At last year’s South by Southwest Conference & Festivals, visitors could enter a re-creation of the town square from HBO’s drama “Westworld.” Actors played out scenes inspired by the show at this branding event, or “activation” in SXSW parlance.
These activations have ranged from a five-story stage built to look like a Doritos vending machine to fast-food restaurant Pollos Hermanos from AMC show “Breaking Bad”—and they have become a staple at SXSW Interactive.
According to Hugh Forrest, SXSW’s chief programming officer, the success of SXSW’s music and film festivals once propped up technology, but—as the proliferations of activations show– that dynamic has flipped. Now, Forrest said, “tech is a little more of the breadwinner of the family.”
The SXSW Interactive festival will begin March 8, and run through March 12. Forrest, who was the director of SXSW Multimedia when it began in 1994, said the festival that eventually become Interactive was once on shaky ground.
“If it was a stand-alone event, just a multimedia event, I don’t think it would have survived,” he said.
Anyone downtown in March may find those lean years hard to imagine. According to a report prepared for SXSW by Greyhill Advisors, there were 289,000 official attendees at SXSW in 2018, and the event had a $350.8 million impact on the city’s economy.
Do the benefits outweigh the cost?
The rise of tech as the new heartbeat of SXSW has mirrored trends in Austin.
“So far, we’ve seen the growth of SXSW correlate almost one-for-one with the growth of the economy in the city,” said Michael Sury, a finance lecturer at The University of Texas.
That correlation is not an accident, according to Ben Loftsgaarden, an economist and partner at Greyhill Advisors. Loftsgaarden said events like Twitter putting itself on the map in 2007 at SXSW gave Austin some credibility as a tech hub and helped create an environment that ultimately attracted companies like Apple, Google and Facebook.
“Austin’s changed a lot, and I think that SXSW still reflects what Austin is,” Loftsgaarden said.
Austin’s economic growth has come with challenges. Likewise, SXSW is not immune to criticism from locals about the shifting soul of the festival and traffic downtown. This year, SXSW will break with tradition and will not occur in conjunction with spring break for Austin ISD schools and The University of Texas, adding to traffic concerns.
Economists say even if locals find SXSW a headache, the benefits outweigh the costs.
“The downsides, of course, are the infrastructure, noise and nuisance. But you have to balance that against what it’s been doing for the local economy,” Sury said.
SXSW is not the only player in town on the conference and festival circuit. Between high-profile events such as Austin City Limits, the Formula One race at Circuit of The Americas and smaller events throughout the year, Angelos Angelou, founder of Austin-based AngelouEconomics, estimates that what he calls the “festival economy” provides more than $1 billion each year to the metro economy.
Hospitality industry cashes in
The hospitality industry has benefited significantly from SXSW’s growth. Average nightly hotel rates for attendees have jumped from $185 per night in 2010 to $396 in 2018, according to Greyhill Advisors. In those eight years, according to Paul Vaughn of hotel consulting firm Source Strategies, the Austin metropolitan area has added more than 10,000 hotel rooms.
While SXSW alone may not convince a developer to build downtown, it provides a “crucial” boost, according to Justin Bragiel, general counsel and operations manager for the Texas Hotel and Lodging Association.
The revenue from visitors also boosts revenue for city government. According to the 2018 report from Greyhill Advisors, hotels booked for SXSW alone contributed $1.8 million in hotel occupancy tax funds. The city uses that money to fund departments that promote tourism. According to the city, hotel tax funds collected in the quarter that encompasses spring festival season totaled $26.6 million.
Jeff Trigger is one of those hoteliers building in downtown. The founder of La Corsha Hospitality, a hotel and restaurant group that manages Second Bar + Kitchen and Mattie's. Trigger’s next project is the East Austin Hotel at 1105 E. Sixth St.
“To have this celebration [SXSW], that speaks to who we are in such an economically important way, year on year, it’s phenomenal,” Trigger said. The hotel is set to open in late March.
Just north of Second Bar + Kitchen on Congress Avenue, Houndstooth Coffee opens a second cafe on the patio outside its Frost Bank tower location during SXSW. Owner Paul Henry said March, sales at the downtown shop are three times higher than average. “We might be [located] down here anyway, but [SXSW] is a great bonus. There’s no doubt about it,” Henry said.
The effect on local culture
While tech may be the profit engine of SXSW, the shift has not hurt music and arts venues in the downtown area, those business owners say.
Cody Cowan, executive director of the Red River Merchants Association, worked as the general manager of the Mohawk from 2008-18. In his time at the music venue, Cowan said about 12 percent of his annual revenue came from SXSW, because the event offered two revenue streams—official festival events and private company parties.
The growth of SXSW Interactive has been crucial as venues face affordability challenges downtown, Cowan said.
“The money you make at SXSW isn’t ‘Let’s all go to Cancun’ money. It’s ‘How are we going to pay rent in July?’ money,” Cowan said.
Taylor Wilkins, guitarist and singer in local band Otis the Destroyer, said the exposure provided by those showcase gigs can be critical to a young band, but shows at private company parties can provide a much better source of income.
Artists who play an official SXSW showcase slot receive wristbands. They can forego the wristbands to choose a $100 payment for a solo performer or $250 for a group of two or more.
Wilkins said after some experience at SXSW, he has learned to “play smart” and make the festival work for him.
“I don’t think [SXSW] is evil or good, but I think it’s what you make it,” he said.
The Paramount Theater does not rely on the income from SXSW rental fees as a means to survival. However, according to Jim Ritts, Austin Theater Alliance CEO and executive director, the event still benefits the century-old downtown venue.
The spotlight for events, such as the premiere of Steven Spielberg’s “Ready Player One” in 2018 and Jordan Peele’s “Us” this year connect the Paramount to a new audience, Ritts said.
“South By has played a major role in that exposure for us which is a far greater economic benefit than a rental fee,” Ritts said.
The event may have changed in the last few years in its scope and its focus, but the reaction of business owners when SXSW leaves town can be the same. Business owners such as Henry and Cowan have stories of grinding out long hours, fighting exhaustion and pushing through the week alongside their staff until the end of the rush as SXSW’s second weekend concludes.
“[SXSW] is a little bit like your buddy who is rowdy, but who you still like to spend to time with. Whenever he leaves town, you’re like, man that was good to see him, but I am glad he is out of here,” Henry said.
Editor's note: This story has been updated to reflect that La Corsha Hospitality Group is the management company for both Second Bar + Kitchen and Mattie's.
