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South by Southwest Means Big Spending for Austin

AUSTIN, Texas (TheStreet) -- South by Southwest began on Friday and is already in full gear, prepped for 10 days of tech, film and music inundation. In the days leading up to the festival, organizers were busy finalizing shuttle routes and printing badges and the city of Austin was knee-deep in preparation and expectation as well.

Last year's South by Southwest festival was the biggest event yet, drawing 41,700 total registrants, 30,621 paying attendees, and 155,000 overall participants who engaged in at least one activity. Similar numbers are expected this year.

For Austin, the festival means business, literally.

Hotel bookings skyrocket over the festival period and prices rise accordingly. Last year, SXSW booked 13,000 individual hotel rooms for a total of 56,735 room nights. On top of those numbers, SXSW reported 12,926 hotel bookings independent of the festival's pre-registered rooms.

Those who waited to book accommodations are certainly feeling the effects of their procrastination. Hotels near the Austin Convention Center, the heart of SXSW, are pricing at upwards of $800 a night in recent searches, according to Travelocity.com. Even budget options are charging high fees -- a La Quinta motel nearly five miles from downtown Austin is charging $359 a night.

And for all the money put into housing, most attendees of South by Southwest know they'll be getting very little sleep. Last year, music, restaurant and bar revenues were 45% higher than the in next highest earning month.

Individual attendees, who more often than not find themselves surrounded by free food, drinks and gadgets, are not necessarily the ones doing the spending.

To stand out in the crowd, start-ups often find themselves fronting copious amounts of money, renting out bars and catering late-night parties in the hopes of attracting attention and, obviously, investors.

Once upon a time, this technique really did work. While Twitter  (TWTR) didn't officially launch at SXSW, it is notorious for having gained great traction through the festival. Foursquare was discovered and brought to popularity in 2009. These successes leave each new tech start-up wondering whether it will be the next big item.

However, with SXSW Interactive having more than tripled in size since 2009, many are concerned the festival has simply gotten too big. One thing's for sure, though -- the drinks will definitely be flowing.

On with the party.

-- Written by Sophie Bearman in Austin, Texas.

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