culture Track 2014 also looked at arts audiences. It used an online survey with 4,000 + respondents. However, those respondents “were double-confirmed for interest in cultural events and attendance to at least one cultural activity in the past year” (8). The survey consequently only looks at the “culture choir,” so to speak. Doing that can be very useful because the members of this culture choir are the most likely patrons of cultural events and its always good to know your customers and their characteristics. However, less useful for the current analysis, the survey did not differentiate participation done at an arts/cultural venue in person from participation done electronically, e.g., via streaming or the radio or TV. The survey found that among these proven culture consumers, attendance between 2011 and 2014:

  • Rose for historic attractions, living museums, science museums, art museums and art galleries. Declined for children’s museums. Moreover, overall, the museums attracted the most people.
  • Rose for musical theater, but declined for dramatic theater.
  • Rose for classical music and jazz, but declined for opera.
  • Declined for both modern dance and classical dance. (9)

The attendance patterns of these proven culture consumers differed from those found in surveys of our general population that also included those who did not attend arts events. Their attendance at museums, classical music, and jazz events rose. However, opera and classical dance also showed declines among the culture consumers.

Data from Surveyed Arts Organizations. These surveys have some important built in potentials for significant errors. First, they use samples of orchestras, museums, opera companies, theater companies, etc. The question of how representative each sample is always is an issue. The response rates among smaller venues in each group, for example, has had a substantial variation that has impacted on findings. Second, the surveys are then used to extrapolate to the entire arts sector and this can also bring in errors. For example, the Theatre Communications Group (TCG) represents 1,750 nonprofit theatres. Its annual report for 2015 on aggregate attendance, average capacity utilization, tickets sold, packaging and pricing was based on the responses of 198 theatres. The results of that survey were then extrapolated out to the 1,750 theatres that are assumed to be the entire nonprofit theatre universe. Another issue is which events are being included in an organizations counts. For instance, orchestras and dance companies can have traditional concerts, but also educational and community outreach events. Often just attendance at the traditional concerts is counted.

The table below shows that two types of for-profit performing arts events – Broadway shows and touring Broadway shows – basically came through the Great Recession with larger audiences. However, as noted earlier, attendance at movie theaters — that are also for-profit ventures — declined during this period.

Consistent with surveys of the general public’s (not the culture choir’s) participation in the arts, the surveys of arts organizations found shrinking audiences for art museums and operas in 2010 as compared to 2003, and by 2013 they had not rebounded.

SYMPHONY ORCHESTRAS. Contrary to the surveys of the public, the surveys of organizations that manage symphony orchestras and nonprofit theaters in the Arts Index data show significant attendance rebounds from 2010 in 2013 and growth from 2003. It is useful to take a closer look at them.

The symphony attendance went from an index value of 0.94 in 2010 to 1.15 in 2013, while the nonprofit theatres went from .90 to 1.02. The Arts Index explains that the increase in symphony orchestra attendance counts in 2013 “reflects higher response rates to the League (of American Orchestra’s) survey among small orchestras, which have above-average levels of attendance at community engagement and education events” (10). These events, that often are contrasted with “core events,” are regularly uncounted. As the Arts Index, 2016 Report notes: “Much symphony, theatre, dance, and opera activity is offered in educational and community settings to large audiences. Those audiences, however, are not systematically counted” (11). The Arts Index apparently includes such counts when available.

In 2016, the League issued an important report that recognized a significant decline in its core audience between 2010 and 2014:

“Overall, audiences declined by 10.5% between 2010 and 2014…, broadly in line with other performing arts sectors…. This decline was sharpest within tour audiences, which decreased by almost 50% over the five-year period” (12).

However, it proudly proclaimed in the same report that:

“Over the same time period, the symphony has become more accessible to a wider range of people, with the average ticket prices dropping, free attendance rising, and orchestras engaging large and diverse audiences through a range of education and community engagement programming” (13).

The decline in tour audiences suggests that the orchestras had severely reduced drawing power for smaller concert venues in smaller communities.

That report made a number of other points that also illuminate the position many performing arts companies may find themselves in these days:

  • Free Activities. “In 2014, free attendance at orchestra performances, activities, and other musical events was at its highest point in the previous five-year period, and the lowest ticket prices offered were at their cheapest and most affordable level.” (14)
  • “Approximately one in four performances, musical activities, and events offered by League member orchestras was delivered free of charge to audiences and participants, each year from 2010 to 2014.”
  • “Opportunities for audiences to attend both (community engagement and education programs) and symphony performances for free increased over the five-year period. Indeed, by 2014, 15% of all audience members for “core performances” (a term used to refer to all performances excluding those given on tour or within the orchestra’s community engagement and education programs) were attending without charge.”
  • Lower Admission Fees. “Over the same time period, the cost of attending paid-for orchestra performances became more accessible to a wider public. Specifically, League member orchestras dropped the price of their most expensive tickets by 30% between 2010 and 2014, and that of their least expensive tickets by 12%, on average.”
  • Financial Stress Remains. “Despite this drop in ticket prices — but broadly in line with other performing arts sectors — 60% of the 65 League member orchestras reporting data to the OSR reported a drop in overall attendance, between 2010 and 2014….”

Free admissions and lower ticket prices are apparently needed, yet unable to stabilize attendance. Both, however, are likely to place the arts organizations under increased financial stress and with a greater need for contributed incomes. Yet, the biggest benefits that these symphony, theatre, dance, and opera companies may provide in smaller communities may result from their free admissions and community engagement and education programs.

NONPROFIT THEATRES. These arts organizations were having attendance problems well before the Great Recession. Again using the Arts Index data, with attendance in 2003 equaling an index value of one, the annual index scores for nonprofit theatres between 2004 and 2008 were 0.94, 0.95, 0.89 and 0.90. However, in 2012 attendance had surged to 1.07, though it declined to 1.02 in 2013.

In 2016, the Theatre Communications Group, the industry organization for nonprofit theatres, issued a major report that noted: “Attendance is an ongoing challenge and serious concern for theatres” (15). Between 2011 and 2015, attendance peaked in 2012, but then entered into several years of modest decline. Over these five years, total attendance dropped by -3.6%; -2.7% for resident audiences, and a more significant -14.1% for touring audiences. These declines occurred despite an increased number of performances for both resident and touring audiences (16).

The audience decline for the theatres is an admitted serious concern, but it has not been as severe as it has been for the orchestras, especially for touring performances. It is also interesting to compare them along a few other dimensions:

  • As with the orchestras, nonprofit theatres have a significant number of free admissions. Three to four percent of all performances are free (compared to 25% for orchestras) and 10% of their resident audiences attended free of charge (compared to 15% for orchestras). (17)
  • Community outreach and education activities are also important for the theatres, though they charge fees for them that are a significant revenue source. However, much of this outreach and educational activity appears to be related to “training,” for which fees may be expected by participants.
  • In contrast to the orchestras, nonprofit theaters increased their admission fees between 2011 and 2015: 11.4% for subscriptions, 12.3% for single tickets (18). This might be because theatre ticket prices have been lower or perceived as more affordable by potential audience members than orchestra ticket prices. Or it might be because theatres are less interested in trying to attract less affluent potential audience members.

Some Observations:

  • Fluctuations in annual attendance are to be expected at performing and visual arts events, much as any business has fluctuations in customer traffic and sales. Additionally, just as businesses were adversely impacted by the Great Recession, so were nonprofit arts organizations.
  • However, most of the performing and visual arts have had relatively unsteady and slow recoveries in attendance from the recession.
  • This struggle has continued despite significant population growth over the past two decades. Two possible explanations are: they simply have become less popular generally or they may not be winning over as many young people and immigrants as they did in the past.
  • Another troubling factor about arts attendance is that there seems to have been a critical and steady decline in the number of people who frequently attend arts events. For example, Culture Track’s surveys found that in 2007, 31% of its culturally engaged respondents reported attending three or more events per month, but in 2011 that number had fallen to 22% and in 2014 it was only 15% (19). The arts’ core consumer base appears to be shrinking.
  • The degree to which potential audience levels at brick and mortar arts venues have been clipped permanently by electronic consumption channels is still unclear, but such a diversion probably has occurred. For example, Culture Track’s 2014 survey found that about 8% of its respondents reported less frequent attendance at cultural events, because they were “experiencing culture in alternative ways” (20).
  • Some types of performing arts, however, have demonstrated a significant ability to quickly rebound from the recession and to sustain meaningful audience growth in the post-recession years. These performing arts are conventionally seen as popular entertainments – e.g., salsa music, R&B, rap, hip hop, etc. Those that have struggled most are those often associated with high culture or affluent audiences: e.g., opera, ballets, symphony orchestras.
  • In this dynamically changing environment, it is important that arts venues and arts organizations in our smaller communities know who their potential audience members are, what types of arts they are likely to consume, and the spending power they likely would bring with them.
  • To win and maintain broader community support, they also should be prepared to provide a significant amount of community outreach and education activities as well as a significant number of free admissions. Doing this will likely increase their need for contributed incomes significantly.

