VALUING TIMES SQUARE THE ECONOMIC IMPACT OF TIMES SQUARE

VALUING TIMES SQUARE THE ECONOMIC IMPACT OF TIMES SQUARE Spring 2007

CONTENTS Executive Summary... 1 Methodology... 3 Introduction... 6 Work... 10 Play, Shop & Eat... 13 Visit... 17 Live... 22 Value beyond Numbers... 24 Economic and Fiscal Impact... 28

EXECUTIVE SUMMARY Times Square is a small space of enormous consequence. While Times Square represents only 0.1% of New York City s land area, 5% of the City s jobs are located there, and the district generates 10% of the City s economic output. The 200,000 Times Square jobs are New York City s future: approximately 70% of employment is in finance and the creative industries. Times Square activity indirectly employs an additional 190,000 workers throughout New York City. Times Square contributes $1.1 billion in annual taxes to New York City and $1.3 billion in annual taxes to New York State. This exceeds the City s budget for the Parks & Recreation, Cultural Affairs, Youth & Community Development, Aging, and Small Business Services departments and the public libraries combined. Taxes to New York State are $300M more than total state aid to the City University of New York (CUNY). Approximately $4.9 billion is spent directly in Times Square every year on Broadway shows, other entertainment, retail, restaurants, hotels, and billboard advertising. Times Square is a major retail and entertainment destination. More than $2 billion is spent annually on restaurants and retail goods, and an additional $1.2 billion is spent on Broadway and the many other forms of entertainment in Times Square. Times Square is a major tourism draw and hotel center for visitors to New York and convention-goers to the Javits Center. 80% of visitors to NYC visit Times Square. These visitors spend more than $18 billion throughout NYC during their stay. Hotels in Times Square house 25% of Manhattan s hotel rooms and effectively serve as headquarters hotels for the Javits Convention Center. The 15,000+ rooms in Times Square are more than those in all of Philadelphia. More residents are choosing to live in and near Times Square. Approximately 17,000 residents currently reside in the Times Square BID boundaries. 5,500 units have been added since 1996 and an additional 7,000 units nearby have recently been developed or are under construction. Times Square s fiscal impact only begins to tell the story of its contribution to New York City s economy. Times Square is New York City s iconic image and the world s window onto New York City. Every day, more than 10 million viewers see Times Square through programs such as Good Morning America. Times Square is an effective marketing vehicle for New York City with priceless free advertising each day for the City. 1

EXECUTIVE SUMMARY Times Square At A Glance 0.1% of New York City s Land Area 390,000 Jobs (9% of NYC s Jobs) 200,000 direct 190,000 indirect $90 billion in Economic Output $55 billion direct $35 billion indirect 10% of NYC s economic output 15% of Manhattan s economic output $4.9 billion in Direct Spending $2 billion Retail $1.6 billion Hotel $800 million Broadway Shows $400 million Other Entertainment $60 million Billboard Advertising $2.4 billion City and State Taxes $1.1 billion New York City More than combined city budgets for Parks, Cultural Affairs, Youth and Community Development, Aging, Small Business Services, and the Public Libraries $1.3 billion New York State $300 million more than State aid for CUNY 2

METHODOLOGY In March 2007, The Times Square Alliance commissioned a study to comprehensively analyze the contribution of Times Square to the economy of New York City. This is the first such analysis since the revitalization of Times Square. HR&A, Inc., an economic development and real estate advisory firm based in New York City, conducted the study by applying standard fiscal and economic impact methodologies using available data, and information gathered through a set of interviews conducted in Spring 2007. While the team determined the substantial contribution to the City s economy and tax revenue base generated by the jobs, entertainment, and spending that occurs in Times Square, it quickly became apparent that Times Square contributes to New York in many unique ways that are not captured by these measurements. Times Square advertises and promotes the City to the world, and serves as a tourist destination and hotel center, global headquarters for many corporations, and premier public gathering and event location. In many ways and to many people around the world Times Square is New York, an invaluable contribution to the City s image and the power of its brand. Where possible, this study quantifies these additional contributions and catalogs their significance to the economy, image, and attractiveness of New York City. HR&A s methodology for quantifying the economic and fiscal impact was as follows: The study area was defined as the Times Square Business Improvement District (BID). The boundaries of the Times Square BID are roughly from 40 th Street to 53 rd Street, and from Eighth Avenue to mid-block between Sixth and Seventh Avenues (see page 6 for a study area map). Interviews were conducted with key economic actors within the study area to determine the core attributes of economic activity within Times Square, the magnitude of their potential impact, and additional non-quantifiable benefits of the district. Key inputs of economic activity were gathered for the study area from a variety of reliable sources and confirmed through additional research, including: Direct Employment. HR&A analyzed employment estimates obtained from Claritas Inc. Claritas data aggregates employment information from a number of sources, including the Claritas Demographic Update, U.S. Census projections, Bureau of Labor Statistics, and Business-Facts, Claritas database of over 12 million business and professional records, into an up-to-date estimate of total employment by industry sub-category for year-end 2006. HR&A further refined these estimates through the application of industry employment ratios and previous employment surveys it has conducted for New York City. The total employment figures were scaled, where necessary, to match the boundaries of the study area. 3

