Am Cup tipped to make a loss due to impact of closed borders
New Zealand will suffer a loss on the $249.5 million it invested in the America’s Cup, but, over time, benefits will be realised, an event organiser says.
The 36th America’s Cup is what the Government calls a ‘‘megaevent’’, one of two on the horizon, the other being the Fifa Women’s World Cup 2023.
The Government and Auckland Council have invested $249.5m combined in the America’s Cup, with the Government spending $136.5m and Auckland Council spending $113m on public infrastructure, with a further $20m earmarked for downtown upgrades.
But Covid restrictions mean the event and those set to benefit from it will have to rely on largely domestic spectators, and the lasting image of New Zealand it projects to the world.
A 2017 forecast, which included errors when initially presented to decision-makers, predicted that the event would add between $600 million and $1 billion to the New Zealand economy, and boost employment by 4700 to 8300.
Returns were estimated to be between $1 and $1.14 for every dollar spent. But over the long term (out to 2055) every $1 invested in infrastructure would generate approximately $7.50 of economic activity, the forecast said.
The 1999-2000 America’s Cup contributed an estimated $640m ($981m when adjusted for inflation) of economic activity for the country. The 2003 America’s Cup regatta generated $529m ($745m when adjusted for inflation).
Between 21,500 and 26,275 international visitors were expected to arrive in New Zealand for this year’s event, but Nick Hill, chief executive of Auckland Council’s economic development agency Auckland Unlimited, said
that number was now likely to be zero although there were at least 200-odd members of the three overseas teams, and their families. ‘‘That is not trivial. There will be benefits, but they certainly won’t be the level that we initially calculated.’’
He said the investments that had been made, mostly in infrastructure, were still ‘‘worth every cent’’.
‘‘Will the Crown get back fiscally what it spent, or the council? No, I think those benefits will be realised over time.’’
With the borders closed there would not be the same level and mix of benefits that would have been expected otherwise, but there was still worthwhile investment – especially in infrastructure – in an important event, he said.
‘‘I have no doubt that Auckland and the CBD in particular will be way better off because of the America’s Cup. The cost impact to the council I would imagine the next time around would be a fraction of anything that’s been spent this time.’’
Hill said the America’s Cup was an opportunity for Auckland and
New Zealand to connect with the international boating and marine community and reinforce its position as a market leader. He said on average, a 30m to 50m yacht would spend about $1.8m while in New Zealand, and that rose to $6.3m for 70m-plus yachts, he said.
The investment in new and improved infrastructure for the 36th America’s Cup would enable Auckland to compete with international superyacht destinations due to increased berthing capacity, he said.
MBIE manager of major events Susan Sawbridge said the 2017 economic assessment was based on a number of assumptions that had changed, including the number of syndicates that were expected to race.
Five overseas syndicates had signed up to challenge Emirates Team New Zealand for the America’s Cup but Malta Altus Challenge and Stars + Stripes Team USA withdrew leaving just Luna Rossa, New York Yacht Club American Magic and Ineos Team UK to compete.
‘‘On top of this, Covid-19 will have a significant impact given the border closure,’’ Sawbridge said.
As a result the economic return would be much lower than originally forecast, she said.
No revised forecast would be made and the return of investment on the event would not be known until it was over, she said.
The economic assessment in 2017 helped to support the investment into the event, she said.
‘‘As the investment for the event was already committed, no revision of the economic assessment before the event was made.’’
MBIE had contracted an external provider to produce an ‘‘impact evaluation report’’ which would be publicly available once completed, she said.