Arts/Cultural Venues and Organizations, For-Profit or Nonprofit, Are in the Entertainment Business

Unless they have a sufficient base of very rich, very culturally superior and very socially snobby people to comfortably support them, any arts or cultural organization should guard against coming across to the public as having those attributes. Not only is it morally offensive, it’s bad for business and their survival.

People engage in cultural activities for basic reasons of personal enjoyment and social conviviality. For example, Culture Track’s 2014 survey found that the strongest reason its large sample of people who attend cultural events gave for making cultural activities a part of their lives was that they were entertaining and enjoyable, 93%. It was followed by being able to spend time with friends and family, 83% (21).

Also, as was noted above, the performing arts that are conventionally seen as popular entertainments are precisely those that have done best over the past decade. In many small and medium-sized communities, their successful performing arts centers (PACs) or theatres have recognized this fact and structured their programs accordingly.

Event Content and Admission Cost Drive Individual Attendance Decisions

Culture Track’s 2014 survey investigated the positive and negative elements – termed motivators and barriers – that are involved in an individual’s decision-making about attending cultural events. It listed many factors. However, as can be seen in the table below, event content and admission cost stand out because they rank either first or second among both the motivators for and the barriers to attendance. Content is the most important motivator of attendance; event cost is the most important barrier.

The above discussion of arts audience admissions delved into the popularity of different types of arts event content as well as their fluctuations and uncertainties. In the first article in this series, considerable attention was focused on the need for arts venues/organizations to have strong “arts products.” If an arts organization/venue is to succeed, it must certainly provide the types of events that local arts consumers want and enjoy.

The Culture Track survey also shows that the desirable arts product must also be provided at a price that people can afford.

Affordability is a function of the product’s price and the consumers’ incomes. Those with higher incomes obviously can afford more things. The table below shows that households in the top income quintile account for 54.8% of all household expenditures for entertainment fees and admissions — that includes those for arts/cultural events. The top 40% of households by income account for 75.4% of all entertainment fees and admissions expenditures. For smaller communities that want to develop strong arts venues that draw significant audiences, the distributions of household incomes in their market areas should be significant factors in determining their admissions price structures.

The Content – Ticket Price Connection. This is very important: people will be willing to spend more for content they really like. They also are less likely to spend much on tickets for events with content they are unfamiliar with or dislike. This connection is aptly illustrated in this quote from a report from the Wallace Foundation:

“I can see myself paying $100 for a show I’ve wanted to see for a long time, but not more than $50-60 for a normal show, and really more like $20 to 30 if I can.” (22).

Impact of Deliberate Consumers. Americans have suffered from wage stagnation for decades and the Great Recession sparked a wave of more deliberate and conservative consumer behaviors (23). Though this more deliberate consumption has eased somewhat with economic recovery, it still remains very strong among middle-income households and even continues to impact on luxury retail purchases. It also has had its impacts on attendance at arts events. For example, Culture Track’s 2014 survey found that 40% of the respondents reported attending fewer culture events because of economic conditions, and among them:

  • 82% reduced expenses across the board
  • 51% cut back on leisure activities
  • 51% reprioritized their expenditures of leisure time and money
  • 20% experienced culture in alternative ways (24).

Some Ticket Prices. Expectations about ticket prices often are higher than they actually are. In one study, for an actual ticket costing $20:

  • Millennials estimated it would cost $44.57
  • Gen Xers estimated it would cost $34.00
  • Boomers estimated it would cost $29.05. (25)

Generally, smaller communities have arts organizations with smaller audiences and smaller budgets – and lower ticket prices, as demonstrated in the table below that shows ticket prices for 38 opera companies by the sizes of their annual budgets.

A good benchmark for setting ticket prices is the average cost of going to the movies in the local entertainment market area. In 2016, the average ticket price was $8.65 nationally, with significant local variations. Throw in about $ 4.50 for popcorn and another $4.50 for a soda and that brings the total up to about $19.00. The more seats that are available near that price, the larger the potential audience — though admission revenues may well decrease.

Online visits to several museums, theaters and performing arts centers in smaller communities showed:

  • Museums generally have admission fees of $20 or less, with lower fees for students, children, and seniors. Not much different than $25 at MoMA in NYC or $20 at the Art Institute of Chicago for local residents.
  • Tickets for performing arts events ranged from $20 for a play done by a local theater company located in a small rural town, to around $40 to $65 for music concerts in larger rural regional centers, and to a range of between $108 and $1,748 for a seat at a Tom Jones concert at a PAC in a large, densely populated and relatively affluent suburban regional area.

A very important determinant of an arts venue pricing structure may be the definition of its primary mission. If it is to serve residents of the surrounding community and enhance their quality of life, then it will likely have inherent pressures to have lower prices and more free performances that incentivize greater community attendance. If, on the other hand, the venue/organization is tasked with enhancing the area’s prestige or to draw more affluent visitors into its district, then its targeted audiences and pricing structure would likely be quite different.

The Social Aspects of Attendance

Going to arts events with friends and family is an important motivator for attendance. Culture Track’s 2014 survey found that 83% of their proven culture consumer respondents cited spending time with friends and family as an important reason for their engagement in cultural activities. It also found, as displayed in an above table, that:

  • 83% said they were motivated to attend cultural events because they were invited by family or friends.
  • 73% were motivate because their spouse/partner was interested (26).

A report on building Millennial audiences done for the Wallace Foundation found that socializing and having someone to go with are important factors when they decide whether or not to attend an arts event (27). Culture Track 2014 found that: ” Millennials are far less likely than older generations to go to a cultural activity if it means going alone.”

This behavior pattern explains why arts venues can be such important elements in a downtown’s Central social District and why it will probably become even more important as Millennials age.

The Rising Importance of the Millennial and Minority Market Segments

Our nation is changing demographically. Minority populations are growing rapidly and projections indicate that within about three decades, the white population will be a minority. The largest growth has been among Hispanics. Also, Millennials recently became the largest age group in our population, supplanting the Baby Boomers. The fact that their entry into adulthood has been heavily stamped by effects of the Great Recession means very significant changes are appearing in consumer behaviors – and that includes the consumption of arts products.

Minorities. One of the best windows on the importance of the minority market segments is to look at attendance in movie theaters.

It is amazing how infrequently movie theaters are mentioned when the enhancement of downtown arts offerings is under discussion. Nevertheless, they are often critical cornerstones of many downtown entertainment niches and Central Social Districts. Unfortunately, their future, especially in smaller communities, remains uncertain, even though lots of small cinemas recently successfully dealt with the threatening need to adapt to the digital distribution and projection of films. Besides the presence of a number of Hollywood moguls who want to dump movie theaters as a distribution channel, theater owners are increasingly adopting a strategy that will lead to significantly higher picket prices. It is seen as the best way to cope with declining attendance.

For example, the number of movie tickets sold in 2016 was 86% of the 2003 sales (see above table). On the other hand, gross revenues from ticket sales had increased by 123%, and ticket prices had jumped by 143%, about 12% higher than inflation. To deal with declining attendance, theaters owners have determined that their financial future rests on offering more amenities – big leather reclining seats, terraced seating, restaurant type food and drink, 3D and IMAX screens, etc. – for which they can charge higher fees. The viability of such a strategy is most problematic in smaller market areas from the perspectives of both the theater owner and movie goers. For more on this see: https://www.ndavidmilder.com/2014/05/downtown-formal-entertainment-venues-part-4-movie-theaters

Movie attendance, however, has not been uniform across all ethnic groups. As can bee seen in the table above, between 2012 -2016, the average per capita movie attendance of African Americans, 3.86, Hispanics, 5.46, and Asians, 4.90 were higher than that of Caucasians, 3.36.