METHODOLOGY Direct Spending. For retail spending, HR&A utilized 2006 Claritas Inc. consumer expenditure data based on the Bureau of Labor Statistics Consumer Expenditure Survey. This data was scaled for the study area. Broadway ticket and related spending was estimated using data from The League of American Theatres and Producers, Inc. for the 2004-2005 season Hotel Activity was derived using an estimate of the number of hotel rooms developed by the Times Square Alliance, through a telephone survey of 35 hotels conducted in April 2007. HR&A utilized the Q4 2006 PKF Consulting hotel survey of 19 major hotels in Times Square and its broader Manhattan survey for average daily rates (ADR). Non-room revenues were estimated using industry standards provided by Lodging Investment Advisors, Inc. and confirmed by interviews of hotel operators. Advertising Revenues were estimated through a series of industry interviews and based on information in several publications. The inputs were used to determine the total amount of economic activity and fiscal impact for New York City and State using standard methodologies: Economic Output and Indirect Employment. HR&A generated economic output and indirect employment estimates using the IMPLAN (IMpact Analysis for PLANning) Input-Output Model, developed at the University of Minnesota with the U.S. Forest Service s Land Management Planning Unit. This tool generates estimates of direct and indirect economic output, as well as indirect employment. Economic output is defined as a measure of the economic activity, or sales, of each industrial sector throughout the City s economy. IMPLAN provides estimates of economic activity associated with some other economic activity or changes in activity level. For example, when one local business purchases goods at a second local business, the first business is helping to support the second. IMPLAN provides estimates of the level of economic activity the first business supports. The concept of direct, indirect, and induced effects is employed in this analysis. Direct effects are those related to the initial spending in the economy. Using our example, the first business purchasing goods and services is making a direct expenditure to the second business. The second business needs to purchase goods and services to produce the product the first business purchases. These, and the successive rounds of purchases, are known as the indirect effect. The spending that employees and their households make from income earned is the induced effect. Throughout this report, we have used the terminology indirect to incorporate both indirect and induced effects. IMPLAN is widely-used for the preparation of economic impact analyses by public and private entities 4

METHODOLOGY throughout the U.S. The model used for this project utilizes data specific to the five boroughs of New York City. Fiscal Impact. To estimate total income taxes, HR&A utilized 2006 Quarterly Census of Employment and Wages (QCEW) data from the New York State Department of Labor for New York City in conjunction with the employment estimates by industry sector described above. Income taxes attributed to workers in Times Square are for direct employment within Times Square only. Income taxes generated by residents of Times Square were estimated using the per capita income of Times Square residents, identified using demographic data from Claritas Inc. Sales Taxes on New York City and State retail and entertainment spending were derived using current tax rates. Apparel under $110 is not subject to sales tax in New York and therefore only 15% of total apparel spending was assumed to be taxable. This reflects the nature of apparel retailers and shopping options in Times Square, a retail survey of Times Square employees conducted by Global Strategy Group for the Times Square Alliance, and the significant component of the apparel market in Times Square driven by tourist souvenir spending. Hotel Sales and Occupancy Taxes were estimated using average ADR, occupancy, and non-room revenues. City occupancy taxes were applied to room revenues only. Sales taxes to the City and State were applied to room and non-room revenues. Property Taxes were estimated for tax parcels within the study area boundaries with the assistance of the New York City Department of Finance which provided an estimate of total assessed value and total taxes for the study area for the 2007 fiscal year. 5

INTRODUCTION What is Times Square? Times Square BID Boundaries A small space of enormous consequence 0.1% of New York City s land area but New York s center of industry, tourism, culture and commerce HR&A studied the area defined by the official boundaries of the Times Square Business Improvement District (shaded in gray above). The economic effect of Times Square is felt far beyond these official boundaries. Many businesses, entertainment venues, and residential buildings that lie just outside these boundaries that associate themselves with Times Square. Jobs and output generated in Times Square produce spending elsewhere throughout New York City and State, indirectly creating new jobs, output, and taxes. As a result, economic activity in Times Square is magnified several times throughout New York. 6

