On The Circuit.(The World According to Alan Greenspan)(Arts)(festivals)

Byline: William Underhill; With Patrick Falby and Amber Haq

Everyone loves a festival -- especially the host towns, which stand to prosper. Erotic cinema fans, rejoice.

High in the mountains of southern France, the sleepy town of Aurillac has few obvious charms to attract the outsider. If the setting is scenic, its claims to fame are slender: a thriving umbrella industry and a reputation as the coldest place in the country. Understandably, the tourists stay away. Except, that is, for one hectic week each summer, when the community plays host to the International Festival of Street Theater, an extravaganza that now attracts 100,000 visitors keen to watch performers from as far away as Poland and Chile. The bars fill; the shops prosper. "It's put Aurillac on the map," says festival director Jean-Marie Songy. "We're a place that people visit as opposed to simply passing by."

And as countless festival organizers and chambers of commerce have realized, the longer visitors stay, the more they spend. As the summer season draws to a close, communities across the world -- from outsize cities to modest villages -- are counting the rewards of tapping into this booming cultural economy. This year Europe alone will stage some 400 arts festivals, ranging from the Reykjavik Jazz Festival to the Edinburgh International Festival of music, opera and theater, which last month celebrated its 60th anniversary.

All the world loves a party, it seems -- especially one that pays its own way. "More and more places are recognizing the massive economic, cultural and social benefits of a festival," says Joanna Baker, the Edinburgh festival's marketing director. To be sure, a successful arts festival represents a happy union of commercial self-interest and public entertainment. Though many of even the best-known festivals need public subsidies to survive, they still provide an opportunity to lift a community's profile or pack its restaurants and hotels. A U.S. report two years ago found that the nation's various arts festivals generated an extra $103.1 billion for local businesses. Small wonder that city fathers are often happy to play sponsor; a full 25 percent of the $16 million budget for Manchester's new international arts came from the local authorities. "It's simple," says Frederic Vincent of the Culture Directorate at the European Commission in Brussels. "Festivals bring in money and tourism." And not just ordinary tourists, but big-spending well-behaved ones.

Festivalgoers face an increasingly eclectic array of subjects -- and venues. Barcelona, for one, boasts 26 major arts festivals a year (including jazz, electronic media and erotic cinema) -- only one more than Melbourne, Australia. Film buffs can now choose between showings in cities from Aarhus in Denmark to Zagreb, not to mention the Pan-African Festival of Film and Television in Burkina Faso. Abu Dhabi is building a vast park on an island in the gulf as a home for its own biennial arts festival. And with help from the state tourist board and some big-name performers, the annual Singapore Arts Festival pulled in more than 700,000 visitors this year.

Ambitious promoters are now looking across borders to push successful formulas. In recent years, the Hay-on-Wye literary festival in Britain (dubbed the "Woodstock of the mind" by former U.S. ...