This, of course, is also reflected in annual ticket sales:

  • Although African Americans, Hispanics, and Asians only account for about 38% of the US population, they account for 49% of the movie tickets sold.
  • Caucasians represent 62% of the population, but account for 51% of the tickets sold.
  • Hispanics over the five-year period accounted for 21% of the tickets sold, but in 2012 they accounted for over 30%.
  • The trend is for minority movie attendance to grow and for Caucasian movie attendance to decline.

One might wonder where many movie theater operators would be today without their ethnic minority patrons?

Movies are an art form that can attract minorities with relative ease compared to many other performing arts for three reasons:

  • It is familiar to them. Even if they are immigrants. They do not have to learn what they are about.
  • It is relatively very affordable.
  • It is probably easy for minority patrons to go to a movie with friends and family, because prices are affordable and cinemas are probably relatively easy to get to.

 However, as the growth of Salsa and Spanish music, Rap and Hip Hop suggest, the influence of these minority groups will have an increasing impact on our art forms in the future as jazz and rhythm and blues did in the past. Of course, as their population sizes and household incomes increase, so will their impacts on visual and performing arts audiences.

Millennials. In 2015, Millennials (e.g., those aged 20 to 36 in 2017) became the nation’s largest living generation, then numbering 75.4 million people. Baby Boomers (aged 53-71) were the second largest, with 74.9 million (28). While the Boomers have far more purchasing power, they are aging out. The Millennials, many of whom had the early years of their careers and incomes hindered by the Great Recession, the slow growth of our economy over the past decade and/or very burdensome student loans have started to have their major impacts on our economy — and on the arts. Moreover, their run is only in its early stages and it will be a long one.

As was noted above, the affordability of ticket prices is a key factor in individual decisions about attending arts events and in the determination of the sizes of arts audiences. The levels of household incomes and discretionary dollars structure how much individuals can pay for arts admissions. A report issued by the Wallace Foundation found that compared to prior generations at similar ages, Millennials are more financially challenged:

  • They have lower annual earnings.
  • They have lower net worth.
  • Higher percentages of them have student loans and the loan amounts are much higher (29).
  • It is unlikely that these lags in earning and net worth compared to prior generations will disappear even as their careers mature.

The Wallace Foundation study also looked at attendance by 18 to 34-year-olds in 1992, 2002 and 2012. There were declines in all of the studied performing arts: theatre-musicals, jazz, non-musical plays, classical music, dance (non-ballet), ballet and opera. What is interesting is that save for opera, all the others were already in decline in 2002 when compared to 1992 (30). The performing arts’ problem with attracting young adult audiences apparently is not that new.

Culture Track’s 2014 survey found that Millennials was the generation that attended the most events per month and that had the most folks who frequently attended cultural events, i.e., 3+/mo (31). However, since that survey also found that the number of frequent cultural consumers had declined by half since 2014, it is likely that their number has also declined significantly among Millennials compared to prior generations when they were of the same ages.

Ticket pricing will probably have a big affect on an arts venue’s ability to attract Millennial patrons. These venues also will have to compete with other entertainment events that may be more affordable. Moreover, Millennials – who grew up using the Internet and digital devices – are more likely to consume art products digitally, and those arts products are also likely to have the advantages of lower costs and greater convenience.

 The competition for Millennials’ attention, time and money when it comes to entertainment can be pretty fierce. Arts venues and the organizations that mange them in our smaller communities must be ready and able to compete.

Endnotes.

1) National Endowment for the Arts. How A Nation Engages With Art. Highlights From The 2012 Survey Of Public Participation In The Arts. https://www.arts.gov/publications/how-nation-engages-art-highlights-2012-survey-public-participation-arts-sppa . Hereafter referred to as NEA12.

2) N. David Milder. Downtown Movie Theaters Will Be Increasingly In Peril. February 24, 2008. See: https://www.ndavidmilder.com/2008/02/downtown-movie-theaters-will-be-increasingly-in-peril . Hereafter referred to as Movies08

3) Data from the Met’s website.

4) Ali Hortac?su and Chad Syverson. “The Ongoing Evolution Of US Retail: A Format Tug-Of-War,” National Bureau Of Economic Research, Working Paper 21464, http://www.nber.org/papers/w21464, August 2015, pp. 33, p.24

5) Data from http://boxofficemojo.com/yearly/

6) See Movies08

7) Motion Picture Association of America. “Theatrical Market Statistics 2013.” P.2.  http://www.mpaa.org/wp-content/uploads/2014/03/MPAA-Theatrical-Market-Statistics-2013_032514-v2.pdf

 8) LaPlaca Cohen and Campbell Rinker. Culture Track 14, p.2.   http://culturetrack.com/wp-content/uploads/2017/02/Culture_Track_2014_Supporting_Data.pdf  Hereafter referred to as CT14

9) ibid. p.7

 10) Roland J. Kushner and Randy Cohen, National Arts Index 2016, p. 71. Americans for the Arts. http://www.americansforthearts.org/by-program/reports-and-data/legislation-policy/naappd/national-arts-index-an-annual-measure-of-the-vitality-of-arts-and-culture-in-the-united-states-2016. Hereafter referred to as NAI16.

 11) ibid.

 12) Zannie Giraud Voss, Glenn B. Voss, Karen Yair with Kristen Lega. “Orchestra Facts: 2006-2014. A Study of Orchestra Finances and Operations, Commissioned by the League of American Orchestras” November 2016, p.1. https://www.arts.gov/sites/default/files/Research-Art-Works-League.pdf

13) ibid. p.7.

14) ibid. All of the points in this series of bullets come from pages 4-7.

15) Zannie Giraud Voss and Glenn B. Voss, with Ilana B. Rose and Laurie Baskin.   Theatre Facts 2015: A Report On The Fiscal State Of The U.S. Professional Not-For-Profit Theatre Field. Theatre Communications Group. 2016, pp. 37. P 10.. http://www.tcg.org/pdfs/tools/TCG_TheatreFacts_2015.pdf

 16) ibid.

 17) ibid.

 18) ibid. p.11.

 19) CT14, p.9.

 20) ibid. p.12

 21) ibid p.25

 22)   “Building Millennial Audiences: Barriers and Opportunities.” The Wallace Foundation, Building Audiences for Sustainability January 2017. Analysis Conducted by Marketing Research Professionals, Inc. Pp.51, p. 21. Hereafter referred to as Wallace.

 23) See: https://www.ndavidmilder.com/downtown-revitalization/the-deliberate-consumer

 24) CT14, p.13

 25) Wallace, p.22

 26)CT14, p. 25

 27) Wallace, pp.23-25

 28) Richard Fry. “Millennials overtake Baby Boomers as America’s largest generation. FACTTANK. Pew Research Center. April 25, 2016. http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/

 29) Wallace p.9

 30) ibid., p.14

31) CT14, pp. 10-11.

Posted in Central Social Districts, Creative Class, Deliberate Consumer, Downtown Niches, Downtown Redevelopment, E commerce, Economci Development, Entertainment, Entertainment niche, Formal entertainment venues, movie theaters, New Normal, Planning and Strategies, Small Towns, The Arts, Trends, Uncategorized |

Let’s Get Real About: The Impacts of the Arts on Smaller Downtowns. The Arts As An Important Downtown Revitalization Tool — Redux. Part 2

Posted on July 13, 2017 by DANTH

By N. David Milder

Introduction

My intent in this article is to help increase the understanding among downtown leaders and stakeholders (downtowners) in communities with populations under 25,000 about the potential impacts that the arts can have on their districts as well as the types of research techniques and data that should be used in assessing those impacts. (However, much of the content also is applicable to downtowns in larger communities.) Hopefully, such an improved understanding will lead to more realistic expectations, consequent better planning, and more successful arts projects and programs. Optimistically, it will also enable downtowners to more accurately assess just how strong an economic engine the arts can be for their downtowns.

Downtown Arts Impact Studies Should Be Structured to Meet the Needs of Downtown Leaders and Stakeholders as Well as The Arts Organization’s Board and Its Donors.

If downtown arts venues cannot have positive benefits for their districts, then they might as well be located anywhere else in their counties or regions. As a result, the concerns of downtowners should be addressed in any studies of arts venues’ economic impacts. Art organizations that do not do that are being extremely disrespectful to their neighbors – and some of their staunchest political supporters. Of course, these organizations may simply fear that they have insufficient positive impacts on their district and do not want that known.