INTRODUCTION The iconic image of New York Times Square, with its many nodes of activity, energy, lights, and advertising serves as the iconic image of New York. The Times Square bowtie, Broadway and Seventh Avenue at 45 th Street The crossroads of NYC and the world Daily 350,000 pedestrians 300,000 vehicle passengers Annually 100 million subway riders 57 million Port Authority terminal users 7

INTRODUCTION Home to creative and powerful brands Times Square is a center of creativity with global reach and stature. It serves as the global headquarters and key location for a striking number of companies and entertainment venues. These companies have chosen to affiliate themselves with Times Square because they view the brand as an important asset for their corporate images. Times Square s brand is broad and flexible enough to incorporate them all from Broadway to accounting, finance to music television. 8

INTRODUCTION What is Times Square worth? Times Square is increasingly becoming a mixed-use neighborhood, characterized by 24/7 activity from tourists, local residents, workers and New Yorkers. The immense economic contribution of Times Square is generated by the variety of activities that take place within the district. The value of these activities is detailed on the following pages. Dining Visiting Living Shopping Working Entertaining The activities in Times Square create worth 9

WORK The creative job base is the City s future Approximately 200,000 workers are employed in Times Square. Over 70% of the jobs are in finance and creative industries. 200,000 Direct Jobs 5% 5% 4% 6% 30% 29% Professional and other services Media Finance, insurance, real estate Retail 10% 11% Hotel Wholesale Trade Entertainment 20% 18% 22% 20% Other Source data: Claritas Inc. 10

WORK Critical agglomeration of major industries NYC industry clusters by number of employees 20% of publishing 15% of hotel 10% of communication 10% of legal services 10% of motion picture 5% of the FIRE sector The bright lights of Times Square often overshadow its importance as a center for New York s leading industries. Businesses choose to locate in Times Square for several reasons: to leverage the global visibility and cachet of being located in Times Square, to be near to other leading businesses, and to access the transportation network available in close proximity through the 42 nd Street subway station, Penn Station, the Port Authority Bus Terminal, and Grand Central Terminal, among other factors. Times Square is at once Midtown Manhattan, and so much more. Source data: Claritas Inc.; Interviews with local employers 11

WORK Jobs created throughout NYC 390,000 direct & indirect jobs 400,000 300,000 190,000 200,000 100,000 200,000 0 Direct Jobs Indirect Approximately 200,000 workers are employed in Times Square. This represents approximately 5% of all New York City jobs. An additional 190,000 indirect jobs throughout New York City support Times Square, from professional services firms to suppliers of retail goods, to businesses serving Times Square workers. Counting direct and indirect jobs, Times Square supports approximately 9% of New York City s workforce. Source data: Claritas Inc.; HR&A Analysis of Economic Output for New York City using IMPLAN 12

PLAY, SHOP & EAT Retail and entertainment destination $3.2 billion Retail & Entertainment sales 9% 4% 3% 26% 30% Broadway Eating and Drinking Places Deli, Grocery and Convenience 10% Electronics Other Entertainment 10% 12% Specialty Retail and Gift Shops Apparel and Accessory Stores 21% 20% General Merchandise and Other 15% Workers, visitors, and residents, spend approximately $3.2 billion annually on Broadway shows, food, drink, clothing, and other entertainment and retail goods available in Times Square. Source data: Claritas Inc.; The League of American Theatres and Producers, Inc. 13

PLAY, SHOP & EAT Broadway entertains the world 39 theaters draw 1.8 million day trippers Destination for 2.6 million tourists Broadway theater is the primary entertainment draw of Times Square and is responsible for largest category of retail spending. Broadway s presence also catalyzes patronage of the many other entertainment offerings throughout Times Square. Source data: The League of American Theatres and Producers, Inc. 14

PLAY, SHOP & EAT Broadway generates revenues 12 million Broadway tickets sold in 2004-2005 season $2 billion in new visitor spending $800 million in ticket sales alone More than 80% of Broadway attendees come from outside New York City. These visitors spend money throughout New York City that would not have otherwise entered New York City s economy. Source data: The League of American Theatres and Producers, Inc. 15

PLAY, SHOP & EAT Times Square has more entertainment than just Broadway $1.2 billion annual entertainment spending Broadway sales $800 M $400 M Other entertainment sales Broadway accounts for approximately two-thirds of entertainment spending in Times Square. However, more than $400 million is spent on the many other entertainment options available in Times Square, including movie theatres, comedy clubs, live entertainment, and museums. Source data: The League of American Theatres and Producers, Inc.; Claritas Inc. 16

