Why attracting talent, businesses and visitors has never been more integrated

Ten years ago, we started an ambitious project to identify the factors most highly correlated with business formation, talent attraction and visitor expenditure in our cities. We not only analyzed hundreds of data points from traditional sources such as the U.S. Bureau of Labor Statistics, but we also mined user-generated data from online sources such as Google, Tripadvisor and Instagram. This research led to the creation of Resonance’s annual Best Cities rankings, which are now read by millions of people around the world.

With flight from our largest cities during the pandemic and the rise of remote work, there has been much speculation and commentary on the future of cities and whether or not they are still attractive places to live, work and visit. Without a doubt, the rise of remote work has changed our relationship with cities in some parts of the world and many downtowns have felt the effects of lower office visitation and occupancy. But the populations of most cities have not only recovered, but are in fact growing again as immigration bounces back and talent returns to urban centers, albeit sometimes to different ones than they lived in before.

Prior to the pandemic, our research showed that there were a variety of different factors highly correlated with the size of a city’s prime age population (age 25 – 44), visitor expenditure and the number of businesses formed each year. As the figure below illustrates, some of these overlapped with one another such as restaurants, airport connectivity and sights and landmarks, which showed a relationship both with talent and visitor attraction. Others, like nightlife, showed a relationship with both business formation and talent attraction, while culture showed a strong positive relationship with all three.

In preparing our upcoming 2024 America’s Best Cities report, we’ve gone back and updated this analysis of metropolitan areas in the U.S. with populations of 500,000 or more. 

The findings are striking. 

Most of the factors are similar to what we saw in 2019, but a strong convergence has developed between the factors correlated with talent attraction, business formation and visitor expenditure. 

And this may be the most significant and lasting effect of the pandemic: Now that people can go or live almost anywhere, they want to go, live, or start a business somewhere. And, as a result, the keys to attracting talent, businesses and visitors to the city have become more aligned with one another than ever before.

At the same time, a few new factors have emerged, such as the share of the population having access to broadband internet when it comes to attracting prime-age population, and average rents for housing now show a positive relationship with both talent attraction, business formation and even visitor expenditure. 

Just as prior to the pandemic, we still find little to no evidence that factors such as violent crime, commute times or air quality have an impact on the attractiveness and performance of U.S. metropolitan regions as a whole. More likely, factors like these affect our decision about what particular neighborhood or part of a metropolitan area we choose to live in once we move there. 

Based on our analysis of U.S. metropolitan areas with populations of 500,000 or more, here are our 10 key findings on what’s driving the performance and prosperity of U.S. cities now.

1. Innovation 

It’s not surprising to see that the number of professional, scientific and technical enterprises in a metro area has an almost linear correlation with the number of businesses being formed each year in a city. The tech and the knowledge economy has been a key driver of economic growth in U.S. cities for years. We also see an almost linear correlation between the number of these enterprises and the size of a city’s prime-age population—the people that power and drive innovation in our urban economies. But interestingly, we are also now seeing a very powerful relationship between the number of these businesses and the level of tourism spending in these cities as well, showing us that the visitor economy and the innovation economy are increasingly aligned. 

2. Connectivity 

While Zoom and Teams have replaced a significant amount of business travel, airports and the number of direct destinations they serve still play a critical role in shaping the prosperity of the city. Of course they help power the visitor economy, too, but they have an even stronger relationship with attracting talent. Young people want to live in cities well connected to other cities. And with the rise of remote work, the share of the population with access to broadband internet has emerged as a key factor related to year-over-year growth in prime-age population and GDP per capita. Ensuring the city is connected both physically and digitally is now more important than ever before. 

3. Housing

The cost of housing and/or lack thereof continues to be a hot topic for many cities. In the past, we have been unable to demonstrate a clear relationship between the cost of housing and attracting talent—talent tended to move to places where housing was expensive because that’s where the best job opportunities were. But that has now changed. The average rent of an apartment is now showing not only a relationship with the size of a city’s prime-age population, but with business formation and visitor expenditure as well. As the cost of housing has escalated in cities both large and small, it seems that we’ve reached a tipping point where the availability and affordability of housing has truly started to affect location decisions. As remote work has become an option for many more professionals, people are choosing to live in cities that offer more affordable housing.

4. Culture 

For years now, we have used our research to discuss how factors like museums, concert venues, nightlife and restaurants shape a city’s “lovability” and why they are important to attracting both visitors and talent to a city. That hasn’t changed, but these cultural factors now also show a very strong correlation with the number of businesses being formed in a city each year as well. The stronger the cultural offering in a city, the more businesses are being created. And no experiential factor stands out more than the importance of restaurants and a city’s culinary scene when it comes to attracting and retaining prime-age talent.

5. Corporate Headquarters

The number of corporate headquarters located in a city has always been a key contributor to the performance and prosperity of an urban economy. An HQ presence drives visitor expenditure as well (although that may be declining with reduced business travel). We are also seeing a strong relationship between the number of large corporate headquarters and cost of living-adjusted earnings in a city—jobs at large corporations tend to offer better pay to compete with higher costs of living.

6. Diversity

Immigration and the foreign-born population of a city has an important relationship with not only business formation but talent attraction and retention as well. Younger people are choosing to stay or move to more diverse communities. The correlation between immigration and business formation also points to the importance of strong small business ecosystems within cities from an equity lens for these families to generate wealth. Immigrants also help drive inbound and outbound travel to visit friends and relatives, an important driver of air-route development and connectivity for a city’s airport.

7. Professional Sports

Investment of public dollars to fund arenas and stadiums has always been contentious. The recently announced $500 million in funding to keep the NBA’s Washington Wizards and NHL’s Capitals in Washington DC is just the most recent example. Irrespective of where we stand on that debate, we do see a clear relationship between the number of professional sports franchises located in a city and the size of its prime-age population, dollars spent by visitors, and the number of businesses being formed each year.

8. Sights & Landmarks

As visitors, we want to travel to places with things to see and do and it should come as no surprise that the number of sights and landmarks in a city has a strong relationship with the size of its visitor economy. But sights and landmarks also have a strong relationship with the size of a city’s prime-age population and the strength of its start-up economy. This is yet another piece of evidence of the increasing alignment between tourism and economic development for U.S. cities.

9. Convention Center

The relationship between the size of a city’s convention center and the level of visitor spending in a city is probably well understood. And with reduced transient corporate travel, the recovery and importance of large meetings and events is more important to the health of a city’s visitor economy than ever before. What’s less appreciated is the relationship between convention centers and economic development. Convention centers not only support the visitor economy but have a relationship with the number of businesses being formed in a city as well. They also often host as many shows and events for the local community as they do for visitors.

10. Parks & Outdoor Activities 

Our interest and participation in outdoor sports and activities soared during the pandemic. While the number of parks and outdoor activities do not show a strong relationship with the relative prosperity of a city, access to green space and outdoor recreation is an important driver of livability and quality of life for a city’s residents and appears to be of moderate importance when it comes to attracting and retaining both talent and visitors to a city. 

Identifying the key factors that drive talent attraction and retention, business formation and visitor expenditure to urban areas is the purpose of our Best Cities research and rankings. As we’ve seen over the past five years, these factors can change and evolve over time and what worked for cities in the past may not work for them in the future. And what drives city performance in one part of the world can be different than in another. 

If you would like to learn more about our research and how we are applying this to benchmark the performance of cities and inform our work creating economic development strategies and destination development plans, we’d love to chat.