I have done 20 downtown assignments in which possible arts projects and programs were important elements. I cannot remember a single downtowner raising the issues of how much the proposed arts entity would buy from downtown businesses, or how many new jobs they would create or their ability to raise household incomes in the whole community or county. In my experience, downtowners, in municipalities of all sizes, are primarily interested in how a new arts venture might affect:

  • Downtown Businesses. What would their audiences spend in their districts and how would that affect downtown businesses, especially retailers, restaurants, and hotels? Would it attract strong new businesses or strengthen existing merchants? What would happen in the county or city as a whole are at an entirely different level of concern for them. 
  • Downtown Properties. Very importantly, how would a new downtown art venue affect the rents, occupancy rates, appraised values and real estate taxes of nearby downtown properties? Would it spark nearby building improvements and new construction?
  • How the Downtown Works. Would new arts venues raise the level of pedestrian traffic and increase the numbers of the downtown’s out-of-town visitors and persistent local users? Or improve their attitudes toward and perceptions of the downtown, while also having positive effects on the downtown’s appearance, walkability, traffic congestion and parking needs?

If I am correct and the above describes fairly accurately the information most downtowners would like to have, then those needs should heavily influence what an economic impact study of a downtown arts entity should cover. These needs are a lot more fine–grained than some often used impact methodologies can produce.

Some may argue that things like visitor attitudes, the district’s physical appearance, its walkability, traffic, and parking do not strictly fall under the purview of an economic analysis. Yet, those factors have important influences on site selection, the operations of many downtown firms, and the critically important downtown visitation rate. To deny their inclusion in a purported economic study seems plainly dogmatic and idiotic. Of course, the best thing to do is not to take my word, but to ask your own involved downtowners about the types of impacts – current or potential –they want to learn about.

Limitations of Input-Output Models for Downtowners. At the regional, county or multi-zip code level, these models can estimate how many arts audience expenditure dollars will be captured by business operations and how they then will re-spend those dollars.  However, they have the following strong deficiencies for downtowners:

  • They cannot be applied to geographies as small as the vast majority of our downtowns. They just don’t work at that level since the needed data are too iffy or unavailable.
  • Even more importantly, they cannot ever say anything about how arts audience expenditures influenced: business expansion, the opening of new businesses, higher rents and property values, improved property conditions, etc. They cannot address most of the information needs of business people on these issues even if their concerns would be at the regional or county level, where these models are most easily applied.

Arts Advocacy Efforts May Have Different Information Needs. A very important reason that impact studies of downtown arts venues and organizations have not been driven more by downtowner information needs is that they mostly have been undertaken for advocacy reasons. They accordingly tried to meet the information needs of the government officials, foundations and large corporations who would provide needed donations and/or permissions and approvals. The need of arts organization leaders to respond to donor needs and government approvers is certainly understandable, and input-output models and the variables they can address are often well suited for doing that.

 Impacts Involve Senders, Receivers, and Re-Senders: It’s Very Important to Know Their Characteristics.

Impacts are relationships that involve two basic types of entities: the “sender” that causes the impact and the “receiver” that is being influenced by it. The sender has outputs. They turn into impacts when they are absorbed by a receiver. For example, a new theater’s audience generates more customers and higher revenues for nearby restaurants. The receivers can then become “re-senders,” passing along part of that impact to still other receivers: e.g., the restaurants increase their orders to their wholesale food suppliers. The I-O models used in many impact analyses recognize and quantify these types of relationships among the variables they can analyze. This is a simple example of “the multiplier effect’ of any economic activity.

Problems are generated when analysts focus too much on the impact senders and their acts of sending and fail to analyze the presence and ability of the impact receivers to catch and absorb what is being thrown to them. For example, if a small downtown does not have any restaurants, then there is no entity present that can catch the new audience’s dining dollars. If there are some restaurants, but they are of low quality, have a bad reputation, few seats, or are open only for breakfast and lunch, etc., then they probably will not capture many of the audience’s dining dollars. Ignorance about potential impact receivers’ characteristics is particularly dangerous when analysts are trying to identify the potential positive impacts of a new arts project or program. Estimating what the new arts endeavor will throw off is hard enough, but an equally important question is how much of it the receivers are likely to capture.

Sometimes, what a sender is emitting is so strong that it can induce the attraction, creation or expansion of a receiver. For example, a new small town theater is a big hit and attracts a large audience that generates enough potential diners that someone opens a new restaurant. That may sound simple but may not happen all that easily. A typical full-service restaurant nationally will need sales of between $150 PSF and $250 PSF to break even. A restaurant with 1,500 SF would need annual sales of between $275.000 to $375,000 to make it; one with 2,500 SF would need between $375,000 to $625,000 (1). Among a sample of 23 communities with populations below 25,000 (more about these towns below), the median amount of expenditures for meals and drinks generated by their arts events’ audiences was $994,542. The 1,500 SF eatery would need to capture between 15% and 25% of the audience expenditures for meals and drinks; the 2,500 SF restaurant between 38% and 63%. Of course, other consumer expenditure factors might also come into play in the determination of whether a new restaurant will open, e.g., the incomes, spending habits and preferences of the local trade area’s residents and non-resident members of the downtown’s daytime population. Furthermore, my research suggests that in communities with populations under 3,000, it is somewhat easier for a restaurant to enter a market because they only need a relatively small market share to survive financially. However, the quality of the food and service at such a restaurant may not be comparatively high. Such factors further underscore the point that just knowing how much the audience will spend is a very necessary, but insufficient step for determining arts venues’/events’ impacts on the downtowns they are located in. Analyzing the impact’s receivers and the environment in which they are located is also essential.

Additionally, sometimes what the impact sender is emitting is too weak to have much effect on a receiver. For example, the Country Gate Theater in Belvidere, NJ, (population around 2,600) has seating for 200 and 15 performances scheduled for its 2017 season. If they were completely sold out, the total audience would be 3,000 people. If every audience member spent $10.20 (the average for arts audiences in 23 towns with populations under 25,000, more about them below) in local eateries, the total potential direct impact on local restaurants would be about $30,600. That’s not a lot, even though I’ve optimized the scenario. Also,  it’s capture will be potentially split among the local eateries – and others more distant.

Theaters and PACS in communities with populations in the 15,000 to 35,000 range that I surveyed online had seasons with 80 to 90 performances. Some theaters are only open during the summer months, while others, to the contrary, have heavily reduced schedules. Many museums in smaller towns are only open one to three days a week; others only have those sorts of schedules in the warmer months and are otherwise closed. When these arts venues are dark, they generate no customer traffic or spending for other downtown businesses.

Impacts Seldom Occur in Isolation: There Are Usually Multiple Senders (Causes).

The renovated Bryant Park in Midtown Manhattan – a venue for many performing arts events such as outdoor movies, plays, dance and music concerts – has had impressive positive impacts on its surrounding neighborhood. In no small measure this is because it has been able to “mobilize the neighborhood,” i.e., it strengthens and mobilizes other existing nearby impacting forces.

As illustrated in the above diagram, first, Bryant Park had positive impacts on two existing buildings: the Grace Building, and the American Radiator Building that later turned into the Bryant Park Hotel. Then these three entities all had positive impacts on the construction of 1 Bryant Park (BoA) and years later the four entities all helped stimulate the construction of 7 Bryant Park. Notably, both the Grace and American Radiator buildings had inherent strengths and magnetism, so they could benefit significantly from the area’s improved image and higher visitor traffic induced by Bryant Park’s renovation. The new construction of One and Seven Bryant Park was facilitated by the renovated park and the more desirable Grace and American Radiator buildings through both direct and indirect causal paths. Bryant Park’s renovation, because of the quality of the office building stock, was able to “mobilize the neighborhood” and help induce new construction. As time passes, and the neighborhood further improves, Bryant Park’s impacts will become more and more indirect, while other important entities appear that are also exerting positive impacts of their own as well as passing along indirectly some of Bryant Park’s influence.

This is important: if the nearby buildings had been in worse condition, the park’s renovation would have had far less impact on their rents, occupancy rates, and capital value. That implies that if a replica of Bryant Park was created in a far more decayed environment, the magnitude of its impacts would probably be significantly less because it would have far weaker neighborhood “co-impacters” to affect and mobilize.

Because so many impact studies are done to advocate support for a particular arts organization or a specific arts project, their focus is all too often on the present or future benefits produced by them. However, in the real world, arts organizations and projects are likely to have favorable impacts on a downtown only if a number of other forces are involved that also have important impacts. In many instances, their impacts will be greater than those of the arts entity. The impacts of the Lincoln Center for the Performing Arts (LCPA) on the Lincoln Square neighborhood are instructive.