VISIT Times Square fascinates the world Internet references to Times Square and other attractions May 1, 2007 40 35 34 30 Millions of hits 25 20 15 10 17 8 5 2 1 0 Times Square Empire State Building Big Ben Eiffel Tower Statue of Liberty Approximately 34 million web pages reference Times Square. Times Square is referenced on significantly more web pages than both the Empire State Building and the Statue of Liberty, two other key New York City attractions. Internationally, Times Square captures more interest than Big Ben and the Eiffel Tower. Source data: Google Internet Search, May 1, 2007 17

VISIT Times Square is the quintessential New York experience 44 million annual visitors to NYC 80% visit Times Square Non-Visitors 20% 9 million 35 million Times Square Visitors 80% Source data: NYC & Company; Economics Research Associates; Philip Habib & Associates 18

VISIT Times Square visitors spend more than $18 billion throughout NYC 4 million business visitors 31 million leisure visitors Total direct visitor spending in NYC * $23 million Proportion visiting Times Square 80% Amount spent in NYC by visitors to Times Square $18 million * 2005 direct visitor spending. NYC & Company Times Square Alliance citing data from Philip Habib & Associates 19

VISIT Visitors choose to stay in Times Square 35 hotels 15,000 + rooms More than all of Philadelphia 25% of all rooms in Manhattan $1.6 billion in annual hotel revenues More diverse visitors than other NYC hotels * Business: 60-65% Leisure: 35-40% International: 10-15% Times Square is the hospitality center of New York, with more than 25% of all hotel rooms in Manhattan located in the district, a concentration unmatched anywhere else in the City. This tremendous concentration of hotel rooms is greater than all of the hotel rooms in the City of Philadelphia. Hotels in the district generate an estimated $1.6 billion in annual revenues. Hotel Rooms 15,396 ADR for NYC $250 Occupancy ** 90% Non-room revenues 30% of ADR * Industry interviews with hotel operators 14,678 hotel rooms in Philadelphia. Smith Travel Research Times Square Alliance telephone survey of 35 hotels PKF Consulting Q4 2006 ADR for all NYC hotels. PKF Consulting survey of 19 major Times Square hotels (9,986 rooms) identifies an ADR of $314.38. HR&A used the NYC average ADR to be conservative. ** PKF Consulting December 2006 Times Square hotel survey Industry interviews with hotel operators 20

VISIT Conventions depend on Times Square Headquarters hotels for the Javits Center Preferred location for convention goers Javits sells NYC as a package with Times Square Times Square plays a critical role in attracting convention-related business for the Javits Center. The hotels in Times Square are the closest and most convenient hotels for the Javits Center and effectively serve as headquarters hotels for the convention center. Times Square is the mostoften requested location by convention-goers. Times Square is seen as a key attraction and selling point for choosing to locate a convention or conference in New York City over competing locales. * * Industry interviews with hotel operators and tourism officials 21

LIVE People choose to live in Times Square 17,000 residents / 11,000 households 1,000 units under development 5,500 residential units added since 1996 1600 Broadway on the Square Source data: Claritas Inc.; Times Square Alliance residential survey 22

LIVE Times Square catalyzes activity beyond Times Square BID boundaries Times Square BID boundaries Between 6th and 9th Avenues: 20,000 additional jobs 3,000+ additional residential units under development 4,000+ additional residential units recently developed Entertainment venues including the Actors Studio, Second Stage Theater and Birdland outside the BID Source data: Claritas Inc.; Times Square Alliance residential survey 23

VALUE BEYOND NUMBERS Times Square is integral to the New York image As the iconic image of New York, Times Square defines New York s image to millions around the world. The district is projected to the world daily through media coverage, from network television to videos posted on You Tube. Before its revitalization, both Times Square and New York City were seen as inhospitable, dangerous and unwelcoming. Today, Times Square s dynamic image helps New York to be viewed as an exciting, world-class location. Exciting Dynamic World Class 24

VALUE BEYOND NUMBERS Times Square broadcasts New York City to the world through priceless daily free advertising for the City More than 10 million daily viewers * Hallmark shows Good Morning America MTV Total Request Live David Letterman More than 1,000 hours of annual broadcasting from Times Square Times Square Studios Times Square is an iconic location for filmmaking $5 billion industry in NYC Times Square is one of the most popular filmmaking locations * Industry interviews with broadcasting executives; Nielsen ratings Boston Consulting Group New York City Mayor s Office of Film, Theatre & Broadcasting 25

