More than 3,000 people have descended on the northern New South Wales city of Lismore for the largest LGBTI event in the Southern Hemisphere outside Sydney's Mardi Gras.

The Tropical Fruits New Year's Eve Festival began 27 years ago as a celebration for the local lesbian, gay, bi-sexual, transgender and intersex community.

The inaugural event was a party attracting about 200 people at the Repentance Creek hall, about 30 kilometres from Lismore.

In 2003, when the event began to draw thousands, the celebration was extended to four days and moved to the Lismore Showground.

This year's festival began with a street parade on Tuesday, December 29 and will end with a recovery party on New Year's Day.

Tropical Fruits chairman Ken Beilby said research commissioned by the organising committee had shown the event had significant benefits for the local economy.

"We found out that about $10 million is brought in over a two-week period and that's from people travelling into the area, not only from interstate but internationally," Mr Beilby said.

"The money is spent on local accommodation but also on local food and beverages, so people are spending up big in the local town."

Lismore business owners confirmed the results of the research, saying the festival was a huge boon for the city.

Beauty therapist Tracy Newton said it was one of her busiest times of the year.

"I get a lot of the gay boys coming in for spray-tans, waxing and other bits and pieces," she said.

"Over the last few years I've actually missed the parade because I've had my head down and my waxing arms swinging.

"Once you do a good job for them, they spread the word throughout their community and you look after one and you're looking after a whole family."

Bakery owner Geoff Haycraft said the event brought a sense of liveliness to the city in what was traditionally a quieter time.

"Gradually more and more shops and cafes have chosen to open on New Year's Day and that makes Lismore a more interesting place to spend time," he said.

"Otherwise, visitors are going to go and spend their money in Byron Bay or on the coast.

"It's an evolving process and I encourage all businesses to stay open; it's a great opportunity.

"They (the visitors) are cashed up and looking to spend their money."

Lismore Mayor Jenny Dowell, who took part in the street parade, said this year's festival was so far the biggest she had witnessed.

"I've met people from all over the world who have come here after hearing about it through word of mouth," she said.

"To see the people on every corner watching the parade, everyone was thrilled; it was fantastic."