Impact studies have rightly claimed that Lincoln Center influenced a great influx of housing units that then attracted a good deal of retail development. What the studies failed to note was the nearby presence of Central Park, the Hudson River, several busy subway stations and the Midtown Manhattan CBD. Each, individually, may have had a stronger impact on residential development than the LCPA – especially the renovated and revitalized Central Park. Combined, these four factors definitely had far, far greater impact than the LCPA on neighborhood housing development. However, and strategically important, the physical development of the LCPA probably sparked the initiation of the neighborhood’s housing resurgence. It took down many decayed structures and replaced them with buildings filled with uses that brought into the neighborhood a lot of more affluent and well-educated people. That may have been its most important role in the neighborhood’s impressive resurgence.

LCPA’s direct impact through its audience’s spending on retail probably has been relatively modest. Residential growth probably has had the strongest direct impact on Lincoln Square’s retail. LCPA undoubtedly also had some indirect impacts on retail via its direct impacts on housing.

Why is this important? If you are trying to figure out what the impacts of your proposed arts endeavor will be, it is important to identify the other factors, both positive and negative, that might be in play. They can make a critical difference in determining whether a potential impact is likely to happen or not, its magnitude, and if it is likely to be beneficial or harmful. Also, if you are thinking of making the arts the engine of your downtown revitalization, maybe you need to include some other engines as well!

Determining The Impacts Of An Existing Arts Project Or Program Is Much Easier And More Accurate Than Determining The Impacts Of One Being Proposed.

There is an obvious and simple explanation for this, but it still needs to be stated because it is such an important point: the existing projects and programs will have a lot of essential data on admissions, ticket sales, overall revenues and expenses, building and land costs, etc. Estimates must be made for proposed projects and programs and though they may be produced through diligent work, they still will have significant built-in potentials for substantial errors. Finding comparables to use in estimating the impacts of new projects is not easy since there is often a lot of variation in the aforementioned types of information among arts organizations, even those in communities of roughly similar size. Additionally, such estimates are often the foundation for other estimates, so one substantial initial error can undermine the entire quantitative analysis.

It is best to treat such estimates for new arts endeavors as having ballpark accuracy and reliability and stating so frequently in reports, press releases, etc. I would argue that impact analysts should exercise great prudence in stating their findings and overtly acknowledge the potentials for errors. When dealing with the future, analytical modesty and caution are always in order. PR puff is an enemy.

Accurate Information About Downtown Arts Audiences’ Expenditures Is Essential If An Impact Analysis Is To Be Accurate And Useful.

Americans for the Arts (AftA) has just published an enormous amount of valuable information about arts organizations in 250 study areas around the nation (2). For this article, I have extracted information for 23 that are in towns with populations in the 1,500 to 25,000 range. AftA groups together town, city and county study areas with populations under 50,000. However, to me and to some other economic development specialists I conferred with, the 25,000 population threshold more truly focuses on the smaller communities this article is primarily aimed at. The table below shows the expenditure components in their 2015 budgets as well as their audiences’ expenditures. Total organization expenditures and total audience expenditures are two key data inputs in AftA’s impact analyses for each of these communities. They represent the very important direct impacts. If you go to http://www.americansforthearts.org/by-program/reports-and-data/research-studies-publications/arts-economic-prosperity-5/use/arts-economic-prosperity-5-calculator you can get a ballpark estimate of the event related audience spending of your arts organization by providing three pieces of information: town size; its total expenses and its total audience. However, these estimates should be treated as very ballpark since they are not based on a survey of your arts venue’s audience, but on “the average dollars spent per person, per event by cultural attendees in similarly populated communities” as revealed by surveys in those communities.

Arts Organization Spending. The table shows that total organizational expenditures average about $5.6 million or 44% of the combined total, though the median is about $2.6 million, or 52% of the combined total. That suggests the organizational expenditures are more important among the smaller organizations. Such expenditures are substantial and obviously an important channel through which the economic impacts of these arts organizations flow. However, an essential question is how many of those expenditures are likely to go to downtown businesses? The basic geographic unit of analysis AftA uses, counties, does not facilitate generating an answer.

One approach to answering this question is to assess the likelihood of the arts organizations’ expenditure items having related vendors located in their downtowns that can capture them. The above table shows how the Paramount Theater in Rutland, VT, spent its money in 2014. Of the $1,480,086 in expenditures, about 57% was for performance expenses (mostly for out-of-town talent) and 19.9% for salaries (most of which probably was not spent in the downtown because it does not dominate the city’s economic activities.) Of the remaining 24%, the associated line items potentially can be captured by downtown firms, but the Paramount’s CPA, for example, is not officed downtown and most of its other business and professional services vendors probably are not as well. I have also looked at the expenditures of several art museums around the nation and they show a similar story regarding the likelihood of nearby firms capturing their organizational expenditures. Moreover, many of them were not located in their downtown and were too big to be easily accommodated in one. I fear downtowns, especially the smaller ones, are highly unlikely to capture any large proportions of their downtown arts organizations’ expenditures because they have thin business mixes. Moreover, even in large cities, many of the vendors serving arts venues are not located in their neighborhoods. For example, much of the scenery and costumes for Broadway shows in NYC are created or stored in NJ, Brooklyn and other parts of Manhattan.

It should not be burdensome for an arts organization to identify its vendors who are located in its downtown and to total its payments to those vendors in a way that preserves anonymity. They might use their IRS Form 990 responses as a report structure. If they cannot do that, then a lot of other questions should immediately be asked of its managers.

Arts Audience Spending. The AftA data above shows that, on average, the expenditures of the audiences of the 23 smaller town arts organizations were larger, about $7 million, than those of the organizations themselves, about $5.6 million. That is the channel through which most downtown arts venues potentially can impact local businesses.

The best research tool for getting information about what the audience expenditures purchase is a survey based on a significantly large number of interviews. I would suggest at least 600 respondents are needed, the more the better. However, such surveys are notoriously hard to do because respondents’ memories of non-repetitive expenditures, such as how much they paid for dinner last night, or smaller incidental items, are likely to quickly fade. The surveys also can be expensive to conduct. The best approach is to do intercept surveys at arts events and ask about expenditures that happened within the last day. AftA has developed a good questionnaire to use that is available on its website, though downtown organizations might want to amend it somewhat to reveal expenditures made in their districts. With a bit of good training, staff or volunteers can administer it at local arts events. Of course, the questionnaires then have to be made machine readable and properly analyzed. The latter can require professional expertise and experience.

Some of our nation’s most prestigious arts organizations have had studies conducted of their impacts that –done on the cheap, quick or easy — were based on surveys carried out neither by them nor the research firms they hired, but by still other organizations with unrelated research objectives in mind. Other arts impact analyses were based on surveys that were too small, poorly worded or amateurishly administered. Every other piece of analysis based on those poor audience expenditure surveys was, garbage in-garbage out, worthless. Getting a good survey done of your downtown arts organization’s audience spending is a sine qua non for getting a fairly accurate and useful analysis of your existing arts program or project. Properly planned and executed, they can be quite affordable.

Here Is A Real Problem For Downtown Arts Advocates Of New Projects Or Programs: There is no existing actual audience for your proposed arts endeavor, only a potential one of uncertain size. Still, there may be other arts events in your district or community with audiences that could be surveyed. However, if they differ in when during the day their major visitation occurs or in how long the visits last, the results would require very careful and skilled interpretation.

If there are no local audiences to survey, the estimates might be made based on what has been found in comparable communities. Finding a truly comparable community or a group of them is not an easy task– and don’t let anyone tell you otherwise.

Audience Spending Patterns In A Sample of Smaller Towns With Populations Under 25,000. 

The 23 towns I selected from the AftA data set to look at this question all are comparable in that they have populations under 25,000. However, if you look closely at the survey-based estimates of the audience’s total expenditures for meals and drinks and overnight lodgings in each study area, you find that the ranges between lows and highs are quite large. Also, looking at averages may not be the most prudent thing to do. For example, in 19 of the 23 study areas, expenditures of non-resident audience members were below the overall average for all 23; for resident spending 14 of the 23 were below average. In a normal distribution, 11 or 12 would be below the average. The medians appear to give a better indication of where most of these study area audiences are.