VALUE BEYOND NUMBERS NYC sells because Times Square $ELL$ Corporations choose Times Square to market their products to the world 50,000 square feet of major billboards $60 million+ in annual revenues Monthly Billboard Rates Times Square ~$30,000 - $300,000 West Side Highway ~$18,000 Source data: Industry Interviews with advertising executives; New York Times; Brand Autopsy Magazine 26

VALUE BEYOND NUMBERS Times Square is New York s Town Square More than 100 events held in 2006 Snapshot: New Years Eve 500,000 attendees, 85% non-residents 1 billion TV viewers worldwide $24.5 million in direct spending Source data: Times Square Alliance; New York Times 27

ECONOMIC & FISCAL IMPACT 0.1% of New York City s Land Area 390,000 Jobs (9% of NYC s Jobs) 200,000 direct 190,000 indirect $90 billion in Economic Output $55 billion direct $35 billion indirect 10% of NYC s economic output 15% of Manhattan s economic output $4.9 billion in Direct Spending $2 billion Retail $1.6 billion Hotel $800 million Broadway Shows $400 million Other Entertainment $60 million Billboard Advertising $2.4 billion City and State Taxes $1.1 billion New York City More than combined city budgets for Parks, Cultural Affairs, Youth and Community Development, Aging, Small Business Services, and the Public Libraries $1.3 billion New York State $300 million more than State aid for CUNY 28

ECONOMIC & FISCAL IMPACT Times Square is a major source of economic output $90 billion in economic output 10% of NYC s total output $100 ($ billions) $80 $60 $40 $20 $55 billion $35 billion Indirect Direct $0 Output Source data: HR&A analysis of IMPLAN economic impact model 29

ECONOMIC & FISCAL IMPACT $1.7 billion annual income taxes to New York City and New York State $570 million to NYC $1.1 billion to NYS $1,200 $1,200 $100 million $1,000 $1,000 $800 $600 $70 million $800 $600 $1 billion $400 $200 $500 million $400 $200 $0 NYC Income Taxes Workers Residents $0 NYS Income Taxes Workers Residents Percent of Times Square workers residing in New York City * Percent of Times Square workers residing in New York State 60% 80% * 2006 U.S. Census Journey to Work and Place of Work data indicates that approximately 75% of Manhattan workers reside in New York City. To be conservative, HR&A reduced this estimate to 60% for Times Square. 2006 U.S. Census Journey to Work and Place of Work data indicates that approximately 85% of Manhattan workers reside in New York State. To be conservative, HR&A rounded this figure to 80%. 30

ECONOMIC & FISCAL IMPACT $4.9 billion in direct spending Broadway 16% $800 million Other entertainment 8% $400 million Billboards 2% $60 million $1.6 billion $2 billion Hotel 33% Retail 41% 31

ECONOMIC & FISCAL IMPACT Significant retail and entertainment sales taxes $120 million to New York City $130 million additional taxes to New York State Retail and entertainment sales * $3.2 billion Taxable apparel sales 85% City sales tax 4% State sales tax 4.375% * HR&A analysis of data from Claritas Inc. and The League of American Theatres and Producers, Inc. Global Strategy Group analysis of local apparel retail offerings and retailers; Apparel sales under $110 are not taxable in New York. HR&A assumed 85% of apparel sales in Times Square were from transactions of less than $110. 32

ECONOMIC & FISCAL IMPACT Visitors contribute $220 million in annual hotel sales and occupancy taxes $150 million to NYC $70 million to to NYS $150 $150 $100 $80 million $100 $50 $70 million $50 $70 million $0 NYC Taxes Sales Occupancy $0 NYS Taxes Sales Annual hotel room revenues * Annual non-room revenues $1.26 billion $380 million City sales tax 4% State sales tax 4.375% City hotel occupancy tax 5% of ADR plus $3.50 per room per night * HR&A analysis of PKF Consulting data HR&A analysis of data from PKF Consulting, Lodging Advisors, and Industry interviews with hotel operators 33

ECONOMIC & FISCAL IMPACT Proprty in Times Square is valuable $300 $250 $280 million in annual Property Taxes 12% increase since 2004 Millions of dollars $200 $150 $100 $50 $0 2004 2007 Source data: FY 2007 assessed property tax for tax parcels in Times Square BID boundaries, New York City Department of Finance 34

ECONOMIC & FISCAL IMPACT $1.1 billion annual taxes to NYC Sales 10% Income 50% $570 million $120 million $280 million Property 25% $150 million Hotel 15% $1.3 billion annual taxes to NYS Income 85% $1.1 billion $130 million $70 million Sales 10% Hotel 5% 35

Times Square is a small space of enormous consequence.