Tuesday 17 September 2013

Economists versus the cup

As Team New Zealand moves ever closer to winning the America's Cup we are beginning to hear the mindless, uninformed, self serving bs about the wonders having the cup in Auckland will do for the economy. Over a half a billion dollars in financial gain to the country, we are told. Oh what joy! Or is it?

A couple of reporters at the stuff.co.nz website asked a few economists what they thought of all this talk.
Don't believe it, says Shane Vuletich of Covic, specialist in economic evaluation of tourism and major events, who warns numbers already being used are far too large.

"Politicians are usually pleased when a big number comes along and when an independent company says that, they are not in a position to doubt it," he says.

Last year's Volvo Ocean Race was wildly over-sold.

People were counting the dollars spent by everybody who went through the Viaduct village despite the fact that 98 per cent of them would have been there any way.

"You have got to demonstrate that the money is caused by the event, that it would not be present without the event. Measurement is really critical."

Some sectors of a community want to use the big numbers just so they get the event, but ratepayers and taxpayers have to pay for it.

Vuletich says the spectator visitor benefits of the America's Cup will be "reasonably modest". The bigger return will come off teams coming to compete.

"I would say take a deep breath. Don't get caught up in the old numbers, which are a gross overstatement, and let's take a fresh look and build a business case accordingly."

He says money payback would be well down on his list of cup benefits anyway. Feel-good matters more.
It could turnout to be bloody expensive "feel-good", however. The stuff article continues,
Institute of Economic Research economist Shamubeel Eaqub says the economic benefits of a cup regatta in 2017 would be based on "over-hyped studies that are proven to be absolute b........ after the fact."

Post-event evaluations often show a loss in gross domestic product from large sports events.

"There are risks money will be lost, not gained," Eaqub says.

"There are legacy benefits, of course but for Auckland it just brings forward infrastructure projects that were going to happen anyway."
and Sam Richardson, of Fair Play and Forward Passes fame, is reported as saying,
[ ... ] the San Francisco regatta under- delivered in terms of both tourist numbers and spending.

"These figures come from consultant reports that commonly overestimate the positive aspects, like visitor numbers, understate or omit the event's associated costs and as such produce numbers that are optimistic at best."
In summary, don't believe the numbers that you are sure to hear being trotted out about the economic benefits that will flow from having the cup in Auckland and especially keep in mind that there is no economic justification for government, local or central, money being put into a defence of the cup.

1 comment:

Anonymous said...

Another factor, it seems to me, is who gains the benefit. OK, there is GST to central government, but in the main the benefit seems to go to restaurants and bars around the facility. I live in AKL, but I will see only cost and zero benefit from hosting the America's Cup (not that I begrudge making a modest contribution for feel good reasons).