The table above shows the total, average and median expenditures for each audience spending category in these 23 towns. It has two parts. The top displays the results for audience members who are local residents; the bottom covers audience members who are not local residents. The results for the average smaller study area seem impressive: about $3.69 million from non-residents and roughly $3.38 million by residents. Expenditures for meals and drinks are $1.11 million and $1.39 million respectively. However, a more conservative approach is probably more prudent, since so many of the 23 study areas have below average audience spending and most other arts venues in similar communities are likely to as well. Looking instead at the estimates of total spending based on medians shows significantly lower spending levels: the average median of total spending by non-residents is around $1.03 million and about $1.1 million by residents. Spending for meals and drinks are respectively estimated at $401,488 and $593,054.

The per person spending of audience members – see above table — as might be expected, reflects the patterns displayed in the aggregate category totals. Estimates of the total per person expenditures are very interesting. For non-residents based on the means is $42.94, and $31.54 based on the medians. For residents, the estimates are $20.27 and $17.35 respectively. The per person spending for meals and drinks by non-residents averaged $13.52, with a mean of $11.12, with residents averaging $8.84, and having a median of $7.95. To put some perspective on that spending level:

  • In 2015, the average meal in the 22 largest family restaurant chains was around $28 per person. Red Lobster, for example, was at $20.50, Outback at $20.00 and Red Robin at $12.17 (3).
  • Bryant House, near the Playhouse in Weston, VT, has seven entrees on its menu that range in price from $15 to $19.
  • Roots, around the corner from the Paramount Theater in downtown Rutland, VT has several entrees all priced between $19 and $23.

This suggests that per person arts audience spending in these smaller communities is not relatively high. That means that to get any really significant aggregate audience expenditures, the arts venue must attract a significant number of admissions.

This is demonstrated in the table below. For each expenditure item, it simply takes estimates of the total expenditures based on averages and estimates of total expenditures based on medians at the study area level and divides them by the daily average and the daily median of per person spending. This is done for resident and non-resident audiences combined. The resulting estimates are the number of audience spending days needed to generate the total expenditures at the study area level for each expenditure item.

Planners of new arts venues in smaller communities should keep these statistics in mind when assessing their potential economic impacts. As should downtowners when advocates for new arts projects come a–calling.

The Biggest Audience Expenditures Go To Firms In Hospitality Niches. Expenditures for Clothing Are Negligible, But Those for Gifts /Souvenirs Can Be Significant.

Whether one looks at the averages or medians, data at the study area level or at the  per person expenditure item level,  the patterns are persistent and their strategic implications for downtown revitalization leaders are clear:

  • The biggest POTENTIAL impacts of art venues are through their audiences’ POTENTIAL spending in hospitality type establishments – places that provide accommodations, food, and drink. For example, per person expenditure Items associated with a hospitality niche – refreshments and snacks, meals and drinks and overnight lodging – accounted for an estimated 61.2% of the total resident audience’s spending based on study area averages and 71.7% with estimates based on medians; 66.8% and 71.3 % respectively of the non-residents’ expenditures.
  • Meals and drinks are the biggest single expense items (41.4% mean-based and 53.2% median based) for resident audience members and 30.3% and 38.9 respectively for the non-residents. So restaurants have the most opportunity to benefit from arts audience spending. Overnight lodging is the second biggest expense item for non-residents. (These observations are from the table above with the title starting: Categorized Audience Expenditures by Attendees).
  • The potential impacts of arts audience spending on retail are very narrowly focused on just a few types of retailing.There’s little to no impact on such essential small town needs as a grocery or pharmacy.
  • Audience spending for clothing is relatively meager. Downtown leaders should not expect such spending to help sustain their existing apparel shops or to stimulate their expansion or to attract new ones.
  • However, arts audience spending for “gifts” may be significant. Unfortunately, their impact paths are not easy to research. Such expenditures may HELP attract art galleries, crafts shops, bookstores or gift shops that offer an array of such products, though huge amounts of book and music sales are now on the Internet. Moreover,
    such spending pales in comparison to that for food, drink, and lodging.
  • Valparaiso, IN, has adopted a downtown revitalization strategy based on growing its hospitality niche and strengthening its strongly related Central Social District functions. Those are potential revitalization engines that all downtowns should also seriously consider.

Examples of Arts Audience Spending Looked at With Some Additional Information About the Local Context.

From an impact perspective, behind many of the things that downtowners want to know about a potential arts endeavor is this issue: can it favorably influence the decisions of businessmen that are related to the downtown? Will it, for example, make them feel more financially secure, or spark them to expand their operations, or to open new ones? It is hard to provide the necessary answers without an assessment of these operators and the overall market conditions in which they operate. However, some indications of what those answers might be can be obtained if we look at the downtown context in which the arts venue is situated. Often helpful in putting data about arts audience expenditures into a clearer perspective is identifying:

  • The relevant trends affecting the downtown. For example, today apparel shops are facing strong headwinds (e.g., e-commerce and deliberate consumers) that probably will not abate any time soon.
  • Simply if there are currently firms in the sector being looked at and their characteristics. If there are no establishments, then the related audience expenditures cannot be captured. Starting a new firm to capture them is far more complicated than for an existing firm to do so. But, weak or badly managed firms are unlikely to capture many of these dollars and may, in fact, be on the verge of closing.
  • The size of the relevant audience spending compared to the annual revenues of existing firms in that sector. Business operators certainly will accept any new revenues, but for them to expand an existing operation or to open a new one, they usually have to see a very significant market opportunity
  • Other influential forces that cross the arts venue’s impact paths and either facilitate or hinder the ability of art audience expenditures to stimulate business expansion and attraction.

Below, I will try to do this when looking at arts audience expenditures for overnight lodgings and restaurants. For reasons of space, I will not look at the retail related expenditures, except to note here that:

  • They are relatively small, especially for apparel.
  • The gifts expenditures have fewer and fewer stores to capture them as music and book sales have gone strongly to the Internet.
  • The retail industry is in turmoil.
  • Again, note that arts audience expenditures only go to a few types of retailers.

The analysis looks at six arts venues that are located in towns with populations under 17,000. I wrote about four of them in my last article: The Weston Theater Playhouse, The Brandywine River Valley Museum, The Norman Rockwell Museum and Goodspeed Musicals. Being added are the Paramount Theater in Rutland, VT and the Country Gate Theater in Belvidere, NJ. I used averages of AftA estimates of arts audience expenditures in the 23 study areas described above to estimate those generated by these six arts venues. They are probably on the high side as a result. The data on the number of firms in a town should be treated with caution. I used Google and Yelp to make these estimates. I have more confidence in the magnitudes of these estimates than in the precise numbers. Also, I used census data on “accommodations” because that category included operations such as hostels and B&Bs as well as hotels and motels. From here on, I’ll use “hotel” to cover both.

Hotels. Most hotel chains and developers, today, shy away from smaller towns and only see as viable projects with lots of rooms that cost tens of millions of dollars. Attracting a hotel developer/chain to small towns is not impossible, but it certainly can be very, very difficult. There is, for example, at least one chain, with 90+ locations, that specializes in smaller towns. Rehabbing an existing old hotel is never cheap and seldom easy. Whatever the size of the arts audience lodgings expenditures, converting them into new or renewed hotels is unlikely to be either quick or easy.

In the above table, notice that all of the towns have accommodation operations, even those with the lowest populations. Several of these communities have operations that call themselves small hotels or inns, with as many rooms as what others might call a large B&B. However, they often also have fairly popular restaurants and bars. Stockbridge, MA, and Weston, VT, are examples. These operations can capture some arts audience meals and drinks expenditures as well as some of those for lodgings.

The audience expenditure dollars for overnight lodgings vary being between 2% and 29% of the average accommodation establishment in the counties in which these six communities are situated. They account for less than one percent of all accommodations revenues in each county. A new hotel in these communities obviously would need to tap other market segments and would not be able to capture all of the audience expenditures. Arts audience lodging expenditures could be important, if only minority revenue sources, for a hotel with average revenues in four of these towns: East Haddam, CT; Rutland, VT; Stockbridge, MA and Chadds Ford, PA. In these communities, it is probable that existing accommodation establishments are benefiting to some unknown, but a probably significant degree, from the local arts organization audience expenditures. They probably do not in Belvidere and Rutland — and for contrasting reasons. My estimate of the maximum that the County Gate Theater’s audience might spend on overnight lodgings is just $11,070. That is far too small to produce any appreciable effect on either the downtown’s hotel or the town’s highway motel. Competition in the county is relatively sparse – only 14 competitors – so the local operations would have a stronger chance of winning a good share of larger audience lodging expenditures.

The situation in Downtown Rutland (population 16,495) merits a still closer look. It demonstrates the importance that other factors can play in determining if an arts audience’s expenditures will be captured and influence business operators in a downtown. Downtown Rutland has not had a major hotel since 1980 (it has a small hiking hostel), though the city has about two million tourists passing through it annually and several motels opened in the nearby Routes 4/7 corridor. For over 40 years community leaders have tried to attract a hotel developer for “The Pit,” a vacant site where the Berwick Hotel once sat. That site is across the street from the restored Paramount Theater. A recent effort to develop a 128-room, $18 million hotel notably selected another site in the downtown. However, that proposal has been on the table for several years now. Market support, according to a consultant’s report, is not a problem. Another report suggests the project stalled because of city tax rates. I suspect other factors may be involved such as city financial incentives or the need to relocate a bank drive–through that is now on part of the site. Without that hotel, there is no downtown entity that can capture a meaningful share of the Paramount’s audience lodging expenditures

The Paramount’s annual audience of 50,000 probably throws off (based on AftA estimates) about $184,000 in expenditures for overnight lodgings. That’s only about 30% of the average annual sales of hotels/motels in Rutland County. The Paramount’s audience, by itself, plainly cannot provide the needed market support for such a hotel. It might provide some market support, but the amount would also strongly depend on the hotel’s ability to compete with the county’s other 61 hotels/motels. The stalled Rutland hotel project shows that other forces can determine whether an arts venue’s audience expenditures can have clear paths for having positive impacts on downtown businesses.

Some smaller communities with strong scenic and leisure activity assets might attract a large resort hotel, e.g., Crested Butte, CO. Otherwise, nurturing B&Bs, Airbnb units and campgrounds might be better-calibrated facilities for capturing arts generated overnight stay expenditures. This is another good example of how the existence and attributes of an impact receiver can make a big difference in determining whether any impact will be made, as well as its magnitude.

The Brandywine River Valley Museum is located in Delaware County. Of the six counties in the table, Delaware is by far the largest with a population of 558,979. It also has some of the most prestigious educational institutions in the nation: Swarthmore, Haverford, Bryn Mawr and Villanova. These factors will also generate substantial demand for hotel rooms – and restaurant tables.

Restaurants. As noted above, whether the eateries in these smaller towns can capture the arts audience expenditures for meals depends a lot on their characteristics and those of their immediate environs. It’s also important to realize that the restaurant industry today is in the midst of a significant upheaval, if not quite to the extent seen in the retail industry (see for example https://www.theatlantic.com/business/archive/2017/06/its-the-golden-age-of-restaurants-in-america/530955/). Consumer preferences are changing and restaurant operators are trying desperately to keep up with them. This creates more uncertainty about any analysis of an arts audience’s impacts on restaurants.

Nevertheless, the data in the above table suggest that even in these smaller towns, arts audience expenditures may be of considerable interest to local restaurant operators.

All of these towns have at least six eateries, four of them have 14+. Furthermore, four of them have sufficient audience expenditures to support between 1.0 and 2.8 restaurants with annual revenues equal to their county’s average. Also, in those four towns, if each eatery is allotted an equal share of the audience meals dollars, they would average earning between $28,333 and $291,429 from this source. In Chadds Ford, that revenue share, $291,429, is itself above what is minimally needed to support a small 1,500 square foot eatery, $275,000. Stockbridge’s share is about 75% of that number. Those revenue shares would be 16%, 6% 39% and 40% of the average restaurant revenues in their counties. It seems reasonable to conclude that at least restaurant owners are likely to pay attention to these arts venue audiences. Indeed, many are probably now capturing significant revenues from them.

Belvidere is where restaurant operators are less likely to pay attention to its theater’s audience. Only $30,600 in audience meals and drinks expenditures are generated there. Proposals have appeared to build several hundred units of market rate housing in this community. Such units are likely to be predominantly occupied by households with fairly affluent incomes such as those presented in the above table. Just 25 new units occupied would provide three to five times more potential revenue dollars for local restaurants than the theater’s audience now can.  Larger numbers of units might have some benefits for the theater. It may increase demand for tickets to its performances. It may also stimulate the improvement of local restaurants, which then enables them to make more theater goers happy and the eateries can capture more of the audiences’ meal expenditures.

Of course, the expenditures of these new households would go to shops across the whole gamut of retail and professional service functions and have far, far greater potential impacts on the local business community than any arts venue can. Downtowners in smaller cities should also explore housing as a revitalization engine. Conversely, the presence of arts venues can make a community a much more attractive place to live and help bring in more residents.

Weston, VT, also appears to be a place where its arts audience probably will not attract much attention from restaurant operators. However, it is special because the Playhouse audience’s spending for meals is condensed into 10 weeks during the summer. The $204,000 spent during that period may have the impact of $800,000 spent elsewhere over 12 months. As a result, local restaurants might pay a lot more attention than the sales potential numbers alone might suggest. These expenditures also come at a time when there are no “leaf peepers” or skiers — the prime market segments for Windsor County’s hospitality operations. This shows just how important the timing of audience expenditures can be.

More Studies On The Arts’ Impacts On Downtown Real Estate Should Be Done — and Can Be Done — in Small Downtowns.

Any study of a downtown arts venue’s impacts should have a real estate component.

As noted above, many parks are venues for performing arts events. Some also exhibit art or hold crafts fairs. Their ability to impact on nearby property values has been well-established since Olmstead did so for Central Park. Some of the research done on parks has employed techniques and produced findings that should be of considerable interest to those analyzing the impacts of arts venues. Studies done on Bryant Park and Millennial Park in downtown Chicago, are two good examples.

Some interesting research, done over the past decade or so, has been very sophisticated methodologically. These studies recognize that impacts occur in a multi-causal world, using statistical techniques and relevant data that enabled them to estimate the individual impacts of several variables. Two of them  are:

  • Landauer Valuation & Advisory’s study of Bryant Park’s impact on nearby office building rents and property values(4).They used a multi-regression statistical model to isolate the park’s impact compared with several other relevant variables. They also incorporated personal interviews with 29 appraisers, commercial brokers, and building representatives.
  • Stephen C. Sheppard and his team at Williams College’s Center for Creative Community Development did a landmark comprehensive study on the impacts of MASS MoCA, including those on property values in North Adams, MA. They also studied the impacts of the Kenosha Museum in WI on that town’s property values (5).

Unfortunately, as Sheppard has acknowledged, the methodologies used are relatively expensive. Today, only organizations with large budgets are likely to use them.

There is a real need for less expensive, yet similarly, effective research techniques to be developed to study the impacts of arts venues on downtown properties. In smaller towns, fewer properties may make such an analysis easier, if property records are computerized and properly kept.

Some attempts to do so have been conceptually muddled. For example, one study selected an inappropriate geographic area to use as a comparable to establish the impacts of a PAC on its neighborhood. Others mistakenly take the total cost of a new building as the dollar expression of an arts venue’s impact on it – disregarding the possibility of other impacters or that the size and cost of the building might have been heavily influenced by the space requirements of its future anchor tenant.

In smaller downtowns, simple real estate research techniques may be ample for meeting the information needs of their leaders and stakeholders. To begin with, many of these small downtowns will not contain a huge number of properties, so data collection may be easier. In the larger small downtowns, selecting a subarea around the existing or proposed arts venue might also reduce costs and simplify the research. Also, for these downtowners, impact findings that state the magnitudes, not in metric terms, e.g., numbers of dollars or jobs, but through the many ordinary ordinal quantifiers contained in our everyday language (e.g., more-less, strong-weak, large-small, etc.) may not be optimal, but still very sufficient. Though they may not be able to quantify in terms of dollars how an existing arts venue has affected the rents, occupancy rates and property values of nearby properties, they can establish if there have been positive or negative effects. Collecting before and after data on these variables should be feasible. (Landlords and municipal data can provide a lot of the most important data.) Visual inspections of the properties from photographs from previous years and field trips to see current conditions can also provide important clues. Most importantly, interviewing local landlords and a convened panel of experts who really know the downtown’s properties can provide very useful insights on those impacts and whether they have been small or large, important or unimportant, etc.

As for a proposed arts venue, finding comparable projects in comparable downtowns probably will provide useful insights. However, again, finding that comparable may not be easy, so it’s best to be prepared for that.

If the impact analyst can develop reasonable estimates of how much residential, retail, restaurant and hotel space the new art venue might generate that can be turned into estimates of how it would increase demand for those spaces, then asking local landlords, developers, bankers and savvy real estate brokers how they would respond to that increased demand might be instructive in a directional manner, but certainly not predictive with any precision. But, then, you can’t make wine from rocks.

The biggest lesson I have learned from the impact studies done on the Lincoln Center for Performing Arts is the importance of looking at how arts venues affect the desirability of their surrounding neighborhoods as places to live. Restaurant and retail growth usually follow residential growth, as does increased pedestrian activity. An intercept or online survey of local residents to determine how an existing arts venue has affected how much they like living in that town or how much a new venue would do so, can provide very strategically important information. In these small downtowns, the fate of the businesses operating in them as well as residential property values is heavily tied to how many people live nearby and the personal and financial resources they have. Residential development is a key even for smaller downtowns. The degree that arts venues can contribute to it is an important impact path to know about. It also can be part of a quality of life business recruitment strategy.

How the Downtown Works

Dead pedestrian spaces, traffic congestion, improved physical appearance, pedestrian traffic levels, improved walkability and many more aspects of how your downtown works can be impacted by any new venue, including those related to the arts. As a downtown’s Central Social District functions grow in importance, so do those issues. Below are some of the kinds of information I would try to collect and some ideas about where to find them.

The Information Needed (And How To Get It):

  • Arts organization spending by category and identification of district vendors. (Its annual budget and IRS 990 Form; interviews with organization staff or from its vendor list).
  • The number of events. (From organization calendar.)
  • When during the day the events are held. (From the organization’s calendar.)
  • The number of people attending the events: annual total, event average, time of day average. (From organization records.)
  • The arts event related audience expenditures (ideally from an intercept survey at the arts organization’s events; otherwise ballpark estimates based on comparable communities.)
  • Attitudes and perceptions of downtown users about how downtown arts venues and the town’s desirability as a residential location (Intercept and online surveys.)
  • Building Improvements: new, major rehab or addition, minor rehab or addition. (Visual inspections, organization reports, review of photos, review by architects; surveys of downtown residential and daytime populations.)
  • Data on rents, commercial and residential in downtown buildings (Landlords, realtors.)
  • Increased auto traffic and congestion. (Traffic counts, field inspections, consultant reports.)
  • Parking: increased demand, spaces added. (Parking agency and studies.)
  • Mass transit: increased demand and use. (Transit agency.)
  • Public spaces added: if so, is it well-activated or stagnant.
  • Dead spaces added. (Field inspections and distance measurements made with a “wheelie.”)
  • Increased pedestrian activity and congestion points. (Counts and field observations.)
  • Increased need for police and sanitation services. (City departments.)

The Bottom Line

Downtowners in smaller communities who focus on making the arts the chief or only engine for revitalizing their downtown are likely to be disappointed. The range and depth of the impacts arts venues have are insufficient by themselves to spark lots of other businesses to prosper or grow. They often themselves need other strong downtown actors and/or favorable conditions to prosper.

The arts, however, have a value in and of themselves. We should want arts venues basically because of their intrinsic value and how their programs and holdings inform and celebrate the human condition. True, they also can make important contributions to a small downtown’s economy. They can be a valuable component in a comprehensive downtown revitalization strategy. Growing arts venues as part of a larger effort to grow the downtown’s Central Social District functions and to increase the community’s attractiveness as a residential location can succeed because there are strong impact linkages among them. Together, they have true synergies and, for a change, their pathways are fairly well known.

Do not, however, give the arts the role of becoming a downtown’s economic savior. More often than not, that will be a bridge too far.

ENDNOTES

1)     See:  Baker Tilly. “Restaurant Benchmarks: How does your restaurant compare to the industry standard?”  http://www.bakertilly.com/uploads/restaurant-benchmarking.pdf

2) Americans for the Arts. ARTS & ECONOMIC PROSPERITY 5: THE ECONOMIC IMPACT OF NONPROFIT ARTS & CULTURAL ORGANIZATIONS & THEIR AUDIENCES. http://www.americansforthearts.org/by-program/reports-and-data/research-studies-publications/arts-economic-prosperity-iv

3) Ashley Lutz.  “Here’s how much it costs to eat at 22 chain restaurants.” Business Insider, March 23, 2015. http://www.businessinsider.com/how-much-it-costs-to-eat-at-resaurants-2015-3

4) Landauer Valuation & Advisory, “Valuation Study of: Bryant Park Business Improvement District.” New York, NY, December 2014

5) Stephen Sheppard, “Measuring the impact of culture using hedonic analysis.” Center for Creative Community Development, October 2010, pp.28. See also: Stephen C. Sheppard, Kay Oehler, Blair Benjamin and Ari Kessler. “Culture and Revitalization: The Economic Effects of MASS MoCA on its Community.” C-3-D Report NA3, 2006, pp.17.

 

Posted in Business Recruitment, Central Social Districts, Creative Class, Downtown Merchants, Downtown Niches, downtown retailing, Economci Development, Entertainment niche, Formal entertainment venues, movie theaters, New Normal, Planning and Strategies, retail chains, Small Merchants, Small Towns, Suburban Downtowns, The Arts, Trends |

Post navigation

← Older posts

Recent Posts

  • How Many Residents Does it Take to Create New Functionally Diverse Downtowns – How to Think About Allocating Scarce Resources to Get There?
  • The Downtown Curmudgeon vs The Retail Contrarian
  • Let’s Recognize and Leverage the Opportunities the Covid Crisis Has Given Our Downtowns: Some Examples
  • The Downtown Curmudgeon vs The Retail Contrarian
  • OUR LARGE DOWNTOWNS CAN LEARN SOME IMPORTANT THINGS FROM THEIR SUBURBAN BRETHREN?

Labels

  • 15 minute neighborhoods (1)
  • automated cars (4)
  • backdoor retailing (4)
  • BIDs (26)
  • Business Recruitment (28)
  • Captive Markets (8)
  • Central Social Districts (33)
  • Central Social Functions (1)
  • Change Agents (23)
  • clean sidewalks (2)
  • clean streets (2)
  • commercial nodes (8)
  • Contingent workers (4)
  • convenience (6)
  • Creative Class (31)
  • Crime (8)
  • CSDs (2)
  • DANTH (13)
  • Deliberate Consumer (13)
  • Downtown Garages (4)
  • Downtown Merchants (29)
  • Downtown Niches (59)
  • Downtown Redevelopment (66)
  • downtown retailing (63)
  • driverless cars (4)
  • E commerce (27)
  • Economci Development (54)
  • Economic Development (3)
  • EDOs (26)
  • Entertainment (41)
  • Entertainment niche (32)
  • Entrepreneurship (14)
  • fear of crime (8)
  • Financial tools (5)
  • Formal entertainment venues (26)
  • Formats Facades Signs (6)
  • Housing (7)
  • Informal entertainment venues (23)
  • Innovations (33)
  • Jamaica Center (3)
  • Jobs (6)
  • Leakages/gaps (7)
  • Live-Work (3)
  • Living donor (1)
  • Luxury retail (7)
  • Market research (5)
  • movie theaters (23)
  • Moving People (3)
  • multichannel retailing (20)
  • New Normal (50)
  • Office Development (8)
  • Pamper Niche (7)
  • Parking (5)
  • Parks (1)
  • Parksmand public spaces (6)
  • Pedestrian traffic (14)
  • Planning and Strategies (47)
  • Public Spaces (21)
  • Remote working (1)
  • retail chains (30)
  • self-driving cars (4)
  • Small Merchants (35)
  • Small Town Entrepreneurial Environments (8)
  • Small Towns (36)
  • Social Media (3)
  • Sprawl (3)
  • Suburban Downtowns (21)
  • Superstar downtown (2)
  • technology (11)
  • teenagers (4)
  • The Arts (25)
  • time pressure (5)
  • Tourism (6)
  • Trends (50)
  • Uncategorized (34)
  • Up for Grabs shoppers (2)

Links

  • CCED
  • Planetizen

BACK TO TOP

83-85 116th Street, Ste 3D
Kew Gardens, NY  11418
Phone: (718) 805-9507
[email protected]

Copyright © ndavidmilder.com